HP Making Virtual Progress

Hewlett-Packard Co. (NYSE: HPQ) may be developing a new virtualization product, one based on its relationship with FalconStor Software Inc. (Nasdaq: FALC).

Sources say HP and Falconstor have reached a tentative agreement for HP to use FalconStor software for a virtualization product. One source, who asked not to be named, says the product would be an in-band appliance that competes with IBM Corp.'s (NYSE: IBM) SAN Volume Controller, Hitachi Data Systems' TagmaStore virtualization capabilities, and the coming Storage Router from EMC Corp. (NYSE: EMC).

HP's new product would compete head to head with IBM's and HDS's, which also take an in-band approach to virtualization. EMC is developing an out-of-band appliance due in the first half of the year. (See IBM Revs Virtualization Engine, Hitachi Struts Mr. Universal, and EMC Takes Storage Router for a Spin.)

The new HP offering would ostensibly replace the embattled HP OpenView Continuous Access Storage Appliance (CASA), which the company recently lost the right to sell after a drawn-out legal battle with EMC.

Let's start at the top. The pressing need for a new virtualization product follows the apparent downward spiral of CASA, originally named the SV3000. HP picked up the product with its stock-based $350 million acquisition of StorageApps in 2001 (see HP Acquires StorageApps). In that purchase, HP also inherited EMC's lawsuit against StorageApps for patent infringement. EMC won the case in May 2004 and an injunction in October, which prohibits HP from selling the product with the disputed functionality.