2006: Storage Business Highlights

The storage industry was livelier than ever in 2006. The last quarter alone showed roughly 10 percent growth year-on-year in hardware and software. (See IDC Storage Software Numbers Rise and IDC Shows Surge.) But like any robust market, storage had its ups, downs, and milestones. Following are what we consider to be the key business stories to emerge last year.

As always, hit the message board below if you agree, disagree, or have more to add. Or write to us at [email protected].

Mergers/Acquisitions

Best: EMC buys Kashya for $153 million. (See EMC Coughs Up for Kashya.) With the exception of VMWare, none of the myriad of acquisitions EMC made since 2003 gave it as much bang-for-the buck as its Kashya pickup last May. Kashya gives EMC heterogeneous replication software, CDP, and functionality that could jump-start its Invista virtualization platform.

Worst: Brocade buys McData for $713 million. (See Brocade Bags McData For $713M.) Brocade execs may rue the day they agreed to pay up to put their switch rival out of its misery. Proponents of the deal argue it was merely a matter of time before Brocade and McData got together, and they had to unite to fight off Cisco. But McData appeared well on the road to self-destruction and the massive integration can prove distracting to Brocade at a time when Cisco is renewing its storage push. (See McData Post-Mortem and Cisco Salvo in 4-Gig FC.) Maybe anti-trust regulators will do Brocade a favor and kill the deal.IPOs

Biggest Surprise: Yet-to-be profitable WAFS startup Riverbed went public at $9.75 a share in September, and shot up from there -- trading at $31.26 at mid-day today. (See Riverbed Comes Out at $9.75.) Proving you dont need profits to be public, Riverbed opened the door for clustered storage vendor Isilon and replication software firm Double-Take to follow. (See Double-Take, Isilon Go Public.)

Smallest Surprise: After years of talk, backup vendor CommVault finally took the plunge in 2006. (See CommVault Swims in Public Pool.) Silly CommVault waited until it was in the black to go public.

Startup Funding

Biggest: 3PAR and BlueArc scored big, with $30 million and $29 million, respectively, in mezzanine funding for each. (See BlueArc Returns to Trough and 3PAR Picks Up $30M .) The question now is, when will either firm go public? 3PAR has already gleaned $183 million, and investors have sunk $204 into BlueArc.Most Exasperating: Incipient's $24 million. (See Incipient Still Incipient.) Now, after five years and $79 million in funding, this startup has released a product that only works with Cisco switches. (See A Baby Step for Storage Virtualization.) We agree with the firm's first announced customer: "That it's taken us this long to get virtualization in the fabric absolutely makes me nuts," says Jeff Boles, IT manager for the city of Mesa, Arizona.

Silliest: CentrePath's $10 million. (See Another Round for CentrePath.) You have to ask why VCs sunk money in April into a firm that was sold for parts in December. On top of all that, CentrePath had already morphed from an earlier, $160 million, failure called GiantLoop. Lessons learned!

Regulatory/Legal Snafus

Biggest Ongoing Case: Former Brocade CEO Greg Reyes has pleaded not guilty to fraud charges in relation to backdating stock options, but no trial date has been set. (See Brocade: We're Clean, Reyes Charged With Fraud, and Feds Made Mistake.) His old company isn’t completely out of the woods yet either. While Brocade has set aside money to pay the SEC, it has not yet reached a settlement. (See Brocade Eyes SEC Settlement.)

Biggest Settled Case: Hewlett-Packard paid $14.5 million as part of a settlement with the California attorney general’s office in December. (See HP Reaches Resolution.) The payment is to resolve civil claims resulting from HP’s spying practices to find the source of news leaks from its directors. While the payment closes the books with the state, the stench of the scandal and stain on CEO Mark Hurd’s reputation will remain for a long time. (See Hurd Apologizes, Probe 'Disturbing'.)Lawsuits

Most Fun to Watch: In May, Symantec filed suit charging Microsoft “misappropriated” technology from Veritas VolumeManager and used it in its Vista OS. (See Symantec Locks Horns With Microsoft.) While the suit failed to derail Vista’s launch, and we don’t know if Symantec will see any damages, it set the stage for an ongoing battle between the software giants. (See McAfee, Symantec Hit Back Against Changes to Windows.)

Biggest Payout: Finisar Corporation won $79 million in back damages in a patent infringement case against the DirecTV satellite television company. (See Finisar Wins $78.9M.) We don’t know if this will have a positive impact on Finisar’s storage monitoring and testing products, but we expect the cost of satellite TV service to rise to cover the bill.

Executive Moves

Best Departures: While the dust's still settling on many executive arrivals and departures in 2006, the best moves certainly include the dismissal of Chris Calisi from Overland Storage. (See Overland Names Interim CEO and Overland's Woes Widen.) And it's tough to argue against the departure of McData's management, though Brocade has regrettably spent $4 million to retain them awhile. (See Brocade Bags McData For $713M and Kelley Gets 1.1M Reasons to Stay.) Another good move was the departure of Scott McNealy from Sun. Though the jury's still out on the long-term efficacy of the overhaul there, storage appears to be picking up. (See Sun Takes Action Amidst Concerns, Schwartz Shakes Up Sun, and Sun's Storage Rebounds.)Most Questionable: We'll be watching the ascendance of Tom Hudson, former CNT CEO, to the leadership of Capital Growth Systems, a virtual network operator (VNO) that rebrands and augments services from facilities providers like AT&T. (See CentrePath's Fate May Be Sealed.) Hudson earned notoriety with the size of his payout after McData bought CNT in 2005. (See CNT CEO Eyes $3M Payout.) At least one storage firm may fall under his axe as he pursues fresh riches.

Partnerships

Most Dazzling: NASA and Google. (See NASA.) This just might turn awesome. NASA, which has data of interest to Googlers but no extra dough to fund its projects, will benefit from the exposure Google offers. Google in turn will get a development partner extraordinaire for its ever-expanding network. While pitfalls loom (the government is notorious for shooting itself in the foot), the possibilities are intriguing, to say the least.

Most Disappointing: Key management partnerships. (See Multivendor Management Locked Up.) Folk applauded in March 2006, when encryption appliance maker NeoScale opened its key management APIs to third parties. Archrival Decru (now part of NetApp) followed suit four months later with a similar initiative. (See Decru Picks Key Partners and File Security Gets All Cryptic.) But the hoped-for results have yet to materialize. The promise of multivendor encryption key management is still a pipe dream, held back by lack of cooperation from vendors.

— The Editors, Byte and Switch