It reads like a soap opera. This time, the cliffhanger surrounds VARs' role in the burgeoning storage industry.
EMC Corp., based here, last week said it would buy Westboro, Mass.-based Data General Corp. in a stock deal worth about $1.1 billion. Two days later, Sun Microsystems Inc. and EMC rival Storage Technology Corp. (StorageTek) agreed to OEM each other's upcoming storage arrays.
Louisville, Colo.-based StorageTek,which lost IBM Corp. as an OEM customer last month when the Armonk, N.Y.-based vendor released its own disk array,had faced a potential conflict with EMC over its OEM purchases of Data General's Clariion storage products. However, Palo Alto, Calif.-based Sun will replace IBM as a tape-drive array customer and Clariion as an OEM disk array supplier.
It was just another week in the enterprise storage industry, which has exploded along with the thirst for data spurred by E-commerce sites.
But the EMC-Data General deal is seen as the most critical yet by analysts and VARs.
The pact immediately expands EMC's storage products opportunity by almost 40 percent to a $50 billion market in 2001 from a $35 billion market this year, said EMC Chief Executive Michael Ruettgers.
The acquisition reduces the cost of entry for EMC storage hardware and software, he said.
EMC, with its direct focus of the past, may now want resellers to help with its sales, particularly of Clariion products, said Dave Hill, senior analyst at Boston-based Aberdeen Group Inc. "This could offer opportunities to resellers clever enough to take advantage of them," he said.
EMC will invest in the channel after the acquisition is complete, Ruettgers said. "For some time, EMC has used both a direct and indirect model," he said. "We have a number of alliances that are helping bring our products to the market. With the nature of these products, which are more midrange products, I would think you would see even greater utilization of those channels."
While EMC sales are focused on high-end mainframe and open-systems environments, Data General's Clariion storage products are targeted more at the midrange market,going head-to-head with products from Sun, Hewlett-Packard Co. and IBM.
"EMC is pushing [Windows] NT very hard," said Aberdeen's Hill. "The problem is [the company is] starting to get into a new area where price is more sensitive. They may have gotten Clariion to get into this area."
That is indeed the case, said Dave Donatelli, vice president of new business development at EMC. "EMC has always been in the enterprise side of the market," he said. "We get requests from customers to serve the middle market for storage, including NT and midsize Unix machines from various vendors. Clariion products have been sold to that market for years now. . . . It's the fastest way to get to that market."
This is not EMC's first attempt to crack the midrange arena. The company's short-lived midrange Centriplex line was introduced and discontinued in 1995. "Customers' open-storage needs were growing by leaps and bounds, and they wanted Symmetrix [EMC's higher-end storage]," Donatelli said. "Today's difference is that Clariion already has a half-billion-dollar revenue stream."
EMC also acquired Data General's Aviion NT and Unix servers.
"Aviion is useful because of the NUMA [non-uniform memory access] architecture and clustering," Hill said.
But the acquisition's success depends on how well EMC digests Clariion, said Carl Wolfston, director at Headland Associates, a Pleasanton, Calif.-based systems integrator.
"What I'm seeing is they're going to suck in the Clariion side of the business directly into EMC and then the server business will stay as a separate system," he said.
CHRISTINA TORODE & MARGIE SEMILOF contributed to this story.
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