Sun, Hitachi Talk Storage

5:40 PM -- Hitachi Data Systems and Sun have been storage partners for years, and industry insiders say that partnership could lead to the next huge storage acquisition.

There are whispers that Sun will sell off all or part of its storage business, and HDS is considered a likely candidate to buy. One source with ties to Hitachi says HDS's parent company in Japan has discussed a deal with Sun execs, but nothing is imminent.

"Sun is talking to Hitachi Japan about its storage," the source says. "Both sides are exploring their options."

Those options are for Sun to sell its entire storage division one year after acquiring StorageTek for $4.1 billion, or to sell only its disk or only its tape business to Hitachi. (See Sun Sets on StorageTek.)

Neither of those options makes sense right now. It's unlikely Sun would surrender its entire storage line so soon after buying and integrating StorageTek. And why would Hitachi want Sun's disk business, when it has its own SAN portfolio, including the enterprise TagmaStore SAN that Sun resells now? It also doesn't make sense for Hitachi to get into the tape business at a time when tape is in decline.That doesn't mean that Sun won't sell and Hitachi won't buy -- they might just find different partners. A former Sun storage executive thinks there is a good chance Sun would spin off its disk business for the right price. "Anything is possible with them, but all indications inside the company are that they want to keep the tape business," the source says.

A financial analyst who follows HDS says it is unlikely to make any deals now. He believes HDS is completing a rocky quarter after making substantial gains with its TagmaStore system against EMC's Symmetrix over the past two quarters. The analyst attributes the slump to two factors: a recent reorganization of the HDS sales force, and EMC getting its act together on Symmetrix after a couple of tough quarters. (See Tucci: EMC's Problems 'Self-Induced'.)

In this analyst's view, most of Hitachi's problems at the moment have been caused by sales force reductions.

"Right now may not be a very good time for HDS to think about acquisitions," he says. "They are having issues. HDS needs to fix those issues first, before trying to eat another company. HDS did very well the last two quarters and put pressure on EMC. But in the third quarter, the fortunes reversed."

Dave Raffo, News Editor, Byte and Switch