September 2, 2004 11:40 AM PDT

Disk storage outlook dimmer

Sales of a key kind of data storage hardware rose 5.1 percent in the second quarter, but the outlook for the product category is less rosy, according to a new report from research firm Gartner.

Gartner on Thursday said sales of external, controller-based RAID disk storage hit $3.23 billion, up from $3.08 billion in the second quarter of last year. Such storage equipment is sold by companies like EMC, Hewlett-Packard and IBM, and is often used at larger businesses to hold data for mainframe computers or groups of servers.

Gartner said sales of these products are likely to hit $13.8 billion this year, down from an estimate earlier this year of $13.9 billion. The lowered target stems partly from trouble at HP, Gartner analyst Roger Cox said. HP remained second to leader EMC in sales in the second quarter. But the Palo Alto, Calif., computer giant saw its revenue fall 8.5 percent year over year to $532.5 million, and its market share slipped 2.4 percentage points year over year, to 16.5 percent.

"I'm concerned about HP's ability to recover in the third calendar quarter," Cox said.

HP recently replaced three executives after poor performance in its enterprise servers and storage unit led to disappointing financial results.

Cox said HP's decline in the Gartner report owed to distribution problems as well as weak products in the midrange disk storage market. "They really let their EVA (Enterprise Virtual Array) and MSA (Modular Smart Array) get behind the disk technology curve," he said. Those products did not incorporate the newer serial ATA drive interface, while competitive products like EMC's Clariion did, Cox said. HP has since upgraded both the EVA and MSA lines, Cox noted.

HP declined to respond directly to the comment about its midrange systems. But in a statement, HP storage general manager Bob Schultz hinted that the company recognizes it can do better. "We have a great foundation with the number-one share in total worldwide storage revenues, plus the industry's broadest storage portfolio and exciting new innovations that will move our customers forward," Schultz said. "Now it's time to improve our market execution, and that's where we're focused."

External, controller-based RAID disk storage products use "redundant array of independent disks" technology to prevent data loss when a disk drive fails. They are run by their own controller device; and are separate from server computers.

While HP slipped, EMC extended its lead in this market. EMC's revenue jumped 17.4 percent to $745.6 million in the second quarter, and its market share rose 2.5 percentage points to 23.1 percent. IBM was third, with 13.2 percent share, followed by Sun, Hitachi, Dell and Network Appliance.

Hitachi held third place in the first quarter of the year, thanks partly to strong sales in Japan, Cox said. The company's slip in the second quarter probably is due in part to the fact that Hitachi plans to announce a new product later this month, Cox said. The upcoming announcement may have led customers to delay a Hitachi purchase.

Dell has a partnership with EMC to make and sell storage equipment. Gartner's numbers for EMC do not take into account revenue earned from machines that Dell resold. Similarly, Sun and HP resell equipment from Hitachi. Gartner's numbers for Hitachi do not reflect revenue from those arrangements either.

 

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