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Now that Data Domain has been scooped up by EMC (NYSE: EMC) and everyone's gotten used to blow-out sales numbers from STEC (NASDAQ: STEC), who will be the next data storage vendor to set the world on fire?
We polled analysts to ask them who will be the next hot storage company or startup, but there was no general consensus on who the next star will be which raises the possibility that the next storage standout could be one that few saw coming.
So what are the hot storage areas right now? At this year's EMC World, EMC CEO Joe Tucci said deduplication, FCoE, thin provisioning and solid state drives (SSDs) will be the hot technologies. Of that list, analysts seem to give the most favor to SSD vendors (see Solid State Drive Developers Try to Catch STEC).
"Fusion-io does well in the benchmark and product announcement/partner announcement category, while STEC is knocking the skin off of the ball in the SSD space with actual shipments, and Pliant looks to have some interesting capabilities if they can execute," said Greg Schulz, StorageIO Group founder and senior analyst.http://o1.qnsr.com/log/p.gif?;n=203;c=204655439;s=10655;x=7936;f=201806121855330;u=j;z=TIMESTAMP;a=20400368;e=i
Overall, though, Schulz hedges his bets across a long list of storage hopefuls. He thinks StorMagic might be a sleeper with its ability to perform management orchestration in the mid to low-end of the market on a broad basis instead of trying to be yet another storage virtualization solution. In the I/O virtualization space, he believes Xsigo is doing well, while Virtensys is ramping up its PR and messaging and Barracuda Networks should be watched with its acquisition of Yosemite for backup, dedupe and file CDP.
Brian Babineau takes a different view. As a senior analyst for Enterprise Strategy Group, he thinks Compellent (NYSE: CML) has promise. He also highlights Dell's (NASDAQ: DELL) EqualLogic business as one that is faring well. And he calls attention to a couple of relative unknowns such as Data Robotics and Nexenta.
"Data Robotics has a very simple RAID solution for small to mid-size businesses and is quickly moving up market," said Babineau. "Nexenta has a scalable file system that works on any commodity storage. They have several customers that have implemented the product."
Further, he's picking Iron Mountain (NYSE: IRM) to stay strong, as it has a robust enough business model to withstand the difficult spending environment. Also, he's awaiting the net effect of the EMC-Data Domain deal to see how the dedupe and disk-based backup combo will play out in the market. Finally, he's tracking archive providers like Mimosa, C2C and LiveOffice as an area that could suddenly leap onto the radar screen.
With overall venture capital investment back at 1997 levels, Babineau reports that data storage funding hasn't fared much better and has probably hit its lowest level in years. But he sees some reason for optimism in storage funding, fueled by a few startups getting an initial round of financing, especially those that are optimized for virtualized server and desktop environments.
"The Data Domain exit helped reinvigorate some interest in storage infrastructure solutions," said Babineau.
Great ideas can still get funded. Schulz notes that there is always money for those who want it and have a good story. That said, there appears to be many startups that are only using smaller amounts of VC funding for now. While it may be a function of the tighter purse strings, it might also indicate a revolt against the lavish spending times of yesteryear by those seeking VC money or that VCs have learned not to get too carried away in their pursuit of a technology breakthrough.
The trend could also be contributing to the dearth of storage startups in the limelight these days.
"Many have lower profiles than in the past, as this generation of startups is taking a far more low-key approach to their launches," said Schulz. "Gone, at least for now, are the dot-com era over-the-top announcements before there was even a product."
The Not So Hot List
Analysts are generally reluctant to name candidates for the "not hot" list. But they did come up with a few.
"As far as declines go, Copan looks to be being spun down," said Schulz, a pun on the company's MAID technology.
It isn't just lower and mid-tier storage firms that are struggling. Babineau named a big fish on the list.
"The one vendor that seems to be struggling is IBM," he said. "The company's first-half storage numbers were not impressive."
An even bigger surprise VMware (NYSE: VMW). Its glory days of massive quarterly expansion may well be over, at least according to its latest financial results. Flat revenues and declining licensing are countered by improved services revenues, which might not be a great sign for the long haul.
"VMware's services revenues now equal the revenue that it gets from software licenses," said Gordon Haff, an analyst at Illuminata. "In general, software companies like to see revenues coming disproportionately from licenses because the cost of selling an additional license is relatively small. A heavy shift towards services is not where VMware wants to go long-term."
But TheInfoPro (TIP) begs to differ. Rob Stevenson of TIP said the firm's "heat index" continues to show VMware jumping up dramatically. For that matter, he gives high marks to IBM, too, as well as EMC, Cisco (NASDAQ: CSCO), NetApp (NASDAQ: NTAP) and Brocade (NASDAQ: BRCD). TIP also cites other hopefuls such as Asigra, ExaGrid and Fujitsu.
"Solid state is interesting, with companies such as Fusion-io and Texas Memory Systems," said Stevenson. "There is a lot of development work going on in this area, but no one has emerged fully yet."
Meanwhile, his numbers show that 50 percent of the Fortune 1000 has cut back on storage spending by an average of 25 percent. Thus, customers are simply not looking for bold new leaps in technology right now.
"This means that companies are coping by ensuring their storage is better utilized," said Stevenson. "This will show up in more rapid storage deployments once the economy revives."
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