The Odd Couple, or Soul of a New Machine?
Just as the vacation season peaked, the storage industry percolated. The IBM story (see p. 1) seemed big in early August, but the mid-month EMC-DG acquisition announcement was enough to send any RAID vendor out of the beach chair and back to the cell phone.
As noted in our cover story this month, in terms of changing the competitive landscape the (probable) acquisition ranks up there with IBM`s 1996 decision to resell StorageTek`s "Iceberg" and Compaq`s acquisition of Digital`s StorageWorks.
Despite prevailing emotion toward EMC (mostly fear and loathing), this was a brilliantly strategic move on EMC`s part, both offensively and defensively.
On one hand, EMC gets what it lacks: a solid mid-range RAID strategy and sane pricing. On the other hand, it blocks competitors from snagging Clariion, which was going to be sold one way or the other.
Unlike a few financial analysts, I`d say the price was right: roughly $1 billion in an all-stock transaction for a company with fiscal 1999 revenues of about $1.5 billion. The deal will go a long way in helping EMC achieve its once-questionable goal of hitting $10 billion in revenues by 2001.
It`ll be interesting to see how a combined EMC-Clariion, together with the Sun-STK and HDS-HP alliances--not to mention a reinvigorated IBM--will affect second-tier RAID suppliers. I predict further contraction and consolidation over the next few months, with a welcome stabilization setting in next year.
I`m also curious about what EMC will do with DG`s Aviion server division, which it can`t sell off for two years under the terms of the agreement.
It`s clear EMC doesn`t want to be in the server business, so it has two choices: 1) operate Aviion in maintenance mode for two years and, unless it dies a natural death, sell it off, or 2) use Aviion`s symmetrical multiprocessing NUMA technology in some sort of NetApp-killer NAS device. I`m not sure the former choice makes sense from a technology standpoint, so I`m betting on the maintenance mode approach.
However, EMC has been making inroads with its Celerra NAS server, despite stealth-mode marketing. And, with the imminent entry of major server players such as Compaq into that market, NAS is poised for serious growth. And EMC`s too smart to miss out on those revenues.
But before EMC can take advantage of the DG acquisition, it`ll have to address the culture clash issue. It`ll be interesting to see how Felix and Oscar work things out once the deal is completed.