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March 11, 2011

Storage Stories Take Center Stage: “To the Moon, Alice!”

Steve Campbell

What a week it’s been in the land of storage…

Consolidation continues at rapid pace this week with two big announcements.  A hell of a week or week in hell–depending, of course, on which side of the consolidation you sit.

The week opened up with a big bang with Western Digital’s swift acquistion of Hitachi Global Storage Technologies in a cash and stock deal valued at about $4.3B. Although a major exchange, it is fair to say that this came as no surprise to the industry or customers… “Finally someone has purchased this Hitachi Company.” The resulting company will retain the Western Digital (WD) name and remain headquartered in Irvine, California.

WD’s market HDD share saw a big boost.  The top vendors according to iSuppl, prior to this, were WD 31%, Seagate 29%, Hitachi 17%, Toshiba/Fujitsu 11% and Samsung 10%. Clearly this potentially gives WD a huge leap in market share, almost 50%.  They have become the big dog in the HDD market, leaving everyone else choking on their dust. It will be interesting to see how this impact pricing over the next few months.

Everyone wins here, as prices for enterprise and consumer products are likely to shift downward before any stabilization.

The other really big news is that NetApp is buying LSI’s external storage systems business for $480M in cash, it is expected to close in couple months.

This divestiture of the external storage systems business will result in LSI becoming a pure-play semiconductor company and reportedly improve their profitability – sounds like the storage unit was a real dog.

NetApp will take over all the assets of the LSI external storage systems business, which develops and delivers Engenio, a bandwidth intensive storage play–nothing that unique or different necessarily, but it’s part of a product line NetApp doesn’t have and maybe they can step up the food chain in the Isilon and BlueArc camps, increasing their addressable market and generate higher revenues.

This past few months in storage land has also seen Dell, EMC and HP gobbling up storage companies. Dell acquired enterprise data storage solutions provider Compellent Technologies Inc. EMC Corporation acquired storage systems vendor Isilon Systems Inc. Last September, Hewlett-Packard completed the acquisition of 3Par Inc.

Just in case you were wondering or questioning–storage is still a hot market. Nothing is thrown away; it just keeps doubling in one itself every 18 months or so.  The market is moving toward more and more cloud offerings and the nirvana of real storage virtualization.

But that’s not all the news from this past week.  Mid-week saw the announcement by Fusion-io that it has filed for an initial public offering.  Again nothing new here.  Even the idea of Flash and solid-state storage is not new, it has been around since late 1970s early 80’s, remember Cray X-MP SSD or the Texas Memory System with TI computers for Seismic processing in the 80s.  Texas Memory System is still chugging away today.

The SEC filing indicates that Fusion-io is losing money, surprise surprise. Generated a meager $58.2 million in revenue for the six months ended Dec. 31, with a net loss was $8.2 million. Apparently “ineffective management of our inventory levels could adversely affect our operating results.”

However, Flash based storage solutions are hot a topic with lots of solutions.  The speed and bandwidth of CPU, memory, and networks, all major building block for datacenters, are increasing 2x or more every year or so. Disc performance is lagging behind creating an IO bottleneck and slowing down performance and throughput.

Several start-ups, such as Violin Memory Inc. and Virident Systems Inc., both have innovative solutions to this problem and are pounding on the Fusion installed base and many of the same prospect.

As a closing note:- LSI also has a Flash base product line.  Wonder what will happen to that going forward.

If you live and breathe storage then strap yourself in tight–You’re in for fast and bumpy ride – to the moon, Alice!

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