MTI Halts Its Hardware

MTI Technology Corp. (Nasdaq: MTIC) has decided to throw in the towel on its storage system business, after struggling for the past year through restructurings and layoffs to keep its head above water (see MTI Running Low on Gas and MTI Stuck in Storage Slump).

The company, which until now has produced its own branded SAN and NAS systems, announced today that it will start reselling EMC Corp.'s (NYSE: EMC) full line of storage systems and software to its customers (see MTI to Resell EMC Gear). While MTI says it will continue supporting and servicing all of its own existing branded storage products for its installed customer base, today's news appears to be the execution notice for the its hardware development business. Instead, MTI is repositioning itself as a pure services company.

Robert Linsky, MTI's senior VP of product marketing and global strategies, says the company simply wasn't investing as much in the storage software as many of its competitors. Its products are "on parity with the rest of the industry," he says. "But we came to realize that if you're not No. 1, 2, or 3 in the space, why are you in the space?" [Ed. note: MTI just started wondering about this now???]

From now on, MTI will only sell EMC storage arrays. "For any disk-based storage solution, if a customer asks can you sell us something other than EMC, the answer is 'No,' " Linsky says. "There is a tremendous amount of trust between our two companies."

That may well be, but investors reacted negatively to the announcement, as the company's stock price took more than a 23 percent hit in trading today, slipping to close at $1.03.Aberdeen Group Inc. analyst David Hill notes that it has been a struggle for MTI as a smaller player in the storage game. But he says that once MTI made the choice to refocus its business, joining forces with storage giant EMC was probably a good move. "They've picked a strong vendor," he says.

Today's agreement calls for MTI to resell EMC's full line of automated networked storage systems and software as part of its services offerings, including storage networking assessment, installation, resource management, and data protection. MTI will also sell EMC's management, infrastructure, and data protection software. In addition, MTI has become an EMC Authorized Service Network provider and will offer the ability to service EMC Clariion systems.

Will the new deal mean more layoffs at MTI? Linsky insists that the company's refocused business strategy won't involve any further restructuring of the business. "We've been moving out of manufacturing for quite some time," he says. "Now, we're going to start stacking up on our sales force." After laying off about 200 employees last year, the company currently has a headcount of 360 worldwide.

With reseller deals with companies in every field of the storage arena, the company claims to be uniquely positioned to offer customers unified service across the board of a range of best-of-breed products. "We're one of the few guys out there that cover the full spectrum of what we call storage," Linsky says.

MTI currently resells products from Brocade Communications Systems Inc. (Nasdaq: BRCD), Emulex Corp. (NYSE: ELX), FalconStor Software Inc. (Nasdaq: FALC), Legato Systems Inc. (Nasdaq: LGTO), Storage Technology Corp. (StorageTek) (NYSE: STK), QLogic Corp. (Nasdaq: QLGC), Quantum Corp. (NYSE: DSS), and Veritas Software Corp. (Nasdaq: VRTS).As for EMC, the company says the deal fits well with its overall strategy -- which might be summed up as get more people to sell EMC stuff. "EMC has been expanding its channel and has been looking for a company that could wrap services around our products," says EMC spokesman Rick Lacroix. "MTI was a good fit."

Eugénie Larson, Reporter, Byte and Switch