SOURCE: Data Domain

April 24, 2008 16:00 ET

Data Domain, Inc. Reports First Quarter Financial Results

Revenue Increases 17% Compared to the Fourth Quarter 2007, 160% Compared to First Quarter 2007

SANTA CLARA, CA--(Marketwire - April 24, 2008) - Data Domain, Inc. (NASDAQ: DDUP) today announced results for its first quarter ended March 31, 2008. Revenue for the first quarter of 2008 was $52.6 million, an increase of 17% from the fourth quarter of 2007 and an increase of 160% from the first quarter of 2007.

Data Domain posted net income under U.S. generally accepted accounting principles ("GAAP") for the first quarter of 2008 of $2.7 million, or $0.04 per diluted share. This compares to a GAAP net loss of $76,000, or $0.00 per diluted share in the immediately preceding fourth quarter of 2007, and a GAAP net loss of $1.5 million, or $0.18 per diluted share in the first quarter of 2007.

Excluding the impact of stock-based compensation and related taxes in all periods, the non-GAAP net income for the first quarter of 2008 was $7.7 million, or $0.12 per diluted share, compared to a non-GAAP net income of $5.1 million, or $0.08 per diluted share in the immediately preceding fourth quarter of 2007, and a non-GAAP net loss of $363,000, or $0.05 per diluted share in the first quarter of 2007.

"In the first quarter of 2008, Data Domain again achieved record revenues with strong gross margins," said Frank Slootman, President and Chief Executive Officer of Data Domain. "Approximately 285 new customers were added during the quarter, bringing our cumulative customer count to over 1,800 worldwide that have purchased our systems. In addition, with new solution platforms, expanded protocol support, and nearline application support, Data Domain is positioning deduplication storage as a new tier of data center storage for data that customers don't want on tape for performance reasons and don't want on primary storage for cost reasons. As our storage platform expands in scale and scope, we plan to further deepen and broaden this growing position in the data center."

"Data Domain has again exceeded its revenue targets for the quarter, while improving key financial metrics and continuing its investment in infrastructure to promote and accommodate future growth," added Michael Scarpelli, Chief Financial Officer for Data Domain. "GAAP net income rose to $2.7 million, and while the company added 92 new employees, gross margins were strong at 74%."

First Quarter Highlights

--  In February 2008, Data Domain announced the new DD120 appliance for
    remote offices.  The addition of the DD120 underscores Data Domain's focus
    on addressing the full range of data protection needs of large distributed
    enterprises.
--  In March 2008, Data Domain established a new strategic North American
    distribution agreement with Ingram, one of the world's largest technology
    distributors.
--  The Company announced it will establish a new Operations Center in
    North Carolina's Research Triangle Park. The new facility will house
    additional Engineering, Customer Support and Inside Sales personnel to help
    support the Company's expected continued expansion.
--  The Company expanded its executive team with the addition of Pete
    Rukavina as Senior Vice President of Operations.  Mr. Rukavina comes to
    Data Domain from Cisco Systems, Inc., where he last served as Vice
    President of Business Operations.
--  In March 2008, Data Domain announced the availability of its
    OpenStorage software option.  Data Domain was the first vendor to ship
    product in support of the new Veritas NetBackup OpenStorage (OST) API by
    Symantec.
    

Conference Call Information

Data Domain will host a conference call for analysts and investors to discuss its first quarter of 2008 results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The dial-in number for this conference call is 800.591.6945 (617.614.4911 international) and the participant passcode is 46364463#. A live webcast of the conference call will be accessible from the Investor Relations section of the Company's website at www.datadomain.com. Following the webcast, an archived version will be available on the company's website for 30 days. To hear the replay, parties in the United States and Canada should call 1-888-286-8010 and enter passcode 69749574#. International parties can access the replay at 617-801-6888 and should enter passcode 69749574#.

Use of Non-GAAP Financial Information

Data Domain has supplemented the financial measures contained in this press release that are provided in accordance with GAAP with non-GAAP financial measures. Data Domain believes that these non-GAAP financial measures better reflect its core operating results and thus are appropriate to enhance the overall understanding of its past financial performance and its prospects for the future. These adjustments to Data Domain's GAAP results are made with the intent of providing both management and investors a more complete understanding of Data Domain's underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate Data Domain's financial results, develop budgets and manage expenditures. The method Data Domain uses to produce non-GAAP financial results may differ from the methods used by other companies. Data Domain's reference to these non-GAAP financial results should be considered in addition to results that are prepared under current accounting standards but should not be considered as a substitute for, or superior to, the financial results that are presented as consistent with GAAP. Reconciliation of the non-GAAP financial measures to the nearest GAAP financial measures is included in the financial measures attached hereto.

