Financially outgunned, NetApp found discretion the better part of valor Wednesday and dropped out of the bidding war with EMC for Data Domain.
The deduplication house will go to EMC for $33.50 a share in cash.

EMC raised its bid from $30 Monday, as determined to get Data Domain as it was to keep it away from rival NetApp.

NetApp had started at $25 a share in cash and stock a few weeks ago and thought it had the deal sewed up until EMC crashed the party with a hostile $30 tender offer. NetApp went to $30 but in cash and stock; it couldn’t match EMC cash offer. When EMC went to $33.50, it was simply outmatched.

A rueful NetApp CEO Dan Warmenhoven said in a statement, “NetApp applies a disciplined approach to acquisitions, one focused intently on creating long-term value for our stockholders. We therefore cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal’s strategic and financial benefits.”

Data Domain, which had accepted both of NetApp’s offers over EMC’s, has agreed to the acquisition and has reportedly already sent NetApp a $57 million check to cover the breakup fee.

EMC will be paying a total of $2.1 billion, net of Data Domain’s cash, making it one of its priciest acquisitions. EMC paid $2.1 billion for RSA Security in 2006, the most it’s ever paid for a property.

EMC expects the acquisition to be neutral to its non-GAAP earnings per share in fiscal 2009 and accretive in fiscal 2010.

The deal should close by the end of the month.

NetApp throwing in the towel so soon surprised the Wall Street punters who bid Data Domain’s stock up over $34, a fact one of its largest investors reportedly took advantage of.