StorageTek bets on tape-disk SAN for future

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Executives with struggling storage systems vendor Storage Technology Corp. say it's a leaner, more focused company after six months of internal scrutiny that included the appointment of a new chairman and CEO, a revamped marketing plan and the introduction of several products.

Patrick J. Martin, who was appointed chairman, president and CEO of the Louisville, Colo.-based company four months ago (see story), attributed a long slump in sales to poor marketing, mission focus and overall execution.

Tape automation and virtualization, or multiple storage mediums, through open storage-area networks (SAN) will be its new focus, and with the introduction of its L20 tape-library system in September, the T9940 tape drive and StorageNet6000 series network manager in October, Martin said his company is poised to make a comeback.

"We're a storage provider, not just a tape provider," Martin said. "We're betting on disk, tape and SAN."

Martin said StorageTek isn't abandoning its mainstay tape storage systems, but will focus on providing storage systems in general, alluding to the disk drive market currently led by EMC Corp.

"There are some storage vendors in the Boston area who are not storage companies. They're disk companies. And they're saying tape is dead," Martin said in an interview Friday in Boston, where he and other executives were meeting with industry and financial analysts after demonstrating the SN6000.

"Ninety percent of digital storage is still on tape today," he said.

Ed Broderick, an analyst at Robert Frances Group in Westport, Conn., agreed that while tape library systems are here to stay, virtualization through SANs that incorporate multiple storage mediums are the future.

"I think they have something with this one. I like the road map I see," he said. "It's a good implementation of tape today. Now [you] have a big I/O server that sits back there handling everything, supporting all environments and providing a lot of sophisticated management functions at the same time."

The NS6000 supports, among others, Windows NT, Sun System's Solaris or any Unix variant, StorageTek said.

StorageTek laid off 1,300 employees earlier this year because it suffered a $39.5 million loss in the first quarter, which ended March 31, and higher-than-expected losses last year (see story). IBM's decision last year not to renew a three-year-old contract to resell StorageTek's disk-array subsystems under its Ramac storage banner was a blow that represented a loss of 20% of StorageTek's annual revenue, Martin said. That, coupled with some late product deliveries, spelled a traumatic period for the company.

According to a recent filing with the Security and Exchange Commission, as of Sept. 29, StorageTek had substantially completed all of its restructuring. "The Company anticipates annual savings of approximately $150 million will result from the restructuring activities initiated in October 1999," the filing stated. "Because the October 1999 restructuring activities were implemented in stages throughout the nine months of 2000, the company anticipates the realized savings for the year 2000 will be slightly in excess of $100 million."

With StorageTek's books now balanced, Martin said, the compaany will be eyeing expansion into new global markets, including China. Martin said expects to increase revenue by 50% and to grow profits by eight to 10 times over the next three years.

And, while StorageTek's recent expansion into the SAN market is wise, the company is at a disadvantage in that space because it faces stronger contenders, analysts have said.

"Will [StorageTek] ever compete with EMC [Corp.] [in the disk market]? I think not," said Broderick. "I think they're the leader in tape and tape recognition technology, and they'll keep that."

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