ABOUT DATA DOMAIN

Data Domain® is a leading provider of deduplication storage appliances for disk-based backup and network-based disaster recovery. Approximately 1,800 companies worldwide have purchased Data Domain storage systems to reduce costs and simplify data management. Data Domain delivers the performance, reliability and scalability to address the data protection needs of enterprises of all sizes. Data Domain products integrate into existing customer infrastructures and are compatible with leading enterprise backup software products. To find out more about Data Domain, visit www.datadomain.com. Data Domain is headquartered at 2421 Mission College Blvd., Santa Clara, CA 95054 and can be contacted by phone at 1-866-933-3873 or by e-mail at sales@datadomain.com.

Forward Looking Statements

This press release contains forward-looking statements regarding our products addressing the full range of data protection needs of large distributed enterprises, our continuing investment in infrastructure to promote and accommodate future growth, our positioning deduplication storage as a new tier of data center storage, and our plans to further deepen and broaden this growing position in the data center and our plans to establish a new Operations Center in North Carolina's Research Triangle Park to help support our expected continued expansion. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties include any weakening of general economic and market conditions and customer budgets for information technology spending, our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; market acceptance of our products; our ability to scale our distribution channels; our ability to recruit and retain personnel; our ability to compete in our industry; our ability to maintain and expand relationships with technology partners; our ability to protect our intellectual property; shortages or price fluctuations in our supply chain and the performance of our contract manufacturer; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact our business are set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

Data Domain and the Data Domain logo are trademarks or registered trademarks of Data Domain, Inc. All other trademarks used or mentioned herein belong to their respective owners.

A copy of this press release can be found on the Investor Relations page of Data Domain's website at www.datadomain.com

                            Data Domain, Inc.
                        Consolidated Balance Sheet
                              (in thousands)
                                (unaudited)

                                                   March 31,   December 31,
                                                      2008         2007
                                                  -----------  -----------

Current Assets:
            Cash and cash equivalents             $   126,522  $   102,939
            Short-term investments                     65,775      104,197
            Accounts receivable, net                   30,371       35,320
            Inventories                                 2,513        2,341
            Prepaid expenses and other current
             assets                                     2,953        1,711
                                                  -----------  -----------
                      Total current assets            228,134      246,508
Long-term investments                                  29,704            -
Intangible assets                                         233          267
Property, plant and equipment                          21,771       14,589
                                                  -----------  -----------

                      Total assets                $   279,842  $   261,364
                                                  ===========  ===========

Current Liabilities:
            Accounts payable                      $     8,813  $     7,251
            Accrued compensation and related
             benefits                                   8,900       11,992
            Other accrued liabilities                   6,734        6,731
            Income taxes payable                        1,939          196
            Deferred revenue, current                  20,335       16,650
                                                  -----------  -----------
                      Total current liabilities        46,721       42,820

Deferred revenue, non-current                          11,997        9,322
Unvested exercised stock options                          484          766
Other liabilities                                       1,186          594

Common stock                                          258,241      248,078
Other comprehensive income                             (1,265)          47
Accumulated deficit                                   (37,522)     (40,263)
                                                  -----------  -----------
                      Total stockholders' equity      219,454      207,862
                                                  -----------  -----------

            Total liabilities and stockholders'
             equity                               $   279,842  $   261,364
                                                  ===========  ===========



                            Data Domain, Inc.
                  Consolidated Statements of Operations
                  (in thousands, except per share data)
                                (unaudited)

                                                              Three Months
                                              Three Months       Ended
                                             Ended March 31,   December 31,
                                           ------------------  -----------
                                             2008      2007        2007
                                           --------- --------  -----------

Revenue:
            Product                        $  45,220 $ 17,880  $    39,399
            Support and services               7,368    2,137        5,448
            Ratable product and related
             support and services                 27      192           33
                                           --------- --------  -----------
                     Total revenue            52,615   20,209       44,880
                                           --------- --------  -----------
Cost of revenue:
            Cost of product                   11,316    5,849       10,179
            Cost of support and services       2,489      798        2,119
            Cost of ratable product and
             related support and services          1       76            3
                                           --------- --------  -----------
                     Total cost of revenue    13,806    6,723       12,301
                                           --------- --------  -----------
            Gross profit                      38,809   13,486       32,579
                                           --------- --------  -----------

Operating expenses:
            Sales and marketing               23,232    8,683       23,508
            Research and development           8,736    4,503        7,190
            General and administrative         5,606    1,778        4,102
                                           --------- --------  -----------
                     Total operating
                      expenses                37,574   14,964       34,800
                                           --------- --------  -----------
            Operating income (loss)            1,235   (1,478)      (2,221)
                                           --------- --------  -----------

