Sun/StorageTek deal could affect HP reseller pacts

Sun/StorageTek deal could affect HP reseller pacts

Though they disagree on the timing, analysts claim the planned buyout of Storage Technology (StorageTek) by Sun Microsystems will probably force the cancellation of StorageTek's reseller agreement with HP.

Questions about the reseller agreements emerged in the wake of the announcement last week by Sun that it will spend $US4.1 billion to buy StorageTek in a bid to strengthen its portfolio.

An analyst at Enterprise Strategy Group, Brian Babineau, said he expected that Sun rival HP would probably drop its reseller agreement with StorageTek once the buyout is complete.

"I've got to believe that if you're HP and you have other choices for tape vendors ... you'll be able to rationalize changing your entire tape portfolio without having StorageTek in the mix," Babineau said. "One can expect that the StorageTek business at HP will dwindle quickly."

Analyst at Merrill Lynch, Shebly Seyrafi, agreed that HP would shift suppliers but said that the change would occur over the long term. In the near term, she expected that HP's focus on revitalising its storage business would lead it to stick with StorageTek and Sun.

Enterprise Strategy Group estimates that 5 per cent to 7 per cent of StorageTek revenue is currently derived from HP reseller sales.

Babineau said he believed that Quantum and Overland Storage, both of which already sold automated tape systems to HP, had a chance to take over StorageTek's reseller business.

Director of marketing at HP's StorageWorks division, Patrick Eitenbichler, said both Sun and StorageTek reassured him that the companies would continue to support any existing reseller agreements.

Nonetheless, the deal caught HP off guard.

"I haven't found anybody inside HP who wasn't surprised by this," Eitenbichler said. "I think everybody would have expected Sun to go more in the software direction. To buy a tape storage hardware vendor is difficult to understand. The tape market is ... declining right now."

General manager of StorageTek's Information Lifecycle Management group, Brenda Zawatski, said, "We don't anticipate any changes in our OEM agreement. It's like the relationship ADIC has with IBM and EMC on the tape side."

Zawatski was referring to reseller agreements Advanced Digital Information has kept with the competitors.

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