Watching Big Blue.....
IBM veteran charged with revamping storage business
By Bloomberg News
August 8, 2000, 4:55 p.m. PT
ARMONK, N.Y.--When Linda Sanford started at IBM 25 years ago, she was assigned to a product line that was doomed: typewriters.
Two weeks ago, the 47-year-old engineer was named a senior vice president at IBM, the world's largest computer maker. In one sense, her fortunes have changed dramatically. The product line she now controls is corporate data-storage systems, one of the fastest growing and most profitable segments of the computer industry.
In another sense, Sanford faces a more daunting task--to check the relentless rise of corporate-storage market leader EMC and move IBM back to the top ranking it once enjoyed.
"She's very bright, very sharp and aggressive and knows she's got to play catch-up," said Carl Howe, a research director at Forrester Research.
Sanford has run the storage systems business for the past seven months within IBM's server group. In late July, IBM decided to pull storage out from under the server umbrella and make it one of seven independent product groups.
Storage is "the business with perhaps the most potential for improving revenue growth" at IBM, Gartner analyst Thomas Bittman wrote recently.
IBM needs to tap that potential. Though the company's second-quarter profit surpassed expectations, sales fell by 1 percent--the third quarter in a row in which revenue declined. IBM's personal computer business had a pretax loss of $69 million, and total hardware sales slipped 5 percent.
Web servers and high-end disk drives, led by the company's premier storage product, called "Shark," both had 30 percent revenue gains in the quarter. The company expects overall sales growth to return in the second half.
IBM, based in Armonk, N.Y., lead the storage market less than a decade ago, when data lived inside mainframe computers. It slipped behind when EMC, based in Hopkinton, Mass., changed the market by adopting advanced technology that stores data on scores of disk drives arrayed so that if one fails, backup copies are instantly available.
In the meantime, data storage has boomed with the rise of the Internet. Companies now need to deliver via the Web huge amounts of information to customers in digital formats ranging from text and graphics to sound and video.
"Information data is becoming the crown jewel of a company's business," Sanford said in an interview.
EMC controls 30 percent of the $13.6 billion market for external storage units, followed by Compaq Computer with 11.1 percent and IBM with 7.9 percent, according to industry analyst IDC. Last month, IBM and Compaq formed an alliance to resell each other's storage products.
Typically, storage units are made of both hardware and software. They are separate boxes that supply information to servers, which in turn manage information flows to users on devices such as PCs or cellular phones. Forrester Research predicts a fivefold increase in corporate spending on storage systems in the next four years, even as the unit cost of storage declines.
Sales of such units are projected to make up 60 percent to 80 percent of all computer hardware purchases within five years, said analyst Bob Zimmerman of technology consultants Giga Information Group.
Companies in banking, telecommunications, media and entertainment are vastly increasing storage and moving it onto computer networks, Sanford said. The impetus has been the booming use of the Internet to conduct business.
Sanford will need to sharpen and broaden IBM's storage products to regain the company's edge in storage, analysts say.
"Right now, it's a skirmish (with EMC), and IBM doesn't have all the weapons it needs in its arsenal," said Wit SoundView analyst Gary Helmig, who has a "strong buy" rating on IBM and a "buy" on EMC.
Sanford already has moved to add firepower. Concerned about quality, in March she took the unusual step of postponing delivery of specialized software components for the Shark storage unit. Those components are starting to move to customers, though the last elements are not expected to be shipped until the fall, IBM said.
She's also focusing on a new and fast-growing storage technology niche called Network Attached Storage, where IBM is lagging because it doesn't yet have a product to compete with EMC.
"Watch this space," Sanford said.
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