Sun Shines on Hitachi

Sun Microsystems Inc. (Nasdaq: SUNW) hopes to get a leg up on the SAN market via amultibillion-dollar cross-licensing deal announced with Hitachi Data Systems (HDS) today.

Sun's storage systems have traditionally only supported its own servers.Hitachi's Freedom Storage Lightning 9900 storage arrays, in contrast,service a broad range of server types, says Jim Herbert, general manager ofSun's data center storage business. "From a network perspective, companieswant storage to be agnostic and able to hook up to anything, which is whatthis deal is about," says Herbert. Sun intends to rebadge the products asits StorEdge 9900 series.

The deal appears to be a direct challenge to rivals EMC Corp. (NYSE: EMC) and IBM Global Services. Sunplans to bundle its servers, applications, and storage networkingdevices with those from HDS, and then provide the support services on top.This is a business at which IBM already excels. It is also onethat EMC is planning to augment: The storage giant has made no secret of itsintentions to beef up its professional services business since the declinein hardware prices.

During EMC's recent earnings call, JoeTucci, president and CEO, said the company would put 75 percent of its research and developmentbudget -- roughly $750 million -- into developing its automation software andexpanding its services organization. EMC is shooting for a business model for2003 where about 30 percent of its revenue would derive from software andapproximately 20 percent from services. During the most recent quarter,software and services represented 25 percent, and 11 percent, respectively,of EMC's total revenue.

"We will be keeping a close eye on those numbers," says Sun's Herbert. "We planto give IBM and EMC a pretty good run for their money.""The deal with HDS is "a very good solution in the short term for Sun[after] failing to execute" on its other storage efforts, says JamesBerlino, storage analyst with Merrill Lynch & Co. Inc. "Sun has finally admitted itneeds" to sell storage, he adds.

An interesting question raised by the deal is the effect, if any, it will have on Hewlett-Packard Co.'s (NYSE: HWP) OEM arrangement with HDS. At present, HP adds its firmware tothe HDS systems and resells them as HP products. HP was unavailable forcomment at press time.

Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com

Movers and shakers from more than 100 companies – including Sun and Hitachi – will be speaking at StorageNet, Byte and Switch’s annual conference, being held in New York City, October 2-5, 2001. Check it out at StorageNet2001