Category Archives: Storage

Cisco to Cut Staff; EMC Speculation Vanishes

Gleacher & Co. analyst Brian Marshall drew some notice earlier today when he wrote that Cisco could slash as many as 5,000 positions, about seven percent of its workforce, next month. Marshall estimated that the cull “could incrementally reduce Cisco’s pro forma operating expenses by about $1 billion annually.”

Cisco Confirms Cuts

Marshall said the estimates were his own, based on what he believed Cisco needs to do to meet its meet its $1-billion objective for reduced annual expenses. Cisco later confirmed that job cuts are coming in August, though it did not indicate how many employees would be affected. Previously, Cisco had been encouraging employees to take early-retirement packages.

At the same time he made his projections about how many workers Cisco might need to jettison, Marshall also speculated that Cisco should seek a “transformative merger” with EMC. On that theme, Marshall apparently opined that a combination with EMC would give Cisco “better exposure to enterprise storage trends, ownership of the VMware asset for virtualization, a more robust security offering and a better collection of IT service professionals.”

I included the qualifier “apparently” in the preceding sentence because it seems Bloomberg and BusinessWeek, which both earlier today published a report including references to Marshall’s musings regarding a Cisco takeout of EMC, have excised any mention of EMC from subsequent iterations of the coverage.

Marshall’s M&A Advice Disappears

It’s hard to tell what that means, if anything. All I know is that the earliest version of the story included reference to Marshall’s advice that Cisco buy EMC, and later iterations of the story made no mention of EMC. It’s odd, but strange things happen when news is published in realtime.

Presuming I did not hallucinate — and a report by Jim Duffy over at NetworkWorld suggests I did not — what are we to make of Marshall’s recommendation? Well, it wouldn’t the first time somebody has suggested that Cisco acquire EMC, and it probably won’t be the last. The conjecture or rumor (or whatever else you want to call it) has had more comebacks than Brett Favre. It’s an old chestnut that gets repeated plays on analysts’ virtual jukeboxes.

Given its current valuation, though, EMC probably isn’t going anywhere. At the conclusion of stock-market trading today, EMC had a market capitalization of more than $56.1 billion, whereas Cisco had a market capitalization of $84.8 billion. Cisco has made a few sizable acquisitions in its time — though it established its wheeler-dealer bones on smaller, bite-size technology buys — but it never has done a deal on the gargantuan scale that would be required to land EMC.

Cisco’s Repatriation Holiday

What’s more, Cisco still has most of its cash overseas, It’s lobbying the U.S. government assiduously for a repatriation tax holiday, but that break hans’t been accorded yet. Even if Cisco were desperate enough to abandon its old acquisition playbook and splash out obscene amounts of cash and stock for EMC — and, for the record, I think Cisco is teetering on the cusp of becoming seriously desperate — it is not in a position to make the move until its overseas cash hoard (of approximately $31.6 billion) has been repatriated.

Even then, does EMC want to sell? Like every other vendor out there, EMC faces daunting challenges as the ascent of cloud computing realigns the data-center landscape. Still, one could make a compelling case that EMC, with its storage leadership and its 80-percent-plus ownership of VMware, is better placed than most vendors, including Cisco, to survive and even thrive in that brave new world. Does it really want to take Cisco stock — any deal would have to involve Cisco shares as well as cash — as part of a potential transaction? I don’t see it happening.

Dividing the Spoils

Cisco might have concerns regarding its share of the spoils from its Virtual Computing Environment (VCE) joint venture with EMC, which perhaps partly explains why it has partnered increasingly aggressively with NetApp on the FlexPod converged infrastructure architecture. Nonetheless, Cisco isn’t in a position to buy EMC, and EMC isn’t willing to part with its majority-owned VMware, so even a more modest deal is off the table.

Could Cisco buy NetApp? It could, but such a move would entail a different set of consequences, risks, and rewards, all of which we will save for another post.

Dell: Brocade and CommVault Rumors Redux

 
Dell is sitting on more than $15 billion in cash and investments, and we should expect that the diversifying computer mainstay will tap that money in pursuit of further acquisitions in 2011.

Brocade: A Reasonable Target for Dell

I have heard repeatedly that Dell wants to make a networking acquisition. The most logical target, given Dell’s increased storage profile in recent years, is Brocade Communications. Dell already resells Brocade’s Fiber Channel SAN switches, and Brocade’s technology plays well with Dell’s earlier acquisition of Compellent Technologies. An acquisition of Brocade would boost Dell’s margins, allowing it to become a vendor, rather than a reseller, of SAN switches.

