Wm.,
<<I didn't know that SEG was a big supplier to EMC but certainly, its lost a customer. >>
Much too hasty a conclusion. However, any way you read it this is a blow to SEG IMO and frankly comes as a huge surprise to me. You mentioned you didn't know EMC was a customer of SEG. However, I have many posts here that mention the importance of this relationship. EMC is the 800 lb. Gorilla in the disk array (corporate storage) business and SEG's relationship with them has been a major asset to SEG's position in the high end. As you may not recall, SEG's position in the high end has suffered over the last 24 months as market share slipped away to a newly energized IBM and the onslaught of Fujitsu. Only recently has SEG begun to show signs of reestablishing dominance in the high end segment with timely introduction of new models that operate at spindle speeds of 10K RPMs.
I am stunned by this announcement. Why EMC is cuddling up to their primary competitor is beyond me, especially in light of SEG's recent showing in the high end.
By the way, your analysis of the deal, including the notion that EMC has agreed to buy out IBM's storage business is as flawed a notion as I have heard.
<<EMC agrees to buy the storage business by going into a long term deal for IBM's components and patent right licensing. They need to assure themselves of long term future business. >>
First of all, IBM has, from the beginning, defined the storage business in many ways, mostly in terms of technical excellence. Your scenario would really be the tail wagging the dog as EMC doesn't have any basic drive technology at all. What EMC does have is a dominant position in a segment of storage that IBM once had and covets muchly. The two companies have been arch competitors and I share some of Duker's incredulity over this deal. Secondly, your analogy to the Dell/IBM deal is flawed as well. Dell has always made IBM compatibles.
<<Dell did the same thing in the PC market. Now everything Dell is going to be IBM compatible in the business market. >> Just out of curiosity, what do you mean by "business market"?
It is terribly important IMO to understand the primary trend towards recentralization of data. In other words, we are getting more "netcentric" and less "PC centric". This argues for vast installations of data farms, where data will be stored, protected, updated, and accessible via remote communications. We are edging our way towards the disk drive industry being more driven by institutional data storage requirements then by PC OEMs unless the emerging appliance segments gains a dominant market demand position.
Seagate's recent regaining of strength in this segment has had a lot to do with their stock price IMO (as opposed to the MMs you like to blame). This announcement by IBM and EMC is going to have to be offset by some rationale before investors feel confident enough to come back IMO. We should watch SEG very carefully at this point IMO.
Best,
Stitch |
