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NetApp Inc. (NTAP) declined to raise its offer to acquire Data Domain Inc. (DDUP) Wednesday, ending a bidding war for the data-storage company and allowing EMC Corp. (EMC) to swoop in with a superior $2.2 billion bid.

Data Domain said it entered into a definitive merger agreement with EMC, which will acquire the company for $33.50 a share in cash. The price represents an 87% premium to Data Domain's stock price prior to the original offer from NetApp in May.

With the Data Domain acquisition, EMC nabs a leader in the growing market for a technology known as deduplication, which reduces the amount of information in company data centers. The technology has been a hot seller despite the downturn, allowing Data Domain to post strong revenue growth even as many firms watched sales slump due to tech customers slashing spending amid the recession.

EMC has the opportunity to expand on that growth by coupling Data Domain's products with its much larger sales force, though Data Domain's $274 million in 2008 revenue pales compared to EMC's $14.9 billion in revenue last year.

"This is a compelling acquisition from both a strategic and financial standpoint," said EMC Chief Executive Joe Tucci in a press release. "We look forward to bringing Data Domain together with EMC to form a powerful force in next-generation disk-based backup and archive."

After a bidding war that drove the offer price of Data Domain up by roughly $700 million from NetApp's original $25 a share offer, Data Domain's board of directors unanimously approved NetApp's decision and also recommended that Data Domain stockholders tender their shares to EMC.

As a result of the broken deal, NetApp said it received a $57 million break-up fee from Data Domain. Data Domain also said it would cancel its special meeting of stockholders scheduled next month to discuss the NetApp merger.

"In any acqusiition plan, you apply some discipline to it and decide what is the 'walk away' price," said Jay Kidd, head of marketing for NetApp. "When EMC bid the $33.50 we decided that was above the price that we were willing to go."

Following the news, NetApp's shares rose 4.3% to $19.18 in after-hours trading, as investors showed relief that NetApp wasn't pushed to spend more than it arguably could afford.

Data Domain's shares fell 1.4% to $33.42 and EMC's shares were up 0.6% to $12.60.

Many had expected EMC to eventually acquire Data Domain because it has a larger war chest than NetApp. On Monday, EMC raised its offer for Data Domain by 11% to $2.2 billion, up from last month's bid of $30 a share. EMC's offer is all cash, while NetApp had offered $30 a share in a combination of cash and stock.

"EMC just had far more resources to devote to the battle than NetApp," said Brigantine Advisors analyst Mark Kelleher.

While Data Domain would have complemented NetApp's existing growth trajectory, NetApp Chairman and Chief Executive Dan Warmenhoven said in a prepared statement that the company is confident in its current strategic plan, market opportunities and competitive strengths.

EMC said it expects the deal to be neutral to EMC's non-GAAP earnings per share in its fiscal year 2009 and accretive to its non-GAAP earnings per share in fiscal year 2010.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com

(John Kell contributed to this report.)