A Market of Contradiction

M&A fever in a market where spending is tight. Expect more confusing news

May 10, 2006

3 Min Read
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Storage networking is a highly volatile space, where seemingly contradictory forces blur the financial picture.

The month of May has barely begun, for instance, yet we've been hit with the following news:

All that unfolded against a backdrop of reduced revenue reports from big players and reduced investment in startups. (See Storage Financials Take a Dip and Storage '06 Funding Down.) Which raises the question: What kind of market is this, where combinations and consolidation proceed so briskly despite a touch of sluggishness in user spending?

There's no easy answer. But storage networking is clearly a landscape where suppliers who can't chart the terrain fail to gain the considerable ground that's open for staking.Evidence of burgeoning demand is everywhere. Not a day passes without news of new customer deployments of storage, switches, and software. But users are looking for consolidation and savings in their networked solutions, and if a product or service doesn't offer that, it's not likely to succeed.

If you doubt this trend, take a look at the kinds of companies that are getting scrapped up or funded: Tacit has wide-area file services (WAFS), which will add to Packeteer's WAN optimization to reduce customer headaches in remote site management. Kashya brings EMC the ability to use SANs for CDP and replication, instead of relying just on servers -- a clear path to simplifying replication for big networks. (See Users Push for CDP Shapeshift .) Njini offers data classification software to further IT pros' ability to implement ILM.

The market moves listed above also point to the need for suppliers to be proactive. They must anticipate what will be required in future products and make a move to acquire the technology now, especially if developing it in house would mean getting delayed as the market heats up.

Vendors will pay the penalties for not reading the road signs, as this week's news also shows. Storage networking is not a field in which success is guaranteed. Demand may be strong, but without the requisite focus, disappointment can follow in short order.

In the long run, the financial signals make sense, if you know how to read them. Expect more "confusing" news.— Mary Jander, Site Editor, Byte and Switch

Organizations mentioned in this article:

  • Advanced Digital Information Corp. (Nasdaq: ADIC)

  • Brocade Communications Systems Inc. (Nasdaq: BRCD)

  • EMC Corp. (NYSE: EMC)

  • Kashya Inc.

  • Njini Inc.

  • Packeteer Inc. (Nasdaq: PKTR)

  • Quantum Corp. (NYSE: QTM)

  • SGI

  • Silverback Systems Inc.

  • Sun Microsystems Inc. (Nasdaq: SUNW)

  • Tacit Networks Inc.

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