Storage vendor NetApp is to acquire Data Domain, a maker of disk-based backup products. 

Data Domain will become a product line within NetApp and both sales organisations will be integrated. NetApp's global sales, support and partner network of NetApp will extend the reach of Data Domain's products, the companies said.

Data Domain specialises in backup systems with data de-duplication technology, which reduces the amount of storage space required for backups by eliminating redundant bits of data. The company began shipping products in 2004 and went public in 2007. The companies said Data Domain's products are complementary to NetApp's own backup systems.

Despite the current economic downturn, demand for storage capacity is growing rapidly. IDC estimates the total disk storage capacity shipped in 2008 was up more than 40 percent from a year earlier. To deal with that trend, enterprises are beginning to turn to data deduplication in disk backup.

NetApp, one of the biggest vendors in storage, announced in February that it would lay off 500 of its approximately 8,000 employees. Yesterday, it reported revenue of $880 million (£557 million) for its fiscal fourth quarter with a quarterly profit of $75 million, matching the expectations of analysts.

Last month, NetApp announced a partnership with Cisco to jointly develop a "unified storage architecture" as part of Cisco's Unified Computing strategy of combining networking, computing and storage in virtualised data centers. NetApp has also worked with virtualisation giant VMware to integrate its storage systems under VMware's management interface.

The deal, for about $1.5 billion (£950 million), has been approved by Data Domain's board of directors and is expected to close within 120 days.