New Figures, Report Cast Shadow on Storage Sector

Storage appliances and the software that manages them have been keensellers and a strong growth area over the last two years as organizations, companies and data centers eagerly put in place infrastructure to house a growing amount of data. However, Gartner's new report, on server and storage user wants and needs in the Asia-Pacific region, casts doubt on the market's ability to sustain its remarkable growth. It states that 75 percent of corporations surveyed in Asia-Pacific do not expect to embark on any major storage acquisitions in 2002, a statistic Gartner reads as a result of over-adoption and under- utilization.

"There are a number of reasons why companies won't be embarking on anymajor storage purchases this year, namely the economic downturn andresulting budgetary constraints, and storage under-utilization," saidPhil Sargeant, research director for servers and storage, Gartner AsiaPacific.

The report goes on to say that the server market will be comparativelystrong this year, with 34 percent of those surveyed indicating theywould execute major server acquisitions this year.

The report represents a change in Gartner's overall message. Untilrecently the Connecticut-based research firm had been espousing thelikelihood of a strong third and fourth quarter for the storage marketthis year. In December, Phil Sargeant, Gartner's storage market researchdirector overseeing Asia-Pacific, said he expected to see a slow firsthalf of 2002 followed by a rebound starting around the mid-term.

Adding to the gloom are new International Data Corp. (IDC) figuresreleased last week showing that the disk storage systems hardware marketin the U.S. fell by US$5.7 billion, or 18.2 percent, in 2001, its firstdecline since 1998.

The U.S. economic recession and the decline of dot-com companies, plusprice competition in the U.S., sent the disk storage market into a slumpthat will continue to ripple throughout the worldwide market, IDC saidin its report 2001 Disk Storage Systems Forecast and Analysis,2000-2005, published last Wednesday.

Despite the general downturn in the market, IDC did point to pockets ofgrowth in 2001, in particular in sales of networked storage systems,which experienced gains of 8.3 percent in 2001. Revenue for that sectorof the disk storage market should reach about US$8.5 billion in 2001,IDC said.

Specifically, NAS (network attached storage) and SAN (storage areanetwork) technologies are showing signs of growth within the networkedstorage systems sector, due to the benefits of storage consolidation andthe need for efficient management of storage infrastructure resources,IDC said.

The slowdown also comes despite renewed interest in storage-relateddisaster recovery systems, a concern aroused by the September 11 attacksin the United States.

Representatives from major storage vendors were not available to commenton the research reports at press time.

The impact of the storage slowdown already seems to be having an effecton market leader EMC Corp. Cost cutting at EMC has yet to have an effecton its bottom line, as the data storage giant last week reported itssecond consecutive quarterly loss.

EMC reported a net loss of US$70 million, or $0.03 cents a dilutedshare, for the fourth quarter ending December 31, 2001, the company saidin a statement. That compares with net income of US$562.8 million, or 25cents per diluted share, in the fourth quarter of 2000, EMC said.

EMC's revenue in the fourth quarter was down significantly to US$1.51billion, compared to $2.62 billion in the same quarter last year, thecompany said.

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