There’s considerable logic supporting a Dell acquisition of Brocade, but there are some reasons to think it won’t happen, too. Brocade has a current market capitalization of about $3.15 billion, and it’s not unthinkable Dell would have to offer at least $4 billion to seal a deal.

Big Deal, Big Risks

The larger the deal, the bigger the risk that integration and assimilation won’t go smoothly. Dell would prefer smaller, digestible deals, and Brocade could result in acquisitive indigestion. Additionally, even though there’s technological logic underlying a potential Dell bid for Brocade, the market and channel profiles of the two companies are not perfectly aligned and could result in post-merger complications.

Furthermore, recent indications within Brocade suggest a sale of the company isn’t necessarily imminent. Its now-former CFO, Richard Deranleau, left the company recently to “pursue other interests.”  Seemingly knowledgeable observers believe Deranleau would have stuck around if a deal for the company had been in the works.

Let’s also remember that Brocade isn’t exactly a new focus of takeout rumors. Every few months, if not more frequently, Brocade is said to be on the block or on the cusp of an impending acquisition. Those deals did not develop, and it’s possible the latest flurry of Dell rumors will fall into the same uneventful bucket.

OEM Entanglements

One reason Brocade might have remained on the shelf, to speak, might involve the nature of its OEM agreements with vendors that include not only Dell but also IBM, HP, EMC, Oracle, Hitachi, Fujitsu, among others. It’s top three OEM resellers — HP, IBM, and EMC — account for about half the company’s revenue.

It’s reasonable to assume that those companies might have included language in their OEM contracts with Brocade that protect themselves and their customers from potentially injurious consequences resulting from Brocade being merged with or acquired by another vendor. Citi analyst John Slack is among those who have contended that Brocade’s existing OEM agreements might cause difficulties for a buyer of the company.

That said, as mentioned above, Brocade would be a reasonable addition to Dell’s storage-centric strategic buildout. It makes sense technologically, and could happen, but that doesn’t mean it will.

CommVault Rumors Return

Meanwhile, CommVault has been perennially rumored to be a Dell acquisition target. Again, it’s a plausible scenario. Dell is a major reseller of CommVault’s Simpana data-management software, accounting for 23 percent of the company’s revenue. Just as in the case of Brocade, Dell could improve its margins significantly by directly selling those products to its channel partners and customers rather than functioning as a reseller.

But the rumor about Dell acquiring CommVault has circulated, quite literally, for years. If Dell wanted to lock up CommVault, it could have done so before now, at a price more favorable than CommVault’s current market capitalization of more than $2 billion. (And, in any deal that might transpire, CommVault would negotiate a significant premium over its current market cap.)

Unless, of course, CommVault wasn’t open to acquisition proposals. Some contend CommVault will be even less amenable to acquisition now that it has struck a potentially lucrative OEM deal with NetApp. If Dell finally wishes to consummate a deal with CommVault, it might be forced to pay a relatively hefty price.

Virtualization Still Calls Data-Center Tune

As the latest VMworld begins its transformation from current event to memory, now probably is as good a time as any to reflect on what it all means, if anything, for the future of data centers, the IT industry, and various big-name vendors.

There has been a lot of talk about public, private, and hybrid clouds at VMworld, but I think that’s something of a side issue. Yes, certain enterprises and organizations will partake of cloud services, and, yes, many enterprises will adopt a philosophy of IT as service within their data centers. They’ll make data-center management and automation decisions accordingly.

Even so, at a practical level, it is virtualization that continues to drive meaningful change. The  robust growth of virtualization has introduced problems (optimists would call them opportunities), too. How do you automate it, how do you manage it, how do you control it so that it remains a business asset rather than a potential liability?

Reciprocal Choking

At a fundamental level, that’s the big problem that data centers, whether within enterprises or service providers, must solve. The ultimate solution might involve data- center convergence — the integration and logical unification of servers, storage, networking, and orchestration — but it’s not clear whether that is the only option, or whether the price of vendor lock-in is worth the presumed benefit. Most enterprise customers, for the time being, will resist the urge to have one throat to choke, if only because they fear the choking might be reciprocal.

Indeed, as the vendor community has reacted to the popular appeal of data-center virtualization, the spectacle has been fascinating to watch. Who will gain control?

