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Analyst: Sun in storage deal with Hitachi

Sun Microsystems has signed a deal to sell high-end storage products from Hitachi Data Systems, according to an analyst who follows the companies.

Sun Microsystems has signed a deal to sell high-end storage products from Hitachi Data Systems, according to an analyst who follows the companies.

"A deal has been signed," Pacific Growth Equities analyst Thomas Mancino said in an interview Tuesday. "I think it will be announced in the next couple of weeks to a month."

The deal, rumored for weeks, would join Hitachi's growing storage business with Sun's top position in the Unix server market. HDS spokesman Bob Neudecker said in May that the company was in talks with Sun.

Hitachi and Sun declined to comment.

A partnership between Sun and Hitachi would put more pressure on EMC, the top company in the high-end data storage market. EMC is vulnerable right now, having warned that quarterly results to be reported next week will be far below estimates.

Merrill Lynch analyst Thomas Kraemer characterized EMC's most recent announcement as "catastrophic." J.P. Morgan analyst William Lewis said that with EMC's gross profit margin dropping from 55 percent in the first quarter of 2001 to 45 percent in the second, any recovery in unit sales won't necessarily mean more money.

A partnership with Hitachi has the potential to bolster Sun's storage efforts, long weaker than the company's server business and an area the company has been trying to fix.

As data storage has taken on greater importance and storage systems have become more independent from servers, they've accounted for a larger portion of sales of new computing products. Server companies such as IBM, Compaq Computer, Sun and Dell Computer have been struggling to catch up with EMC, whose sole focus on storage that works with any server has given it a major edge.

But Sun changing to resell Hitachi storage systems as well as its own won't be a simple process, Mancino said. Sun sales reps will likely have financial incentives to sell Sun's own products, for which compensation likely will be more lucrative.

"I think the agreement is going to take some diplomacy and skill to pull off," Mancino said.

It took months for Hewlett-Packard to change from selling EMC's storage products to its current arrangement selling Hitachi products under its own name, he said.