Storagetek head denies financial rumours

Despite rumours to the contrary, Storagetek is not in deep financial difficulty and is not for sale, says Storagetek Australasian managing director Martin Hall.

DESPITE rumours to the contrary, Storagetek is not in deep financial difficulty and is not for sale, says Storagetek Australasian managing director Martin Hall.

“We’re moving forward and remaining independent,” says Hall, who was appointed to the position in January after 18 years with the storage vendor.

The rumours began when Storagetek turned a 1998 profit of nearly $US200 million into a loss of $US74.6 million last year. CEO Dave Weiss resigned and the company is shedding jobs as it consolidates six business units into two.

“Primarily why we got into this position was lack of accurate forecasting to the US stock market,” Hall says.

“The Asia-Pacific region is showing 20% revenue and profit growth.”

A few years ago Storagetek entered into a relationship with IBM, whose Ramac storage product — based on Storagetek technology — took 34% of the worldwide market last year, according to Hall. “But at the end of the year IBM went its own way with its Shark product.”

Storagetek began to reorganise in December. It hired Goldman Sachs to look at whether the company should stand alone, go on the acquisition trail, be acquired or form alliances. McKinsey Group was hired to look at internal operations.

“The announcement of Dave Weis’ resignation went hand in hand with us deciding to stand alone,” Hall says.

“The strategic direction is to remain independent. Open storage provides us with the opportunity to attach to many platforms and makes us much less attractive for someone to buy.”

A key decision of the reorganisation was to divest itself of services business not related to core business.

“In most countries we’ve been a very direct-oriented business,” Hall says. “We’re now looking very heavily into channels.”

In New Zealand, large vendors such as Unisys, Sun, Hewlett-Packard, Dell and IBM rebadge Storagetek’s products. Its direct operation is focused on historical business with companies like EDS — its biggest customer — Telecom, the banking sector and the mainframe environment.

Hall foresees the high-end market declining at 20% a year over the next three years. “The big movers are Unix and NT, particularly NT.”

Storagetek has adopted a SAN (storage area network) strategy for NT.

“It’s about the reduction of storage cost,” Hall says. “The key to that is server consolidation. Our new products will be focused on SAN in the client-server space.

“Our approach is an open SAN where you can start to consolidate servers. Nothing breeds faster than rabbits except servers.”

He says Storagetek will make a loss this quarter but will be back in profit in the second half of the year.

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