Shark Snapping at Storage Foes

On Tuesday, IBM unveiled upgrades and new peripherals for its "Shark" refrigerator-sized storage server. It's the start of the storage wars, and IBM's jaws are snapping at competitors' market share.

by Clint Boulton and Colin Haley of internetnews.com [August 1, 2001]

IBM Corp. (NYSE:IBM) Tuesday unveiled breakthrough storage products in its quest to gain market share from storage standby EMC Corp., (NYSE:EMC) which has had its troubles in recent months.

Big Blue plans to roll out a fiber channel-based connection (FICON) for customers' high-end disk systems, under the belt of its TotalStorage Enterprise Storage Server, or "Shark", as well as two new models of the IBM TotalStorage Virtual Tape Server (VTS). Taken together, these technologies and products should increase the amount of data that customers can store, but will also speed up data transfer.

Fi, fie, foe, FICON
With FICON, Shark can ramp up data transfer rates to 100 megabytes per second (Mbps), compared with the 17 Mbps per second performance of the current standard Enterprise Systems Connection (ESCON), a mainframe standard created by Big Blue in 1990. IBM also enhanced Shark with the availability of a 24-gigabyte (GB) cache (as opposed to 8-, 16- or 32-bit) for increased flexibility.

When used with Shark, IBM offers a FICON storage solution which enhances performance, distance, and sharing, and reduces infrastructure costs by allowing multiple ESCON channels to be replaced with a single FICON channel.

Basically, with FICON-based storage for mainframes customers may connect mainframes directly to the same storage area networks (SANs) used by UNIX and Windows/NT servers. While there isn't total interoperability, a common SAN infrastructure can ease the administration of storage networks and enable customers to modify their requirements based on what their businesses call for.

"FICON will deliver a significant boost to the performance of many mainframe applications," said John McArthur, vice president of storage research for IDC.

"As more and more enterprise customers are using Windows and Unix, we are trying to address their requirements," Chris Saul, marketing program manager for IBM's enterprise storage group, told InternetNews.com. "Mainframe customers will be able to share storage without needing all sorts of separate fibers and switches."

IBM's advantage, some analysts feel, is that it is the first to bring such a solution to market; it's due to hit the racks in September. John Webster, an analyst with research firm Illuminata, told InternetNews.com that IBM's move to bring FICON to the table will keep the rival wolves at bay for bit, but that EMC and Hitachi (NYSE:HIT) would probably make aggressive moves to counter Big Blue.

"IBM will have an advantage for the period of time in which EMC [and others] cannot deliver similar solutions to customers," Webster said. "I think IBM's customer base will find that this an attractive solution. Customers demand mainframe solutions and it's been a while since IBM refreshed their channel protocols."

As for the new virtual tape systems, the products are the first of their kind to be powered by the technology titan's copper chip technology, effectively doubling storage performance. Copper, in lieu of silicon, lowers power requirements and reduces total cost of ownership.

The two new TotalStorage Virtual Tape Server (VTS) models, the B10 and B20, are the first storage tape drive products to utilize IBM's copper chip technology, which has been used in the firm's hardware servers aplenty. The VTS tape servers are fitted with IBM's PowerPC microprocessors, which are smaller, denser, faster and cooler than their aluminum brothers.

Harsh questions for EMC
As for the top competition it guns for, EMC Corp., it is thought that the Hopkinton,Mass.-based firm will be pressed on growth, margins and pricing at analyst meetings this week.

Investors will be "demanding answers to issues such as sustainable growth and margins, pricing, competition and near-term demand," according to a Goldman Sachs (GS) research note.

Like other hardware manufacturers, the company, has seen its revenue and earnings slide as customers cut capital budgets. As a result, EMC's stock is hovering around 20, way off a high of 104 in September.

Some issues expected to be addressed at the meetings (to be held Wednesday and Thursday in Boston) include: business pulled forward in the June quarter, sustainable gross margins, and accuracy of data from the field.

"With EMC bending over backwards to accommodate customers' reduced IT budgets, customers had little incentive to take shipments early in the quarter, resulting in an extremely back-end loaded quarter that may have seen 70 percent of revenues come in the third month," GS said.

An uneven quarter makes it difficult to forecast future results, especially if customers pulled the trigger on purchases that were too good to pass on.

EMC's price slashing could be a boon going forward however. Previously the firm's data storage equipment was clearly more expensive than competitors such as IBM. Now, there is little differentiation.

"This new pricing flexibility removes one of the biggest disadvantages that EMC had faces...and will make it an even more formidable competitor in a better demand environment."

The pricing could help explain new half-year sector numbers from Gartner Dataquest. The market researcher found that EMC extended its lead in the networked information storage (NIS) market, which includes Storage Area Network systems and Network Attached Storage gear.

GS also believes that EMC's gross margins, which plummeted from 59 percent in December 2000 to 47 percent in June, will stabilize in the September quarter and begin to improve in the December quarter.

Other observers, including analysts at Banc of America Securities, don't expect EMC executives to offer any financial guidance for the current quarter. Earlier, EMC said the quarter would be difficult, in part because of the summer slowdown, but declined to give numbers.

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