HP Upgrade Features OEM Crowd

StorageTek and a handful of startups have a lot riding on the upcoming HP launch

May 14, 2005

3 Min Read
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If Hewlett-Packard Co.'s (NYSE: HPQ) storage tide rises from next weeks product rollout, it could lift a lot of boats with it.

The storage gear HP plans to launch officially next week encompasses OEM gear from Storage Technology Corp. (StorageTek) (NYSE: STK) and startups PolyServe Inc., Riverbed Technology Inc., and Sepaton Inc.

HP will OEM StorageTek’s midrange tape library, PolyServe’s clustered file system software, Riverbed’s WAN accelerator software, and Sepaton’s virtual tape library (VTL) engine (see HP in Deal With Riverbed, Sources Say).

The largest deal from a revenue standpoint is likely one that has been the works for a while -- HP's agreement to sell StorageTek’s SL500 midrange tape library as a companion to its new Enterprise Virtual Array (EVA) midrange SAN systems (see HP Plans EVA Facelift). As it has been telling customers since last fall, HP will rebrand the SL500 as the Enterprise Modular Library (EML) family (see StorageTek, HP Deal on Tape and StorageTek Slings SL500).

Despite the reduction in use of tape as backup media, the market is still solid: According to IDC, tape automation gleaned $1.8 billion in 2004. At least one financial analyst, Shebly Seyrafi of Merrill Lynch & Co. Inc., thinks the tape deal could bring StorageTek a sizeable chunk of those sales -- an additional $22 million in revenue this year and $66 million in 2006. That revenue will likely come at the expense of HP’s other OEM library partners – Quantum Corp. (NYSE: DSS) on the high end and Overland Storage Inc. (Nasdaq: OVRL) on the low end. This is also a reunion of sorts: It is the first tape library OEM deal between HP and StorageTek since HP replaced StorageTek as its high-end partner with Quantum three years ago.

Although the startups probably won’t make as much money from their OEM deals as StorageTek will, partnering with HP is even more crucial to their business outlook. HP is the first major OEM partner for PolyServe, Riverhead, and Sepaton, and all three expect the relationship to improve their chances of long-term success:

  • HP will use PolyServe’s software in its first enterprise NAS system, the HP Enterprise File Services Clustered Gateway. PolyServe, which sells its software on off-the-shelf hardware and through smaller partners, will provide HP with global file system and NFS support. HP will package the software on ProLiant servers as a gateway connecting to its storage arrays.

    PolyServe claims more than 500 customers, but general manager of Linux Systems Steve Norall calls the HP partnership “a cornerstone deal for our company.”

  • HP will license Riverbed’s Steelhead software for its Enterprise File Services WAN Accelerator to provide wide-area file services (WAFS) for branch offices. Riverbed becomes the latest startup offering this kind of technology to hook up with a major vendor. Cisco Systems Inc. (Nasdaq: CSCO) bought Actona last year for its WAFS appliance, and Brocade Communications Systems Inc. (Nasdaq: BRCD) last week bought a minority stake in, and forged an OEM deal with, Tacit Networks Inc. (see Brocade Invests in Tacit).

    Riverbed claims 150 customers within a year of launching product, but marketing VP Alan Saldich says it will be a lot easier selling through HP than going it alone as a startup (see Watch Out for WAFS). “Often, large companies tell us they would prefer to buy our product from HP,” he says.

  • Sepaton, one of the early VTL players, is providing the engine for HP’s StorageWorks 6000 VTL. “This really extends our reach into the marketplace,” Sepaton CEO Mike Worhach says.

    Like WAFS, VTL is another space where established companies are using startups to gain entry. Network Appliance Inc. (Nasdaq: NTAP) acquired Sepaton rival Alacritus last month (see NetApp Annexes Alacritus). — Dave Raffo, Senior Editor, Byte and Switch

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