Compaq puts billion-dollar faith in storage

Compaq puts billion-dollar faith in storage

Compaq's recently signed $US1 billion storage networking deal with IBM is an obvious attempt by Compaq to realign itself in one of the industry's most lucrative markets. But according to a company executive, the shift won't be easy.

Mark Lewis, vice president of enterprise storage for Compaq, said he believed the initiative may be plagued by teething problems. In fact, he conceded he did not have faith that Compaq would succeed in "repositioning (its) brand as a storage specialist quickly". Compaq was more famous as a leading hardware supplier, he said.

And EMC, Compaq's "biggest competitor" in the storage area networking space, may overshadow the joint initiative.

Compaq entered the deal to tap into the lucrative storage systems market, tipped to hit $US53 billion globally by 2003, according to IDC. The partnership was aimed at fostering market competition, not stifling it, Lewis insisted. "We want to create a level playing field," he said.

Lewis said he felt it was crucial to secure a stable partner like IBM to lift its storage networking profile. "IBM was a perfect fit," he said, citing Big Blue's position as the world's third-largest storage technology provider as a winning factor in the alliance.

Under the deal, the companies will sell products from each other's storage portfolios, and provide plug-and-play interoperability for their storage software and hardware.

The companies have a 50-50 investment in the alliance. Their investment will finance training costs for storage specialists, interoperability labs and engineering equipment, Lewis said.

The shared storage portfolio will also increase depreciation time on the value of the storage solution from an 18-month cycle to a three to five-year cycle, Lewis claimed. "It's not saying Compaq is better. It just depends on the equipment you buy."Lewis refused to provide a forecast for the deal's local return on investment, saying it would "not (create) a significant change" in earnings, but an "overall acceleration" of the storage market. "We will stay on track with aggressive growth," he asserted.

Compaq earned $US40 million in enterprise storage product sales in 1999. Lewis predicted this would grow to $US140 million this year.

Over the next 45 days, Compaq Australia will conduct a pre-sales training and assessment program before selecting accredited Australian resellers for the initiative, according to Stephen Bovis, Compaq Australia's manager of enterprise products. Bovis tipped Express Data and Sims International, a specialist storage reseller, as local distributors for the open storage network deal.

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