Storage Consolidation Continues

"We think the merger and acquisition picture will pick up at some point this year," said Dave Roberson, president of Hitachi Data Systems, Santa Clara, Calif.

"We think there are 15, 20 or 30 still-viable companies out there," Roberson said. "My belief is ... 10 to 15 [companies] will be players by the end of the year."

One Hitachi competitor, Brocade Communications, is set to lead the pace.

Executives at that company said it was on track to close its acquisition of Rhapsody Networks by the end of January, giving it a leg up in what should be a growing market for fabric-based applications.

Brocade CFO Tony Canova said last month at the RBC Capital Markets System Area Network Conference here that the Rhapsody deal will accelerate Brocade's ability to permit ISVs and OEMs to build applications directly into storage systems.

"[Rhapsody's] virtualization switch is already running a Veritas application and has been for the past six months," Canova said. Currently, Brocade OEM partners are evaluating the technology.

"What we really acquired Rhapsody for is the virtualization switch," Canova said, speaking at the investor conference. "What it allows us to do is take advantage of being a leader in fabric-based applications."

Indeed, competition to host intelligence on SANs has recently heated up, analysts at RBC Capital said in a recent report about Brocade.

"The fabric itself needs to become an enabler," Canova said. "Companies need to be able to take advantage of tools that manage very, very large networks."

Brocade wasted no time in moving to leverage the Rhapsody properties. Last month, the company entered into a technology- sharing agreement with Hewlett-Packard, under which HP VersaStor virtualization technology will be deployed within the new Brocade SilkWorm Fabric Application Platform. Analysts said this was the first Brocade deal that embraces the Rhapsody virtualization technology.

But the Brocade-Rhapsody deal is far from the only merger or acquisition in the market.

Right before that deal was unveiled, IBM said it agreed to acquire Trellisoft to provide storage resource management functions in its own product line. Veritas Software, meanwhile, acquired Storage Reporter for similar technology.

What's more, EMC late last year acquired Prisa Networks for $22 million and bought an equity interest in independent software vendor Diligent Technologies.

And storage vendor McData, which recently posted strong fourth-quarter 2002 earnings, said in a filing with the U.S. Securities and Exchange Commission late last year that it "may engage in future acquisitions. %85 As part of our strategy, we expect to review opportunities to buy other businesses or technologies that would complement our current products, expand the breadth of our markets or enhance our technical capabilities, or that may otherwise offer growth opportunities."

Martin Suzman, co-owner of storage solution provider BackupWorks, Santa Ana, Calif., said, "Resellers like us benefit from tons of different products." Suzman was not sold on the notion that some companies,such as Brocade with its pickup of Rhapsody,are trying to hasten their entry into more advanced technologies such as virtualization.

"They just want to grow their gross [revenue]," he said. "That's how they increase their earnings,by acquisition."