Other income (expense), net:
            Interest income                    2,163      156        1,949
            Other income (expense), net        1,243      (96)         164
                                           --------- --------  -----------
                     Total other income
                      (expense), net           3,406       60        2,113
                                           --------- --------  -----------

Income (loss) before provision for
 (benefit from) income taxes                   4,641   (1,418)        (108)
            Provision for (benefit from)
             income taxes                      1,900       55          (32)
                                           --------- --------  -----------
Net income (loss)                          $   2,741 $ (1,473) $       (76)
                                           ========= ========  ===========

Net income (loss) per share, basic         $    0.05 $  (0.18) $     (0.00)
                                           ========= ========  ===========
Net income (loss) per share, diluted       $    0.04 $  (0.18) $     (0.00)
                                           ========= ========  ===========

Shares used in computing basic income
 (loss) per share                             56,414    8,038       53,595
Shares used in computing diluted income
 (loss) per share                             64,704    8,038       53,595





                            Data Domain, Inc.
                      GAAP to Non-GAAP Reconciliation
                   (in thousands except per share data)
                                (unaudited)


                Three Months Ended March 31,  Three Months Ended March 31,
                            2008                          2007
                ----------------------------- ----------------------------
                          Adjustm-                      Adjustm-
                  GAAP      ents    Non-GAAP    GAAP      ents    Non-GAAP
                --------- --------  --------- --------  --------  --------

Reconciliation of
 Gross Profit:
 Total revenue  $  52,615 $      -  $  52,615 $ 20,209  $      -  $ 20,209
 Total cost of
  revenue          13,806     (255)    13,551    6,723      (104)    6,619
                --------- --------  --------- --------  --------  --------
 Gross profit   $  38,809 $   (255) $  39,064 $ 13,486  $   (104) $ 13,590
                ========= ========  ========= ========  ========  ========

Reconciliation
 of Operating
 Expenses:
 Sales and
  marketing     $  23,232 $ (2,792) $  20,440 $  8,683  $   (477) $  8,206
 Research and
  development       8,736   (1,320)     7,416    4,503      (308)    4,195
 General and
  administrative    5,606   (1,013)     4,593    1,778      (221)    1,557
                --------- --------  --------- --------  --------  --------
  Total operating
   expenses     $  37,574 $ (5,125) $  32,449 $ 14,964  $ (1,006) $ 13,958
                ========= ========  ========= ========  ========  ========


Reconciliation of
 Operating Income
 (loss), net,
 provision for
 income taxes net
 income and net
 income per share:
 Operating
  income (loss) $   1,235 $  5,380  $   6,615 $ (1,478) $  1,110  $   (368)
 Income (loss)
  before
  provision for
  income taxes  $   4,641 $  5,380  $  10,021 $ (1,418) $  1,110  $   (308)
 Provision for
  income taxes  $   1,900 $    440  $   2,340 $     55  $      -  $     55
 Net income
  (loss)        $   2,741 $  4,940  $   7,681 $ (1,473) $  1,110  $   (363)
 Net income
  (loss) per
  share, basic  $    0.05           $    0.14 $  (0.18)           $  (0.05)
 Net income
  (loss) per
  share,
  diluted       $    0.04           $    0.12 $  (0.18)           $  (0.05)
 Shares used in
  computing basic
  net income
  (loss) per
  share            56,414              56,414    8,038               8,038
 Shares used in
  computing
  diluted net
  income (loss)
  per share        64,704              64,704    8,038               8,038

Stock based
 compensation
 expense:
 Cost of
  product       $     134                     $     16
 Cost of support
  and services        121                           88
 Sales and
  marketing         2,792                          477
 Research and
  development       1,320                          308
 General and
  administrative    1,013                          221
                ---------                     --------
 Total stock
  compensation
  expense       $   5,380                     $  1,110
                =========                     ========




                            Data Domain, Inc.
                      GAAP to Non-GAAP Reconciliation
                  (in thousands, except per share data)
                                (unaudited)

                      Three Months Ended           Three Months Ended
                        March 31, 2008              December 31, 2007
                ----------------------------- -----------------------------
                          Adjustm-                      Adjustm-
                  GAAP      ents    Non-GAAP    GAAP      ents    Non-GAAP
                --------- --------  --------- --------  --------  ---------

