STORAGE RIVALS SEEK FRIENDS TO SURVIVE CONSOLIDATION

January 26, 2001

COMMERCIAL NEWS

Stephen Shankland reported for cnet news.com: Network Storage Solutions, a small storage company with big competitors, believes forging partnerships will be the key to surviving potential hard times.

Though the storage market is growing fast, Network Storage Solutions CEO Brad Clemmonds believes fewer and fewer companies will supply the products. To ensure his company won’t be one of the ones that disappears, NSS is in the midst of an effort to get computer companies with bigger names to sell its technology, Clemmonds said. “There will be a lot of consolidation,” he said in an interview. One of the ways to stay strong: “You align yourself with some key partners. We’re talking to a lot of people.”

He declined to name prospective sales partners but said the deals should help NSS expand its customer base to large corporate customers as well as its current smaller specialty markets.

NSS, a privately held company in Chantilly, Va., began making network-attached storage (NAS) devices long before the special-purpose computer systems attained their current status as a hot product. NAS devices are designed to plug into networks and easily provide extra storage capacity for tasks such as holding corporate email messages.

Network Appliance has long been the leader in the NAS market, which researcher IDC projects will generate $4.1 billion in sales this year and $10.5 billion in 2003. The popularity of NAS systems has lured just about every computer company to come up with its own product, including Dell Computer, IBM, Hewlett-Packard, VA Linux Systems, Sun Microsystems and Compaq Computer.

One of the biggest developments in the NAS market, however, is the arrival of storage colossus EMC. Until its November acquisition of CrosStor and the December launch of its Chameleon NAS product, EMC chiefly sold higher-end storage systems.

Ironically, though, the arrival of EMC might prove to be a boon for Network Storage Solutions. Companies such as HP and Western Digital that got NAS software from CrosStor in the past won’t be keen on continuing the relationship because that now means giving money to EMC, said Jonathan Webster, a storage analyst at Illuminata. That opens up room for new partnerships at NSS. The company has a special-purpose operating system dedicated to NAS, Clemmonds said.

But partnerships, while important, are just part of the picture. The company plans to continue its direct product sales as well, with about half the company’s revenue coming from that end.

Monday, the company announced a new ProStor family of NAS servers. The devices hold as many as 10 hard drives with a total capacity of 360GB today and 730GB by the end of the quarter, when higher-capacity drives arrive, Clemmonds said. Prices for low-end models start at $7,995. The systems are based on Intel Pentium III chips, the company said.

The company has been focusing on growth at the expense of profits at present, but the current business plan calls for the company to achieve profitability in 2002, Clemmonds said. Revenue has been growing between 30 percent to 50 percent each quarter, he added. Current customers typically include Internet service providers, companies that need to send streams of audio or video, computer-aided design or manufacturing firms, and publishing companies, he said.

Competition is getting fiercer, though. Sun Microsystems, unable to dislodge EMC at the higher end of the storage product spectrum, has focused its energy on NAS. That effort has been bolstered by the acquisition of Cobalt Networks and HighGround Systems, two companies at work on NAS technology. And Compaq, the top seller of Intel-based servers, upgraded its TaskSmart N-Series NAS boxes last week. The company added clustering ability, which keeps services running by having backup systems take over when a primary system fails. The Compaq machine is based on a version of the Windows 2000 Advanced Server operating system, unlike the custom operating systems used by Network Appliance and NSS. The clustered TaskSmart N-Series devices can hold more than 10 terabytes of data, Compaq said. In addition, the company upgraded its lower-end N2400 product so it can hold as much as 2 terabytes.

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