Toshiba looks to tap server appliance trend

Toshiba is teaming with specialized server maker Connex as part of a larger effort to push into a booming segment of server appliances.

Despite its widely recognized name, Japanese electronics giant Toshiba hasn't had the success of Dell Computer, Compaq Computer or IBM in selling servers,

Gartner analyst Pushan Rinnen says Toshiba will likely face challenges because its brand recognition is greater in consumer markets than in enterprise server and storage markets. see commentary

the powerful and profitable computers at the heart of the Internet and corporate networks. Toshiba's success in the U.S. market has been confined chiefly to notebook computers.

But that could change in coming months. Sources said Toshiba is taking steps to move into the market for server appliances, specialized computers hardwired to perform a specific job faster, more conveniently or at a lower price than general-purpose machines.

Some server appliances, for example, strictly handle email or encryption. Shifting this activity to an appliance reduces the time required to perform secured transactions and eases the burden placed on general-purpose servers.

Server appliances, a hot new market, have attracted the entire hardware industry's attention. Compaq, IBM, Dell and even Intel have launched major server appliance efforts.

The computing industry giants, though, have had trouble moving with the nimbleness of start-ups such as Cobalt Networks and Network Appliance, which have focused on server appliances from the start. Consequently, the big companies often have relied on licensing start-ups' technology or have acquired them outright.

For example, Hewlett-Packard signed deals with two different server appliance makers, CacheFlow and Procom. And Hitachi, another Japanese giant trying to make inroads into the U.S. market, signed a deal to sell Technauts' server appliances.

One partner Toshiba has approached is Connex, a subsidiary of hard disk maker Western Digital that designs server appliances that store files on a network.

Connex built a special version of its Connex N3000 server that Toshiba showed at the PC Expo trade show last week. The server, complete with a Toshiba logo, was built at the request of the electronics giant, said Bob Wilson, vice president of sales and marketing at Connex, a 125-person company headquartered in San Jose, Calif.

While neither Wilson nor Toshiba representatives would say whether Toshiba and Connex have signed a deal to sell the Connex products, Wilson said having larger companies sell its products under their names is a key part of the company's plan. He added that Connex hopes to meet with Toshiba executives in Tokyo next week.

The display of the Connex product under the Toshiba name at PC Expo was part of a "concept test to see if feedback was positive," said Toshiba spokeswoman Marie Meoli. Because the feedback was positive, Toshiba now is "looking to further the relationship," she said.

The server appliance push dovetails with another server effort at Toshiba. The company also is tapping the fast-growing but already crowded market for thin, rack-mountable servers.

But Toshiba in some ways has more to gain from server appliances. Where Dell, IBM, Compaq and HP have to worry about cannibalizing sales of existing products, Toshiba's relatively minor presence means it has little to lose.

Toshiba, with $31 million in revenue in the first quarter of 2000, was in 13th place with 1 percent of the worldwide Intel server market share, according to research firm International Data Corp.

Connex expects to sell about a quarter of its products under other manufacturers' brand names, Wilson said. Its N3000 network attached storage (NAS) server costs between $8,000 and $22,000, he said.

The system uses standard components found in most Intel servers, along with a small, specialized version of Wind River Systems' VxWorks operating system, Wilson said. Most of the company's efforts go into designing software, he added.

Western Digital's Connex strategy fits into a trend among hard disk makers to find a more profitable way to sell their drives. Western Digital acquired Crag Systems to form Connex in February 1999, while Quantum acquired Meridian Data Systems to form its Snap server line. Maxtor has based its MaxAttach servers on its acquisition of Creative Design Solutions.