In second-quarter earnings announced last week, Compaq showed flat growth in storage on revenue of $1.2 billion. "The results are below expectations, and we're focusing on accelerating growth in the second half," CEO Michael Capellas told financial analysts last week.
To kick off its storage revival, Houston-based Compaq today unveiled two new products: the TaskSmart N-Series NAS (network attached storage) server and StorageWorks RAID Array 4100 SAN (storage area network) system.
"In today's brick-and-click economy, data is king," said Mary McDowell, general manager of Compaq's industry standard server group. "The NAS market, which we're entering today, is really where servers meet storage. The products here are part of a collaboration between the server and storage groups."
By offering new NAS and SAN products simultaneously, Compaq hopes to cover two lucrative markets as it moves forward. NAS is easier to put in place and is often used to cache content delivered over the Web. SAN, by contrast, attaches a collection of storage devices connected together to corporate networks.
Compaq's approach to selling storage is increasingly one of leveraging sales off its PC--or what the company calls industry standard--servers. Although Compaq's storage division earnings for the second quarter were disappointing, the company's PC server division saw 40 percent growth on revenue of $1.5 billion. The PC maker wants to build on its strength, McDowell said.
In a May research note, Merrill Lynch analyst Steven Fortuna put Compaq's overall growth in storage revenue around 5 percent, with 30 percent of storage revenues coming from external devices and software. But that could increase dramatically as the company pushes into delivering attached storage for Internet servers.
That success started with the surprisingly quick acceptance of the ProLiant DL line of servers, which "went from being 28 percent of the mix in Q1 to 38 percent in Q2," McDowell said.
McDowell said the server, which easily can be stacked in small places, appeals to dot-coms, Internet and application service providers, and companies consolidating from larger to smaller servers.
Compaq started offering the dual-processor DL360 on June 5 and had sold 24,000 by the quarter's end June 30. With many service providers and dot-coms rapidly expanding to support growing Internet traffic or B2B e-commerce, "it's not unusual for them to receive servers every day," McDowell said.
The PC maker's goal is to beef up storage sales as it makes further inroads with Internet service providers, application service providers and e-commerce companies by offering server and storage products that use standard components.
"We have common hardware and software components across (the) models: the same hard drives, the same array controllers and the same software modules, regardless of the specific architecture the customer would implement," McDowell said.
Compaq's TaskSmart series comprises server appliances, or "thin servers," that offer higher performance, less maintenance and easier installation than standard servers.
Piper Jaffray analyst Amir Ahari said going after dot-coms and service providers with server appliances is a smart approach. "Once you get your foot into the door, you can go into streaming media, network attached storage and other options," he said.
But that strategy is wrought with risks, as server appliances stand to bleed sales off traditional servers, analysts say.
The TaskSmart N-Series server will be available within 30 days, starting at $34,710 in a 72GB configuration. The RA4100 SAN is available immediately for $19,800 for a 218GB SAN setup.