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Money for Nothing

In case you haven't been watching lately, there is a lot of consolidation going on in the storage industry. Companies are swallowing up others right and left and even behemoths like EMC are occasionally the targets of buy-out rumors. (I say Starbucks should buy EMC: They've already figured out how to overcharge for a cup of coffee, so there shouldn't be too much of a culture clash there.)

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Some would argue that consolidation is to be expected in the current economy. The consumer appetite for certain classes of storage, especially big iron, has been largely sated and the Fortune 500's spending on IT products and services, hovering as it is at just around 5 percent growth annually, isn't generating sufficient revenues to enable vendors to keep up with Wall Street growth expectations.

Some might argue that we are looking at a "harvest market" in big iron, with vendors of Fibre Channel SANs and enterprise storage frames merely changing out each other's equipment in the same set of accounts on a year over year basis. Tape reached this plateau in the late 1990s. It was only a matter of time before the big array manufacturers reached the same flat line revenue growth wall selling to the 2 percent of companies that account for 60 percent of storage spending worldwide.

I was mulling this point over with a few industry friends in Colorado a week or two ago. One fellow, who was recently released from a major storage vendor, was telling me about "channel stuffing" by his former employer. Basically, deals were being made with large resellers to book a lot of orders for arrays that the vendor had no intention of ever filling. The objective was to make quarterly sales numbers look better to the market analysts to simulate the appearance of robust sales for the company's products.

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