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Intel Invests - Who Else Will Step Up?

Talk about a stimulus package you can believe in. Intel last week announced that it is going to invest almost $7 billion to build next-generation chip manufacturing plants in the U.S. and does not plan to raise capital to do it, leveraging its own cash. To quote their spokesperson Chuck Mulloy, "you never save your way out of a recession, you invest your way." Thank you, Intel.

How about some of the cash-rich companies in the storage industry taking this advice? For example, NetApp has over $1 billion in cash, EMC has over $5 billion, and Cisco has a staggering $20 billion. Let me be clear, I believe in free markets and these companies and others can do whatever they want with their money. It is their money and they earned it -- but could doing the right thing be good for business?

I know the "Street" does not react well when a company indicates that they are going to lower operating profits to invest. I am reminded of NetApp's similar announcement this time last year when it said, despite the down economy (I guess we didn't know what "down" really meant) it was going to lower short-term operating margins to invest in sales and marketing. The street responded, like it did after the Intel announcement, with a healthy dose of skepticism, and I wouldn't expect a different response from people thinking short.

There can be a business upside. First, this is a good time to hire people since the talent pool has grown a bit. Second, we all believe that at some point the economy is going to turn around, so wouldn't it make sense to use this time to move storage technology a quantum leap forward so that when the turn begins you are ready to capitalize on it? This means investing in projects that are going to take a few years to complete. It means hiring people that will make it happen. Meanwhile, if your competitors are standing still, waiting out the storm, they will be flat footed when the economy starts moving again.

Third, when recovery occurs it will not be as if a light is switched on that says "Open for Business." It will be a gradual climb out. During this climb there is going to be a slowly increasing number of companies that need new storage solutions and since you kept innovating, you will be able to catch the front side of the curve.

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