It’s not a simple question to answer, because the vendors themselves won’t have the final say; nor will the industry’s intelligentsia and punditry, formidable as they may be. No, the final arbiters are those who own, run, and manage the data centers that are being increasingly virtualized. Will network managers, or at least those with a strong networking sensibility, reign supreme? Will the leadership emerge from the server, application, or storage side of the house? What sorts of relationships will  these customers have with the vendor community, and which companies will serve as trusted counsel?

Ownership of Key Customer Relationships

As virtualization, by necessity, breaks down walls and silos, entirely new customer relationships will develop and new conversations will occur. Which vendors will be best positioned to cultivate or further develop those relationships and lead those conversations?

Meanwhile, vendors are placing their bets on technologies, and on corporate structures and strategic priorities. HP is an interesting case. Its Enterprise Servers Storage and Networks (ESSN) seems increasingly titled toward storage and servers, with networking — though not an insignificant consideration — relegated increasingly to a commoditized, supporting role. Just look at the executive management at the top of ESSN, both at HP headquarters and worldwide. You’ll notice an increasingly pronounced storage orientation, from Dave Donatelli on down.

Cisco, meanwhile, remains a networking company. It will try to imbue as much intelligence (and account control) as possible into the network infrastructure, even though it might be packaged under the Unified Computing Systems (UCS) moniker. That might not be a bad bet, but Cisco really doesn’t have a choice. It doesn’t own storage, is a relative neophyte in servers, and doesn’t have Oracle’s database or application pedigree.

Dell’s Move

IBM and Dell will be interesting to watch. Dell clearly places a lot of emphasis on owning its own storage technology. It has its own storage offerings right up through the midrange of the market, and it tried hard to buy 3PAR before being denied by a determined HP, which had its own reasons for winning that duel.

Questions remain over the importance Dell attaches to networking. We should learn soon enough whether Dell will continue to partner, with Juniper and Brocade, or whether it will buy its way into the market. To the extent that Dell continues to maintain its networking partnerships, the company effectively will be saying that it deems networking a secondary priority in its data-center strategy. IBM already seems to have made that determination, though there’s always a possibility it will revisit its earlier decision.

This puts Juniper in an interesting position. It needs to continue to push toward its Project Stratus intelligent flat network, thereby enhancing its value to customers and its importance to Dell and IBM as a partner. Brocade faces a similar challenge in storage networking, though it still seems to have a lot of work ahead of it in repositioning the Ethernet-switching portfolio it obtained through its acquisition of Foundry Networks.

Microsoft Pays for Inattentiveness

I have not mentioned Microsoft. VMware threw down a gauntlet of sorts earlier this week when it suggested that the importance of Windows as an operating system had been undercut severely by the rise of virtualization. For the most part, I agree with that assessment. Microsoft has some big challenges ahead of it, and it has been attempting to distract us from its shortcomings by talking a lot about its cloud vision. But a vision, no matter how compelling, is thin gruel if it is not supported by follow through and execution. In virtualization, Microsoft was caught flat-footed, its gaze averted by commotion outside the data center and the enterprise, and it is paying a steep price for that inattentiveness now.

Even though marketing hype has pivoted and tilted toward the cloud, virtualization continues to recast the data center.

3PAR Battle Ends, but Drama Remains

The outcome of the tussle no longer is in doubt, but the dust has yet to settle on HP’s pending acquisition of 3PAR for $33 per share, or about $2.07 billion. In a bidding war that said as much about the fear of the buy-side principals as it did about the scarcity of high-end storage alternatives, Dell finally folded its hand and backed away from the table, unwilling to match HP’s latest escalation.

Said Dave Johnson, Dell’s senior vice president for corporate strategy: “We took a measured approach throughout the process and have decided to end these discussions.”

Measured approach? Well, I suppose it’s all relative, depending on circumstance and context, but “measured” isn’t a word that springs readily to mind to describe the 3PAR transaction.

Discombobulating Value

As Bloomberg notes, HP’s final offer values 3PAR at 325 times the company’s earnings before interest, taxes, depreciation, and amortization during the past year. In 21 computer-services deals in the past five years, acquirers paid a median 16 times trailing Ebitda, according to Bloomberg data. How’s that for context and perspective? Even the price-to-revenue multiple is discombobulating in an economic climate that is described variously as muted, torpid, and uncertain.

Yes, I understand that virtualization is remaking and reshaping the data center — wherever it might reside — and that significant scarcity value rightly adheres to 3PAR and its technology. But there are limits, and I think they were left well behind in this saga.

