Data Domain shares dropped 1.4 percent in extended trade to $33.44, below a $33.50 cash offer that EMC made directly to shareholders on Monday. Investors had bid the stock above that level on hopes that NetApp would come back with a higher bid.
The two rivals had battled for control of fast-growing Data Domain as they looked to boost their sluggish sales. They coveted its data reduction technology, which boosts the efficiency of storage equipment by deleting duplicate data.
NetApp said that it had received a breakup fee of $57 million after terminating an agreement that it had signed to buy Data Domain for about $1.9 billion, or $30 per share.
NetApp Chief Executive Dan Warmenhoven said in a statement that he could not justify paying a higher price for the company. NetApp had already raised its offer once after EMC came in with a hostile bid.
EMC said that its offer has an enterprise value of $2.1 billion after subtracting the $277.8 million in cash on Data Domain's balance sheet.
(Reporting by Jim Finkle, editing by Leslie Gevirtz)