Storage Upheaval update from March 2007

Possible changes in the way China handles capital gains spooked markets around the world, resulting in a 420-point loss for the Dow Jones average. (See Chinese Shockwaves.)

Chinese investors are the largest holders of American debt.

Closer to home in Storageville, Dell has had a crap year lost marketshare, executive turnover, and an ongoing accounting investigation that the company said has already cost it $89 million... not fines, but "investigation fees," I guess. (See Dell Details Ongoing 'Pressure'.) The uneven availability of hard drives is also playing havoc with its PC business, and apparently allowed HP to overtake Dell for market leadership.

EMC's latest 10-K filing revealed that Dell accounts for a sizable chunk of EMC's revenue, thanks in part to a highly successful resale deal the two struck a couple of years ago. (See Dell Responsible For 10% Of EMC Accounts Receivable.) Sounds like the Clariion call has been profitable for everyone.

And our old pal Jon Toigo cites a recent Forbes warning that the market leads the economy by 90 to 120 days, meaning a recession could strike before summer.

I'm not ready to concede the sky's falling. It may be a little dark and threatening — especially where companies like Dell, or even Sun, are concerned. And the stock market may well be ramping up for one of its periodic corrections, which will take storage, the rest of IT, real estate, energy, and lots of other industries along with it.

I don't see doom and gloom in this turn of events. In fact, the storage market is changing. The whole "software as a service" mantra misses the point if you're only focused on things like hosted email. (See GroupSpark Opens Hosted Exchange.) How about software as a business, or as a driver of major revenue? It's what's leading EMC to spin off VMWare later this year, and Oracle to plunk down $3.3 billion to augment its database capabilities. (See Oracle Hops on Hyperion.)

Upheaval doesn't have to destroy the entire storage sector. Some re-working of the landscape was probably long overdue. Whether these tremors portend some lean, dark quarters ahead or just a bit of regrouping to really exploit the full momentum of these changes remains to be seen.Either way, you're not going to find the answers in the bottom of your tea cup.

— Terry Sweeney, Editor in Chief, Byte and Switch

Dell Inc. (Nasdaq: DELL)

EMC Corp. (NYSE: EMC)

Oracle Corp. (Nasdaq: ORCL)

Sun Microsystems Inc.