Gateway Thunders Into SAN Market

PC maker moves toward becoming 'branded integrator' with Hitachi reseller deal

November 19, 2003

3 Min Read
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Gateway Inc. is following its major PC competitors into the midrange SAN market, announcing a deal today to resell the Hitachi Ltd. (NYSE: HIT; Paris: PHA) Thunder 9500V series of storage arrays.

The move will put Gateway into competition with longtime PC rivals Dell Computer Corp. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), and IBM Corp. (NYSE: IBM) in a midrange SAN market that also includes EMC, Network Appliance Inc. (Nasdaq: NTAP), and Sun Microsystems Inc. (Nasdaq: SUNW), as well as Hitachi.

Data Mobility Group senior analyst John Webster says the question now is: How good will Gateway be as a channel? "Gateway got a quality product [in the Hitachi Thunder]," he says. "Well have to see how successful they’ll be in penetrating the storage market with it, because they have no presence there."

Gateway’s push into the storage market is part of the company’s overall strategy to become more of a "branded integrator" and expand its small and midsized business customer base.

The company is entering the storage market after losing $138 million in the third quarter of 2003. Most of its sales in the quarter were on the professional side, which was flat from the previous year while consumer sales dropped nearly $200,000, or 33 percent.Gateway closed 82 retail stores during the first nine months of the year -- almost one-third of the total it started with in 2003. So a big part of Gateway’s strategy is fewer stores and more storage. Along with the Hitachi announcement today, Gateway announced a NAS appliance designed to run on Windows Storage Server 2003, a Serial ATA RAID storage device, and systems management software.

“Storage is a vastly growing market,” says Scott Weinbrandt, general manager of Gateway’s Enterprise Systems Division. “The SAN market is slowing down a little, but there’s still a lot of room for share growth and market to be taken. Companies want more than two Tier 1 options to choose from.”

Unlike Dell’s deal to cobrand EMC storage products, Gateway will not sell Hitachi’s product under the Gateway name. Gateway will install and support the Thunder 9500V series, which sells at an average of $50,000 per unit. The product line ranges from the single-tray 9530V, with a peak capacity of 2 Tbytes across 14 disks, to the rack-mounted 9580V, which provides 64 Tbytes of peak capacity across a maximum of 440 disks.

“What Dell did with EMC raised questions that Dell wasn’t a true SAN player,” Weinbrandt says. “We don’t want people to think we’re going to get into a competitive and complex SAN market and be the market leader initially. Our goal is to prove we can be a strong player in that market and then consider branding our own product.”

In August Gateway introduced a 12-drive SCSI RAID array, promising to broaden its storage portfolio over time (see Gateway Chews Storage Cud).Hitachi, for its part, is following its familiar strategy of licensing SAN products to hardware vendors. Sun and HP resell Hitachi’s high-end Lightning 9900V line (see Sun: We Still Love Hitachi, Too! and HP, Hitachi Renew Vows).

Webster says it makes sense for Hitachi to find a partner in the midrange area as well.

“We know Dell’s already spoken for," he says. "There are other partners out there, and Hitachi’s found one. Hitachi needs feet on the street. To get those feet, either you have to go out and hire them or do relationship selling. Hitachi has had some success in the high end with HP and Sun.”

— Dave Raffo, Senior Editor, Byte and Switch

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