In the end, Dell made a belatedly prudent decision in allowing HP to triumph. Dell will receive a consolation prize in the form of a $72-million termination fee. It’s better than nothing, but it’s not the outcome Dell had in mind when it initiated this process with its original $18-a-share offer for 3PAR on August 16.

Back to the Drawing Board

Consequently, it’s back to the high-end-storage drawing board for Dell. We might consider placing bets on which of the remaining players in an admittedly small pool Dell will attempt to catch, but the implications of today’s events extend well beyond Dell and HP.

The relationship between Dell and EMC already was strained before the 3PAR episode, and you can be sure that the distrust and paranoia will not recede in its aftermath. EMC — along with VMware, of which it is the majority owner — could be driven further into the warm, suffocating embrace of Cisco Systems, which is what Dell feared all along. That’s the funny thing about self-fulfilling prophecies, isn’t it?

Theater Remains Open

And there’s Hitachi Data Systems. It’s been left with plenty to ponder, most of it dark, as HP prepares to punt it to the curb at the upper reaches of its storage portfolio. How will Hitachi respond, and how soon? The company typically doesn’t move at the speed of light, but this week’s events might lend a spring to its step.

We also ought to consider IBM and NetApp. They’re not purely disinterested observers. They will be thinking about what this means for them, not just as it applies to storage but as it applies to playing a part in delivering virtualized solutions throughout the data center. Partnerships, as well as M&A, become prominent considerations.

So, the curtain might be coming down on the drama involving HP, Dell, and 3PAR, but the opera house isn’t closed yet. It’ll be interesting to see what new names appear on the marquee.

Fear and Loathing in 3PAR Bidding War

Fear walks tall, wears steel-toe boots, and carries a baseball bat in the showdown between HP and Dell for ownership of 3PAR.

Keeping tabs on the escalating bidding war isn’t easy, but as of this morning HP assumed the pole position, with a counterbid that values 3PAR at $30 per share,or a whopping $2 billion. If Dell follows its established form in this saga, it will match HP’s bid and regain the upper hand. What happens after that is anybody’s guess.

By this point, talk of price-to-revenue or price-to-earnings multiples is beside the point. The winning bidder, even if does reduce 3PAR’s production costs and increase its sales footprint significantly, will have a difficult time justifying the transaction on the basis of quantifiable business metrics. This has become a strategic play, as much about keeping 3PAR away from the other guy as about its intrinsic business value.

3PAR as Chess Piece

That’s not say 3PAR doesn’t have business value. Clearly it does. A stable of high-profile enterprise and service-provider customers have adopted its technology, and the company is seen as the best entrant in a limited filed of high-end storage players that are available for acquisition.

Still, as a chess piece on the data-center convergence board, how valuable is 3PAR? Does it, in and of itself, reinvent or change the game? Is it a unique asset that confers long-term account control and sustainable competitive advantage for years to come?

There’s probably some of that value to be had here, yes, but not on the scale of, let’s say, Cisco’s $95-million acquisition of Crescendo in 1993, which begot the ever-growing line of Catalyst switches, enterprise-networking market dominance, billions of dollars in annual revenue, and seemingly endless tributaries of profitability.

Then There’s Fear

I just don’t see 3PAR on that scale. So, if sunny optimism and visions of bright tomorrows aren’t driving Dell and HP to engage in this duel, what is? Well, there’s greed and then there’s fear. This feels a lot like fear.

Both vendors are afraid of being squeezed in high-end storage. They’re afraid of each other, and they’re afraid of other parties not directly involved in the transaction. There’s no question, for example, that Cisco and EMC are haunting these proceedings.

In expressing their covetousness for 3PAR so publicly, Dell and HP are exposed, their desires and discontents disclosed for all to see. They’ve sent some clear signals to the market that will not be misconstrued by current — perhaps soon to be erstwhile — partners.

Desires and Discontents

Let’s start with Dell. It can say all it wants about how its relationship with EMC is perfectly fine, but anybody with eyes can see that Dell is building a storage portfolio that will be arrayed (pardon the pun) against EMC across the known universe, from SMBs all the way up to the largest enterprise accounts. The fact is, Dell’s relationship with EMC has been strained for a while, and it will get worse. Another fact is that even though Dell doesn’t carry EMC’s Symmetrix, it will be selling a competing product if it wins its battle against HP for 3PAR. I’m sure EMC is paying attention.

