HP READIES SECOND PHASE OF ASSAULT ON EMC

July 14, 2000

COMMERCIAL NEWS

New York, N.Y. — Stephen Shankland reports that Hewlett-Packard will embark on a new phase of its effort to dislodge EMC in storage when it unveils a new high-end data storage system.

HP’s ambition with the XP512, a corporate storage system that can hold up to 24 terabytes of data and typically will cost more than $1 million, is to sell storage systems that will work with virutally every major server on the market, including those from Sun Microsystems.

This goal has proven difficult for server companies, whose storage systems typically are used in conjunction with their own servers. About 80 percent of HP’s storage systems currently connect to HP servers, said David Scott, general manager of HP’s extended platform storage division. EMC, whose server business is secondary at best, sells to servers from all major companies. Until last year, HP and EMC were allies.

The market for data storage systems has been exploding in the past few years, as corporations have been inundated with reams of data that need to be kept and classified for easy access. EMC has been making billions of dollars by selling refrigerator-sized cabinets stuffed with hard disks and other electronics; these systems cost anywhere from hundreds of thousands of dollars to more than $10 million.

But EMC’s success has unleashed cascades of deal-making and new products among its competitors, the biggest names in the computing world.

IBM designed a new system to compete against EMC’s Symmetrix. Sun is hiring a “formidable” new sales team specifically to try to win accounts from EMC. Compaq Computer and IBM agreed cooperating with each other was better than taking on EMC alone. And HP stopped reselling EMC products and instead sells its own version of a storage system from Hitachi Data Systems.

Another casualty of the fierce competition has been the continuing near-stalemate in the process of setting standards for storage area networks (SANs), the architecture often used to plug expensive storage systems into the heart of corporate networks.

While IBM has withdrawn from EMC’s FibreAlliance standardization effort, HP has stayed a member. But Scott said that effort has been merely so HP’s storage management software can control EMC hardware.

“We joined (FibreAlliance) specifically to give us a way of managing EMC Symmetrix devices within our SAN management environment,” Scott said. “We do not support FibreAlliance as a standard in and of itself because it is proprietary to EMC.”

As previously reported, the new HP storage system is in fact a repackaged version of the Hitachi Freedom Storage 9900 hardware. However, Scott said, the HP version uses different internal programming and software that gives it different performance characteristics and capabilities.

HP claims the XP512 performs better than EMC’s new top-end Symmetrix 8000. That performance, coupled with management features, means HP won’t be charging less for its products than EMC charges, Scott said.

However, Illuminata analyst John Webster said HP and Hitachi could be more flexible if sales don’t take off as hoped. “The people selling the Hitachi box will certainly try to keep prices up over the next three months. If they’re not successful doing that, I would expect some price concessions to come around November or December,” he said.

HP has sold $500 million worth of XP256 machines in the year after it dumped EMC and switched to Hitachi systems, Scott said. HP achieved this in 12 months – six months ahead of schedule. The $500 million goal means that HP has caught up to its revenue level in 1999 when it dropped EMC.

Webster said he believes HP has done reasonably well regaining some of the position it lost when it dumped EMC. “I think that they’ve done a good job catching up. It’s sort of an uphill climb when you have to climb back into an account after you ceded that market to someone who has now become your competitor.”

HP is aiming the XP512 at customers who use Sun servers at application service providers and large data centers. These customers can benefit from storage systems that can be easily managed but also partitioned into different sections for different users.

The XP512 has a starting price of $600,000 and is available now.

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