Companies like FalconStor have claimed that virtualizing storage can dramatically cut operational expenses and increase utilization. Without virtualization software, servers and storage systems don't work with other systems, and making changes often means buying new gear.
So why hasn't virtualization become the rave of the day? Observers say it's because the vendors pitching it focused on the technology rather than on the problems the technology can solve. And that's obscured the benefits of virtualization for many customers. This is especially true since the tightening of IT budgets has all but killed any interest in cool technology for technology's sake. People simply want products that will help them cut costs.
Michael Karp, an analyst with Enterprise Management Associates Inc., claims that none of the approximately 40 virtualization companies out there -- which include DataCore Software Corp. and StoreAge Networking Technologies Ltd. -- are making money. "Virtualization is a means to an end, not an end," he says. "It's not virtualization that people want to buy; it's the solution."
Like many companies in the industry, FalconStor's stock price has dropped precipitously in the past year. The stock has lost nearly two thirds of its value, having dropped to $4.31 from a 52-week high of $12.24. In 2001, FalconStor had $5.6 million in sales and lost nearly double that amount. On the bright side, the company claims to have more than $50 million in cash and no debt, and it has forecast revenues of $20 million for 2002.
Many observers congratulate the company on its swift shift of focus to the specific services it can provide, like mirroring, replication, and disaster recovery, and away from the technology it uses to provide them.
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