As for HP, it’s clearly not content with the foundering performance of its midrange EVA platform or with its arrangement as a reseller of Hitachi Data Systems’ Universal Storage Platform (USP). There are probably at least a couple reasons for HP’s dissatisfaction with the Hitachi relationship, but it’s apparent that the marriage is in serious trouble. Dave Donatelli — HP’s head of enterprise servers, storage and networking (ESSN) — has a wandering eye for hot high-end storage, and he’s doing more than looking in his amorous pursuit of 3PAR.

Again, I’m sure Hitachi has noticed these developments. If it were smart, it would make contingency plans to account for a potential loss of HP’s business. Even if that doesn’t happen now, as a result of HP’s acquisition of 3PAR, it’’s bound to happen later. It’s just a matter of time.

Fear is a stern taskmaster, He’ll continue to drive his fair share of vendor combinations and machinations in the converged data center.

Sweet and High: The Bidding War for 3PAR

All signs suggest that Dell will fire a return volley in the bidding war between it and HP for ownership of 3PAR. Recent evidence can be found in a Bloomberg article that cites a person “familiar with the matter” who says Dell is preparing a sweetened offer for the apparently sough-after vendor of high-end storage.
A  sweetened offer? If the offers for 3PAR get any sweeter, investment bankers involved in the deal will suffer from diabetic shock.

$2 Billion?

Meanwhile, the market sends its own compelling signals that Dell isn’t done with 3PAR. On a down day, 3PAR shares are up, trading at a level that assigns the company a current market capitalization (as of 12:53 pm EDT) of $1.68 billion. HP’s proposal for 3PAR values the company at about $1.6 billion, so market sentiment suggests the tug of war will continue.

Could Dell go as high as $2 billion in its pursuit of 3PAR? It seems like madness, but that’s what some market watchers and Dell aficionados believe will happen.

Let’s say Dell does decide to trump HP’s counteroffer. What will HP do? Opinion on that question is split, with some saying HP will go even higher and others suggesting that HP would back away from the table, content to see Dell overpay spectacularly to win the duel.

Sincerity or Duplicity?

The thinking from one camp, in fact, is that HP is angling for that very outcome. If, after putting 3PAR on its corporate mantelpiece, Dell were to want to add, let’s say, network infrastructure to its data-center solution stack, its options would be restricted by what it spent to acquire and integrate 3PAR. Indeed, after closing a $2-billion deal for 3PAR,  Dell would be on notice to show investors that the gambit was more than a vanity purchase.

But I doubt that HP is playing a maniacally devious game of M&A brinkmanship. If one considers what HP spent to acquire 3Com and Palm, it’s a company that isn’t afraid of paying top dollar to obtain assets it wants to buy. My thinking is that HP is in the race for 3PAR because it wants to own the company, not because it’s trying to drain Dell’s piggy bank.

That said, would HP go above $2 billion to claim the prize from Dell? Don’t ask me. I thought we’d hit nosebleed altitude on this transaction long before now.

Market Wants a Bidding War, but Should Dell Raise Stakes?

As 3PAR’s stock price ascended for much of today, it became obvious that the market, in its abstract and aggregate wisdom, had determined that Dell would not shrink from a showdown with HP over ownership of the virtualized-storage vendor.

HP and Dell both have their reasons for wanting to take 3PAR off the market.

Dell is thought to be desperate to have its own high-end storage offerings rather than have to sustain an increasingly strained reseller relationship with EMC. In addition, Dell wants to burnish its bonafides as a legitimate big-money datacenter player, moving beyond its traditional business market among the SMB set. The margins that could be derived from 3PAR’s storage business are attractive to Dell, which believes it could significantly expand 3PAR’s market presence.

Meanwhile, HP is considering its own options — it sells Hitachi storage gear at the high end of the market — and it has strategic reasons for cutting Dell off at the pass.

EMC Disapproves

None of the other major players, including Oracle and IBM, is thought to have interest in entering a bidding war. For its part, EMC is tut-tutting censoriously from the sidelines, publicly deriding Dell and HP for their showy extravagance.

So, it’s up to Dell to raise the stakes or fold. After hours tonight, the market is unsure which way Dell will go.