Reconciliation of
 Gross Profit:
 Total revenue  $  52,615 $      -  $  52,615 $ 44,880  $      -  $  44,880
 Total cost of
  revenue          13,806 $   (255)    13,551   12,301      (187)    12,114
                --------- --------  --------- --------  --------  ---------
 Gross profit   $  38,809 $   (255) $  39,064 $ 32,579  $   (187) $  32,766
                ========= ========  ========= ========  ========  =========

Reconciliation
 of Operating
 Expenses:
 Sales and
  marketing     $  23,232 $ (2,792) $  20,440 $ 23,508  $ (3,320) $  20,188
 Research and
  development       8,736   (1,320)     7,416    7,190    (1,063)     6,127
 General and
  administrative    5,606   (1,013)     4,593    4,102      (775)     3,327
                --------- --------  --------- --------  --------  ---------
  Total operating
   expenses     $  37,574 $ (5,125) $  32,449 $ 34,800  $ (5,158) $  29,642
                ========= ========  ========= ========  ========  =========


Reconciliation of
 Operating Income
 (loss), net,
 provision for
 income taxes net
 income and net
 income per share:
 Operating
  income (loss) $   1,235 $  5,380  $   6,615 $ (2,221) $  5,345  $   3,124
 Income (loss)
  before provision
  for (benefit
  from) income
  taxes         $   4,641 $  5,380  $  10,021 $   (108) $  5,345  $   5,237
 Provision for
  (benefit from)
  income taxes  $   1,900 $    440  $   2,340 $    (32) $    145  $     113
 Net income
  (loss)        $   2,741 $  4,940  $   7,681 $    (76) $  5,200  $   5,124
 Net income
  (loss) per
  share, basic  $    0.05           $    0.14 $  (0.00)           $    0.10
 Net income
  (loss) per
  share,
  diluted       $    0.04           $    0.12 $  (0.00)           $    0.08
 Shares used in
  computing basic
  net income
  (loss) per
  share            56,414              56,414   53,595               53,595
 Shares used in
  computing
  diluted net
  income (loss)
  per share        64,704              64,704   53,595               63,951

Stock based
 compensation
 expense:
 Cost of
  product       $     134                     $    101
 Cost of
  support and
  services            121                           86
 Sales and
  marketing         2,792                        3,320
 Research and
  development       1,320                        1,063
 General and
  administrative    1,013                          775
                ---------                     --------
Total
 stock-based
 compensation
 expense        $   5,380                     $  5,345
                =========                     ========



                            Data Domain, Inc.
                   Consolidated Statement of Cash Flows
                              (in thousands)
                                (unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2008       2007
                                                      ---------  ---------
Operating Activities:
 Net income (loss)                                    $   2,741  $  (1,473)
 Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
   Depreciation and amortization                          1,201        316
   Stock-based compensation                               5,380      1,110
   Provision (release) for accounts receivable
    allowances                                                4         (8)
   Amortization of evaluation units in inventory            654        468
   Changes in operating assets and liabiilties:
     Decrease in accounts receivable                      4,945      1,561
     Increase in inventories                               (826)    (1,088)
     Increase in prepaid expenses and other current
      assets                                             (1,242)      (436)
     Increase in accounts payable                         1,562      1,830
     Increase in offering costs                               -     (1,539)
     Decrease in accrued compensation and related
      benefits                                           (3,092)      (573)
     Increase in other accrued liabilities                  595      2,373
     Increase (decrease) in income taxes payable          1,743        (91)
     Increase in deferred revenue                         6,360      1,045
                                                      ---------  ---------
 Net cash provided by operating activities               20,025      3,495
                                                      ---------  ---------

Investing activities:
    Purchase of property, plant and equipment            (8,349)    (1,511)
    Purchases of available for sale securities          (42,004)         -
    Proceeds from maturities of available for sale
     securities                                          49,400          -
                                                      ---------  ---------
 Net cash used in investing activities:                    (953)    (1,511)
                                                      ---------  ---------

Financing activities:
   Proceeds from issuance of common stock,
    net of repurchases                                    4,501        526
                                                      ---------  ---------
 Net cash provided by financing activities                4,501        526
                                                      ---------  ---------

Effect of exchange rate changes on cash
 and cash equivalents                                        10         (3)
                                                      ---------  ---------

 Net increase in cash and cash equivalents               23,583      2,507
 Cash and cash equivalents at beginning of period       102,939     11,857
                                                      ---------  ---------

 Cash and cash equivalents at end of period           $ 126,522  $  14,364
                                                      =========  =========

Non-cash operating activity:
  Issuance of common stock for settlement             $       -  $   3,319
                                                      =========  =========

Supplemental schedule of cash flow data:
  Cash paid for income taxes                          $     332  $     143
                                                      =========  =========

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