They Keep Losing? Why?

Posted on June 28, 2013 By Henry Newman

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There's a great article by Chris Mellor in the Register about how the traditional storage vendors are in decline. Dell, HP, IBM, and NetApp—you name your major vendor, and it are in decline. Chris states, and I think he is correct, that the new smaller vendors are taking away the sales and profit.

The connection vendors are having the same problem. Qlogic’s CEO just resigned.

This reminds me of the late 1990s when the nimble vendors were making money and many of them got purchased. Sun and EMC were big consumers of these smaller vendors. I honestly cannot think of a single vendor that Sun purchased from say 1996 to 2004 that was successful inside Sun. On the other hand, many of the vendors that EMC purchased were successful. We know how this worked out for both Sun and EMC.As I am a big fan of believing that history repeats itself, I think that we are ripe for the smaller vendors getting plucked. Of course, times are quite a bit different now than in the late 1990s. We just exited a major recession, and companies are not flush with cash and have high value stock. So what I think will be different this time is that the big vendors will be far more choosey than the kid-in-a-candy-store approach of the 1990s when they were buying everything that they could see.

It is clear that first on the agenda are the SSD companies, where consolidation has been going on for a while. I think many big vendors learned their lessons on how to integrate and how not to integrate.

If I were the big vendors, I would be looking for companies that complement my products, that are operating independently now and are profitable with a good balance sheet. Might be an investment opportunity.

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