Whatever Dell chooses to do, it must not lose its head. Business decisions are supposed to make business sense. As a Computerworld article today noted, 3Par reported $194.3 million in revenue for the fiscal year that ended March 31.  The HP bid that topped Dell’s original proposal represents a valuation more than eight times greater than 3PAR’s fiscal year revenues. (3PAR has had trouble making money, so let’s dispense with a discussion of earnings.)

Reason over Passion

Dell, even though it has nearly as much cash on hand as does — $10.88 billion to HP’s  has $14.17 billion — can’t afford to get crazy. It must spend its cash wisely if it its to fill enterprise gaps and compete across the data center. Spending madly for 3PAR would come back to haunt Dell at a later date.

If Dell truly believes 3PAR is a rocket ship destined for supercharged revenue liftoff, then it can justify an escalation in its bidding war against HP. But can it do that? Or would it just be a case of Dell trying to save face, attempting to win a pissing match against its bigger rival? It sure feels like testosterone might be getting the better of reason at the moment down in Round Rock.

Meanwhile, there’s some debate as to whether Dell and HP have other options. Some say they do, and point to Isilon and Compellent as purveyors of highly virtualized storage systems. Others argue that 3PAR is the best of the bunch, deserving the special attention it has received.

Either way, Dell should weight its next move carefully. It it ups the ante, it just might have to pay the price.

3PAR Shareholders Dance Jig of Joy

3PAR shareholders must be doing a vigorous jig of joy.

Even if Dell’s previously announced acquisition of the company, for approximately $1.15 billion in cash, had gone ahead, 3PAR would have achieved a rich premium on its pre-buyout valuation. Now, though, with HP belatedly rushing back to the negotiating table — apparently HP had discussed acquiring 3PAR before Mark Hurd’s alleged indiscretions came to light — 3PAR’s backers stand to make out like highway bandits. (Actually, they’ll make out like highway bandits on a poorly policed, well-traveled thoroughfare used by affluent commuters in luxury vehicles.)

Indeed, news hit the wire this morning that HP has proposed to acquire the cloud-centric virtualized-storage vendor for $24.00 per share in cash, or an enterprise value of $1.6 billion. That amounts to approximately 33 percent more than Dell had proposed to pay, which represented a whopping 85-percent premium on 3PAR’s closing price immediately before that apparently short-lived deal was announced.

HP Waives Termination-Fee Provision

HP is proposing acquisition terms that are identical to those Dell specified save for one exception: HP dropped a provision for a termination fee. Speaking of which, now that it appears HP has waylaid Dell on the way to the altar, the latter will qualify for special dispensation of $53.5 million from 3PAR for refusing to consummate the corporate union.

Effectively, that breakup fee will transferred from HP to 3PAR to Dell. Some 3PAR shareholders might be upset at seeing their mountain of lucre slightly diminished as a result of the payout, but I’m fairly confident they’ll get over it.

Dell’s 3PAR Buy Like a Blast from the Past

The storage space received a jolt today when Dell announced it would pay a whopping $1.15 billion in cash to acquire 3PAR, whose data-center storage technology competes against offerings from EMC, IBM, and HP.

There are several interesting aspects to this deal, and I’ll touch on a few of them briefly.

First off, Dell is paying dearly, quite literally, for 3PAR. The acquisition price represents an 87-percent premium on 3PAR’s closing stock price last Friday. That sort of acquisition premium is a blast from the past, taking us back to the days of wine and roses in Silicon Valley, when slick spivs cut wild M&A deals with blistering frequency and reckless abandon. It harkens back to a time when men such as Frank Quattrone bestrode the Valley like mythical colossi.

Party Like It’s 1999

Wait, what’s that? Frank Quattrone was on the sell-side of the Dell-3PAR deal, ensuring that his client got fair value for its technological wares? Then I suppose it’s deja vu all over again. For one day, at least, Quattrone and his merry band of investment bankers can pretend that we’ve gone back to a more salubrious time, when the next big transaction was, in more ways than one, right around the corner.

Let’s give Mr. Quattrone his due, though. If he got aboard the time-travel machine and went back to the late 90s, he got his Dell counterparts to make the journey with him. They certainly whipped out their rolls of cash like drunken brokers . . . well, never mind. Let’s not go there.

All things considered, however, I’m surprised Dell paid such a rich price for 3PAR. Dell must have thought it was a necessary measure, for whatever reason. Perhaps Dell was convinced that another company — HP, for instance — was competing for the deal. It would be good know what precipitated the preemptive strike. (Even though the deal seems rich by today’s standards, not everybody associated with 3PAR is pleased with it, much to the delight of litigious lawyers — are there any other kind? — everywhere.)

