Sun to buy StorageTek for $4.1 billion

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Sun and StorageTek have an existing partnership. Sun is StorageTek's largest original equipment manufacturer (OEM) partner, according to StorageTek, and offers StorageTek products under Sun's StorEdge brand name.

StorageTek also has reseller arrangements with Hewlett-Packard, Fujitsu Siemens, SGI and Unisys among other companies. Sun currently offers some storage products, including its StorEdge 6920 storage system, and a month ago bought storage assets from Procom Technology.

Those OEM relationships with Sun's competitors could pose a problem for Sun, analysts said. Sun executives and StorageTek's current CEO and president, Patrick Martin, said that the combined company will seek to maintain those partnerships.

"We expect the relationship to continue as is. I don't see any major concerns there," Canepa said.

Martin said that no single OEM represents more than 10 percent of StorageTek's revenue.

"We will be a consolidator"
Sun executives said that the StorageTek deal is part of an ongoing process to fill out the company's product line, and indicated that more acquisitions could be forthcoming. Sun recently bought storage assets from Procom Technology.

"We will be a consolidator in the industry," said Jonathan Schwartz, Sun's chief operating officer. "This represents a holistic platform strategy."

The combined company will have tools to build business applications, the servers to run them and now a broad storage product set to store and archive corporate data, executives said. Sun also intends to use its identity management server software to provide secure access to data.

The access that Sun gains to StorageTek's customers--many of whom have mainframes--and its sales network or resellers is as valuable as the technology, Schwartz said. "We're channel-constrained, not necessarily constrained by our R&D portfolio," he said.

The two companies both sell disk-based storage, which Canepa said represents some area of overlap. He said the disk-storage product line will likely be simplified once the companies are combined.

StorageTek, based in Louisville, Colo., employs about 7,000 people worldwide. In fiscal 2004, the company reported $191 million in net income on sales of $2.2 billion, compared with $148.9 million in income and $2.18 billion in revenue for 2003.

Sun, which in the 1990s became a dominant seller of powerful, networked computers called servers, has struggled as of late. Since the Internet bubble burst and the economy slumped, the Santa Clara, Calif.-based company has struggled to return to that position of strength. Rivals including IBM and Dell continue to gain market share at Sun's expense.

In fiscal 2004, Sun reported revenue of $11.2 billion and posted a non-GAAP loss of $189 million.

In morning trading, Sun's shares dropped about 3 percent, to $3.79, while StorageTek's shares gained roughly 16 percent, to $36.

[grey_eminence]

Keep an Eye on Atomic Holographic Optical Nanostorage

Inphase is the first Holographic drive to hit the market but several others will be coming out with even higher data storage capacities.

Data storage is still the most active industry in all technology markets.

[George Cole]

higher data storage

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