Mr. Roy: Typically we classify the storage companies in three categories ' storage capacity, storage software, and storage networking. Under the storage capacity vendors, I cover EMC (EMC), Network Appliance (NTAP), and Dot Hill Systems (HILL), which provide storage subsystems; and StorageTek (STK) and Overland (OVRL), which provide tape libraries. Under storage software I have Veritas (VRTS) and BakBone Software (BKB:TSE), and under storage networking I have McData (MCDTA), Brocade (BRCD), QLogic (QLGC), Emulex (ELX) and Adaptec (ADPT).
TWST: What has gone on with this group from a business perspective so
far this year?
Mr. Roy: Let's start a little further back. When things started to
collapse in 2001, storage was one of the last sectors within IT to
collapse. And when things started to pick up, storage became one of the
first sectors to pick up. What happened was this: as the economy entered
the past recession, companies stopped buying storage, partly because of
overcapacity and partly because of across-the-board spending cuts. But
the data kept growing. As a result, the storage utilization rate has
gone up from 40%-50% to, say, 70% or 80% over the course of the past two
years. So now, as data continues to grow and these old systems reach
obsolescence, some enterprises do not have a choice but to buy
additional storage capacity. If CIOs have any money left in the budget
at year-end, chances are, storage will be one area she or he spends it
on. So that's in storage capacity. There are other drivers as well '
look at September 11, look at the blackout. These types of events have
raised the priority of disaster recovery and business continuity
solutions. Large enterprises have always been focused on it, but now
small and medium-sized businesses are looking at such solutions. You'll
see that storage networking companies have actually grown in the last
year or year and a half, and why is that? Although the overall storage
spending was muted in the last two years, whatever little money was
going into storage, CIOs decided to spend in areas that increased
utilization rates and reduced their cost of labor and thus total cost of
ownership. Storage area networks (SANs) fit that description because
they help the sharing of data capacity, thus increasing the utilization
rates of existing storage capacity. Storage software also reduces the
total cost of ownership.
Tickers included in this excerpt: ADPT, BKB:TSE, BRCD, CSCO, ELX, EMC, HILL, MCDTA, NTAP, OVRL, QLGC, STK, VRTS
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