SUN AND HITACHI HOOK UP ON STORAGE
Sun Microsystems (SUNW, $16.76, down 0.49) and Hitachi confirmed
long-standing rumors that the two companies would team up to sell each
other 's storage hardware and software. For Sun, the marketing and
distribution deal is aimed at rounding out its storage product line to
better compete with EMC (EMC, $17.70, down 0.60) and IBM (IBM, $104,
unch.).
The key to the deal for Sun is that the company will now resell Hitachi's
high-end storage unit under the StorEdge 9900 brand. Until now, Sun has
been able to provide its customers only with storage products for its
mid-range servers.
TODD'S TAKE: EMC says that this deal offers nothing new to data storage
customers. Although that might be true in a strict sense of the word, EMC
nonetheless should be concerned here. So far EMC has been the main
beneficiary of the fact that Sun could not supply storage products to
companies running its high-end servers. That's about to change.
Sun has chosen a great partner to fill its product line in Hitachi. This
year Hitachi has shown particularly strong growth in the sale of its data
storage products. By teaming up with Hitachi, Sun is telling its
customers that it can now deliver the total package: servers, software
and storage. Up until this point, the firm's inability to offer complete
solutions has often sent its server users directly to EMC. In fact, Sun
claims that 45% of EMC's business comes from attaching storage products to
Sun servers! Sun is aiming to take some of that business back -- and we
think it will.
On another competitive front, Sun's "total package" solution puts it more
directly in competition with IBM, a company that has its own line of
storage products to go along with its servers and software.
We've written previously that the data storage market offers one of the
best growth opportunities in the technology world. Demand for data
storage is not going to slow down, even in the face of a sluggish economy.
Instead, we think it will continue to explode. There is plenty of room
for all three of these companies to do well in this market, but that's not
to say they won't fight tooth and nail to capture market share. They
will.
The partnership with Hitachi is an aggressive move that makes perfect
sense. When companies come to Sun for servers, Sun has them in the
showroom, so to speak. Now Sun can now offer all its servers
"fully-loaded" with all the storage and software bells and whistles. This
is a great deal that will strengthen Sun's position in a high-growth area.
We expect it to produce impressive returns.
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