StorageTek & Permabit Mingling

Startup Permabit Inc.

is losing a CEO -- and gaining a significant OEM partner.

Randy Seidl has stepped down as CEO of the Cambridge, Mass.-based startup to head eastern regional sales for Storage Technology Corp. (StorageTek) (NYSE: STK). And in what appears to be a related move, StorageTek will OEM Permabits content addressed storage (CAS) products to compete with EMC Corp.'s (NYSE: EMC) Centera.

StorageTek spokesman Bob Wientzen confirms that Seidl's joining StorageTek, but Permabit won’t comment on word that its CEO has left. (Yes, really, they refuse to comment either way.) As to the OEM deal between StorageTek and Permabit, Wientzen won't confirm it either. But he notes that archiving and fixed content is important to StorageTek and that an announcement will follow "later this quarter."

Separately, sources close to both companies say Seidl bolted Permabit for StorageTek within the last month and that StorageTek’s sales force is already quoting prices on the Permabit product.

"It's an open secret that Randy has jumped," a source says. "The other part of it is that StorageTek will OEM and release the Permabit product against EMC Centera."The situation isn't surprising. Seidl and StorageTek VP of sales Mark Ward have a history. They were executives at EMC together and went on to found a managed network services company in 2000 called GiantLoop Network, now known as CentrePath Network Inc. (see GiantLoop Closes on $40 Million and Has GiantLoop Done a Loop?). Seidl left GiantLoop for Permabit a year ago (see Permabit Launches, Names CEO).

Now Seidl and Ward will take on EMC with Permabit’s Permeon Reference Vault and Permeon Compliance Vault products. Both are software products that run on standard hardware and use a proprietary object-based file system written in Java that's designed to store huge amounts of fixed content (see Permabit Steps on the CAS and Permabit Takes Another Bite).

The pairing of products makes sense. Permabit pitches its CAS systems as low-priced alternatives to EMC Centera and Network Appliance Inc.’s (Nasdaq: NTAP) LockVault. However, few gave Permabit a chance of competing with EMC or NetApp without an OEM deal. Now it has one.

StorageTek came to see the need for CAS when it began losing tape sales to Centera and other disk archive products (see Services Save StorageTek).

“One could argue that you would still need tape libraries for archiving, even if you use disk libraries for backup,” says analyst Kaushik Roy of Susquehanna Financial Group.

“But our checks are indicating that many customers are actually substituting disk libraries for tape libraries. The tape library vendors are in denial. But numbers don't lie: StorageTek’s revenue guidance for 2004 has been coming down over the last two or three quarters.”Seidl's appointment at StorageTek and the OEM deal are expected to be announced within a few weeks. But it may not end there. There is scuttlebutt that the StorageTek/Permabit relationship could eventually deepen. The precedent: StorageTek last month bought Storability Software Inc., a storage resource mangement software company with which it had an OEM deal (see StorageTek Salvages Storability).

“It makes total sense for StorageTek to buy Permabit,” one financial analyst says. “Permabit has products in the archiving and CAS markets... StorageTek is missing out on this growing market without a competitive product. This also ties in with their focus on increasing their disk business.”

— Dave Raffo, Senior Editor, Byte and Switch