Down Is Not Out

The pillars of IT are cracking. The question is: Are they crumbling too?

If you scan the news, it's easy to get worried about the futures of firms like CA, McData, and Sun. Despite years as leaders in the IT software and/or hardware space, these are clearly companies at a crossroads.

The challenges facing each are different. CA, an IT software powerhouse, was burnt by a $2.2 billion accounting snafu and subsequent accusations of fraud against ex-CEO Sanjay Kumar. The company faces a range of woes as it struggles to rebuild, including executive burnout and heightened investor scrutiny. (See McData Trails Switch Rivals.) And as I mentioned in a recent blog, it's likely that customers will question their commitment as new problems emerge.

Fibre Channel switch maker McData showed substantially lower revenues last quarter than rivals Brocade and Cisco. (See CA Delays Earnings Report.) But its relative tardiness in delivering 4-Gbit/s wares appears to have shortened its stake in this new market.

Sun, which plays in a range of IT hardware, software, and services segments, is perhaps the most worrisome of the chipped IT icons. Here is a company facing a crisis of confidence in its fundamental direction. (See Sun Ships Little, Talks Big, Sun Takes Action Amidst Concerns, and StorageTek Users Voice Support Fears.)According to our latest poll, Sun's woes won't be easily fixed: At press time, more than half of 234 respondents (52 percent) don't think the selection of a new CEO and storage EVP will make a difference. A full 58 percent of respondents think Sun needs sizeable in-house development and selected OEM deals to get things going again. The areas of focus should be on integration of hardware, software, and services.

In spite of it all, I think it would be a mistake to start hanging crepe for Sun or any other troubled big company in the IT market. It would be an even bigger mistake to assume that startups are safe from the talons of the wounded eagles. Just because a company may appear to be suffering, that doesn't put it beyond acquiring a smaller fry for better or worse.

Case in point: Two years ago, HP was widely considered the storage underdog. Analysts trashed its storage products in particular as out of date and poorly designed. Its sales and support appeared to be in disarray, following a series of ill-advised executive decisions.

Fast forward to early this month, when the vendor's second-quarter results proved that new management and a slew of renovations in its storage lineup are paying off. (See HP to Shrink 'n' Save.) In addition to turning things around, HP is getting into areas like radio frequency identification (RFID) and ILM, which could present fresh opportunities. (See HP Reports Q2, HP Launches ILM Blitz, and HP & BEA Tag-Team on RFID.)

Now, instead of relying on its installed base, HP's resurgence has given competitors like EMC, IBM, and NetApp a fresh challenge among prospects. It also has shown that big companies don't die easily.What's more, as Jon W. Toigo notes in his latest column, big companies are also in a position to buy smaller ones. This can have bad results, of course, but the potential for growth is there, too.

Why do things have to get this bad before the wounded giants buckle down and make whatever course corrections are necessary? Never mind, we'll leave shareholders and enterprise buyers to settle that issue. Still, there's reason to believe that established players can reinvent themselves. Done right, they can reinvent the storage market in the process.

Mary Jander, Site Editor, Byte and Switch

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