Dell and EMC Part Ways

My second observation is that the 3PAR deal, no matter what Dell says publicly, suggests that its reseller relationship with EMC is in serious trouble. It’s been a fraught relationship for a while now, and Dell  must have concluded that the prognosis wasn’t good. Rather than wait for the inevitable acrimonious divorce, Dell decided to throw down the gauntlet and start the recriminations early. If you’re going to go to war you might as well fire the first salvo.

In the end, I suspect Dell felt it could not compete with Cisco for EMC’s affections. That probably was an accurate assessment. With EMC about to be kicked into touch, Dell needed an alternative for its high-end storage customers — something it could control and own — and 3PAR was an obvious choice.

Dell’s Valley Presence

Finally, as 3PAR’s Marc Farley wrote on his StorageRap blog, Dell apparently will leverage 3PAR’s location as well as its technology. The thinking is that Dell will expand both the business and the engineering teams at 3PAR’s headquarters in Fremont, California. Many, including Farley, believe it’s long past time for Dell to raise its profile in Silicon Valley.

I understand the reasoning behind Dell’s 3PAR acquisition. I see how it fills a hole in Dell’s product portfolio while also providing an integral element in Dell’s vision for data-center storage and cloud computing. That said, I’m still feeling a bit of sticker shock looking at that price tag, and I’m not even a Dell shareholder.

Fear of a Converged Data Center

In a relatively short piece today, Michael Vizard has managed to cover a lot of ground. He deserves plaudits for his concision.

Quoting Ashish Nadkarni, a practice lead for Glasshouse Technologies, Vizard’s salient point is that while vendors, notably Cisco and HP, are pushing data-center convergence with fiery ardor, enterprises have not responded with reciprocal fervor.

Resistance is Manifold

The resistance to data-center convergence is manifold. CFOs are wary of anything resembling forklift upgrades accompanied by substantial capital outlays. Meanwhile, CTOs and CIOs are leery of stumbling into vendors’ trapping pits, drawn by the promise of long-term cost savings into a dungeon of proprietary servitude.

Last, and definitely not least, there is cultural and political resistance to sweeping change within IT departments. This makes perfect sense. Any student of history will know that revolutions displace and supplant power structures. The status quo gets pushed aside.

If we think about data-center convergence, we find that many potential enterprise-IT interests are threatened by its advance. As Vizard has mentioned previously, IT departments long have had their specialists. They are staffed by high priests of servers, viscounts of storage, lords of networking, and a smattering of application wizards.

Kumbaya Falls on Deaf Ears

By its very nature, data-center convergence entails that all these domain masters work in concert rather than in isolation. That scenario has theoretical appeal, and many salutary benefits could result from such IT kumbaya and common cause.

However, human beings — particularly in a realm where their positions are subject to offshoring and where job security has faded into a bitter, mocking memory– can be forgiven for eschewing collective idealism in favor of realpolitik calculations of personal survival. In their minds, questions abound.

If the data center is converged, what happens to the specialists? Who benefits, who wins and loses, who emerges from the fray with a prosperous career path and who becomes a dead man walking? These are uncomfortable questions, I know. But you can be sure many people are asking them, if only to themselves.

Answers Needed

An integrated, unified data center, with across-the-board automation and single-console manageability, has its charms — some of which are undeniable — but not necessarily to the specialists who inhabit today’s enterprise data center.

Cloud computing, whether of the private or public variety, faces many of the same issues, though the public option addresses the CFO’s concern regarding capital expenditures. Then again, cloud computing is challenged by the same cultural and political issues discussed above, and by other inhibitors, such as nagging questions about security and compliance.

I know these issues have been discussed before, here and elsewhere, such as by Lori MacVittie at F5’s DevCentral. Vendors, especially executives ensconced in boardrooms eating catered lunches, tend to overlook these considerations. Their salespeople, though, need cogent answers — and they had better be the right ones.

How Brocade Might Connect with Hitachi’s UCP

Hitachi has been said to practice passive — even stealth — marketing. Whatever you call the company’s approach to self-promotion, you’d probably agree that it tends to hide its light under a bushel, at least here in North America, where the company tends to be perceived as an industry afterthought.

That’s why I don’t feel particularly bad about my abject ignorance of Hitachi’s portfolio of networking products, produced through a joint venture with NEC called Alaxala Networks Corporation. Apparently, according to information on Alaxala’s website, Hitachi owns 60 percent of the company and NEC holds the remaining 40 percent.

