Sun sees new role as storage company

Peter Henderson

SAN FRANCISCO: Sun Microsystems Inc., facing slowing growth in its core

server market, is turning itself into a data storage shop, a senior executive

said on Friday, confronting skepticism that the network computer maker could

successfully shift into a new area.

Storage marketing vice president, Denise Shiffman, said in an interview that

the company was having some success with its T3 storage system, which has been

out for less than a year. "We are winning a lot of big deals," she

said. "It is an extremely profitable, fast growing product line for

Sun."

Sun has been one of the fastest growing companies in America in recent years,

cashing in on the drive by companies to network their companies and hook up to

the Internet, but the demise of the high-flying dot-com sector and corporate

caution on spending due to the US economy have hit demand for servers.

Once a second thought, storage has become the new hope for fat profits in the

technology sector as the corporate world invests in equipment to keep tabs on

every customer and partner and spur growth by moving business and management to

the Web. While there's plenty of skepticism that Sun can challenge storage

leader EMC Corp., Shiffman says Sun learned to play a new game in the early

1990s, when it switched from powerful workstation desktops to Internet-building

servers and championed its message: The Network is the Computer.

"I was here when we were a work station vendor and we had to change to a

server vendor," Shiffman said. "We are doing that again around

storage, and we've been doing it for a while. "It (the T3) is a core

element of our strategy and vision of open storage networks that are modular,

highly scalable and highly managed."

Sun a target of competitors

Sun traditionally sold storage to its server customers, and the easy pickings

has helped make it a target of competitors. About half of Sun's storage sales
are disks attached to computers, but such systems can create network bottlenecks

as the central server computer with unique access to data does double duty

sending information and keeping the network humming.

Many say the solution is to hand over storage management duties to

purpose-built machines or storage networks, an elegant response, which turns out

to be a technical challenge. Critics say Sun doesn't get it yet. "They (at

Sun) think of storage as a peripheral," the of Network Appliance Inc.,

chief executive, Dan Warmenhoven, which makes stand-alone products, said

recently.

Merrill Lynch financial analyst Thomas Kraemer said Sun's T3 was not good

enough. "We continue to like Sun's server position, but storage matters

more," he said in a Feb. 21 report. "The increasing demand for

storage, and Sun's weakness in this area, is really coming back to bite them

now."

But Sun's share of global storage sales grew last year to 10.4 per cent of

the market from 8.7 per cent and the T3 has been purchased for use with non-Sun

servers, Shiffman responded, declining to give T3 sales figures or examples of

wins. Customers want "one throat to choke" when they have a problem to

fix, she says, and Sun can provide that without taking over the entire computer

center.

Systems specialists rather than storage specialists can link all the

equipment behind a particular program, she said. "We are not trying to say

that customer environments are going to be homogenous, because they are

not," she said.

But if a single database or program runs on a system that is all from one

vendor - for example Sun - theoretically it is all bound to work together.

"They need to know end to end that thing is going to work, and when it

doesn't they want to make one phone call," she said. Sun also works with

service companies that resell Sun products to users, who can also become the

"throat", she said.

Much of the value, and profits, in storage has moved to software which

manages these information beasts, and Sun appears to be heading for the throat

of top storage software vendor Veritas Software Corp. "Sun's been trying to

engineer Veritas out," Veritas chief executive Gary Bloom said at an

investment conference recently.

In particular, Sun has bought two data management software companies in the

last half year, LSC Inc. and HighGround Systems, Inc., although Bloom said they

were not enough: "I just don't think it is going to help them." Sun

competes and cooperates with Veritas in various areas now, and Shiffman said Sun

wanted to continue the relationship. But she also envisions stand-alone Sun

storage management software that could run on non-Sun systems. "This is a

software revenue business," she said.

(C) Reuters Limited 2001.