I was not alone in being in the dark about Hitachi’s status as a purveyor of network infrastructure. Considering that some of Hitachi’s own employees don’t seem to know about this arrangement, I am in relatively good company.

It’s obvious that Hitachi, despite the existence of Alaxala, hasn’t vaulted to the top of the enterprise-networking charts in North America, or in most other parts of the world.

Still, Alaxala could be an important ingredient in Hitachi’s answer to Cisco’s Unified Computing System (UCS) and to HP’s aptly named HP Converged Infrastructure.

Hitachi’s rejoinder to Cisco and HP’s offerings is called the Unified Compute Platform (UCP). It isn’t on the market yet, but it will be released early next year. It will comprise blade servers, storage and network hardware, plus management and orchestration software. Microsoft’s System Center is in the mix, too, as are Microsoft’s Hyper-V virtualization technology and and SQL Server. VMware’s ESX hypervisors also will be supported.

One of the missing pieces is fibre-channel storage networking, but Hitachi representatives, in conversations with technology blogger Nigel Poulton, intimated that the company “might be working” on fibre channel. Then again, as Poulton cautions, that conversation involved significant language barriers, so meaning might have been lost or misconstrued in translation.

As it turns out, the Hitachi Universal Storage Platform V is a key component of the Hitachi Unified Compute Platform (UCP). In that context, it is worth noting that Hitachi already has an existing relationship with Brocade. That relationship involves Brocade providing extensive SAN-switching support for Hitachi’s Universal Storage Platform V.

I think you can see where I’m going here. I’m not the subtlest of characters. There’s a very real possibility that Brocade will be involved with Hitachi’s UCP initiative. To what extent, whether the relationship might be restricted to Brocade’s SAN gear or might also include its Foundry Ethernet switches, remains to be seen.

It’s a relationship worth watching.

IBM Reorganization Prompts Questions

IBM announced its latest quarterly results yesterday, but it did something else, too: It reorganized itself, shuffling some executives upward and changing the reporting structure for others.

On the surface, it’s not a big deal. It goes on all the time, especially at large companies besieged by changing markets, technological advances, bureaucratic inertia, and intracompany politics. Reorganizations help to shake things up, to keep the generals and the troops focused externally, on customers and markets rather than on solipsistic careerism (not that there’s anything wrong with that) and departmental intrigue.

But I’m wondering whether the IBM move portends more than that. In disclosing the changes to IBM staff in an email, the company’s president, CEO, and chairman Sam Palmisano wrote the following about the most significant aspect of the change, the integration of IBM’s formerly independent Systems and Technology Group (STG) into the company’s Software Group:

“We know that IT infrastructure performance is greatly enhanced when every element – from microprocessors and storage through operating systems and middleware – is designed and brought to market as tightly integrated, optimized systems.”

It’s a straightforward observation, as well as a decent rationale for the change, but it might hint at something more. In recombining its hardware and software under the same executive management — and in acknowledging the enhanced infrastructure performance of “tightly integrated, optimized systems” — IBM’s move causes  one to wonder whether the company might consider becoming a purveyor of other presumably valuable pieces of optimized infrastructure.

Until now, for example, IBM has been willing to stay out of the network-infrastructure business. First, it had a partnership with Cisco, which it still invokes occasionally for mutual benefit, and more recently it has partnered with Brocade and Juniper Networks. Through those partnerships, IBM covers the networking gamut, able to offer its customers extensive solutions that reach from the network edge to the core.

It doesn’t own the gear it sells, though. And it might not feel the need to offer its own gear, even now. But circumstances have changed since it first partnered with Cisco. Back then, Cisco wasn’t trying to sell servers, and it wasn’t aggressively pushing storage from EMC, an IBM “coopetitor.” Moreover, during the same intervening period, HP has gotten more serious about network infrastructure, buying 3Com to complement its HP ProCurve business and to form HP Networking.

Even Oracle is making sounds about getting into the networking game via an acquisition. That would make IBM think twice, if not three times, about whether it needed to change tack. In fact, it’s probably giving ample thought to the matter now.

I don’t presume to know what Palmisano and his inner sanctum are saying after they pad into the boardroom on IBM’s mahogany row. But I do know that this reorganization, entirely logical and justified in its own right, makes me wonder whether the stage has been set for a different sort of move.