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EMC fights back with new architecture

The storage firm is set to unveil a new "matrix" architecture to regain ground from rivals. But Hitachi has plans for its Lightning systems, and Big Blue is circling its Sharks.

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EMC is expected to announce next week a long-awaited overhaul of its high-end products as it moves to narrow the performance gap with rivals in the storage market.

Monday's launch of EMC's Symmetrix 6 line, which releases a new internal architecture, is seen as a critical step in the company's efforts to regain lost ground in the high end of the market.

While the Hopkinton, Mass.-based storage maker was able to post better-than-expected financial results last quarter, analysts said most of those gains were due to cost cuts and strong sales of its midrange line of storage gear.

"Although it is about a year late, Symm 6 is important both for resuscitating (EMC's) mainstay product line as well as for its impact on other revenue lines," Merrill Lynch analyst Steven Milunovich said in a research note last week. Milunovich noted that EMC's total market share dropped from 13 percent to 11 percent in the third quarter of last year.

One of the technical highlights of the Symmetrix 6 line is expected to be a new "matrix" architecture, designed to increase the speed of information traveling between internal components of the storage system, according to Milunovich and others familiar with the company's plans. The new products are also expected to offer higher amounts of cache memory and to reflect a switch from RAID-1 technology to a newer RAID-5 approach, which lets data be stored "redundantly"--or in more than one place for backup purposes--but reduces the amount of disk space devoted to protecting data.

The new Symmetrix 6 line will consist of three models: the modular DMX800, the single-enclosure DMX1000 and the dual-enclosure DMX2000, according to Wall Street analysts and sources familiar with the company's plans.

EMC has scheduled an event in New York on Monday to launch the new products. Executives mentioned the launch in last week's earnings conference call, but refused to talk specifics or answer questions about the new products. An EMC representative declined to discuss details of the new products for this article.

Swimming with the Sharks
EMC's rivals, while downplaying the significance of the launch, are already responding to the company's move. IBM and Hitachi Data Systems are each announcing enhancements to their competing product lines.

Hitachi announced on Wednesday that it is doubling the total capacity of its Lightning 9900 V series by adding the option of 146GB drives, bringing the total raw capacity to 148 terabytes and usable capacity to 128 terabytes. Hitachi also plans to announce an increase in connectivity, offering up to 64 Fibre Channel connections at 2GB per second.

Meanwhile, IBM is set to announce Monday that it is adding support for Bluefin, a proposed standard that lets software makers speak a common language when controlling storage systems. The company also plans to announce availability of faster 72GB hard drives.

"It's a three-horse race right now," Steve Kenniston, an analyst at Enterprise Storage Group in San Jose, Calif., said of the high-end storage market.

At the same time, Kenniston said there is a clear difference between the touting of redesigned systems, such as EMC's expected announcement, and tweaks that represent a "turning of the crank," with faster drives or processors, such as the latest moves from IBM and Hitachi. EMC is expected to highlight the new data architecture within Symmetrix 6 systems.

The company's existing storage systems have used a bus architecture, meaning that data must share the same pathway, potentially creating bottlenecks. Hitachi moved to a switched architecture with its Lightning series two years ago. EMC may tout that its new "matrix" architecture can deliver 64GB per second of maximum bandwidth, according to a marketing presentation seen by CNET News.com. Hitachi offers 16GB per second of internal throughput in its switched approach, while EMC's earlier Symmetrix products deliver 1.6GB per second in its bus architecture.

The move by EMC to the matrix architecture is seen by Hitachi executives as proof that they were on the right track in abandoning a bus architecture.

IBM executives say they believe Big Blue's "Shark" line of enterprise storage systems will still substantially outperform the new EMC products.

"Internal bandwidth is just one component of overall application performance," said Jim Tuckwell, marketing manager for the Shark line.

IBM also points out that EMC is not expected to initially support a new faster method of attaching storage to mainframes, although such support is expected to come by the third quarter. The low-end modular model is not expected to provide any mainframe support, while the two higher-end models are expected to provide ESCON support initially and support the newer 2GB FICON technology later this year, sources said.

Will customers bite?
The major question from analysts is how many of EMC's customers will upgrade to the new hardware. "One of the key advantages that EMC has is its installed base," said Shebly Seyrafi, an analyst at brokerage firm AG Edwards. Analysts say that there is pent-up demand among EMC customers for faster machines.

"EMC has lost over 30 percent of high-end hardware revenue share to IBM and Hitachi over the last two years and about 15 percent in the last year alone," said Toni Sacconaghi, an analyst at brokerage firm Sanford Bernstein.

"Given that EMC is now competitively priced and has similar market share as Hitachi (and to some extent IBM), we believe its recent share losses are mainly attributable to its lagging hardware performance," Sacconaghi wrote in a research note this week.

Although new products typically only boost revenue for one or two quarters, Milunovich said Symmetrix 6 might help EMC for three or four quarters, similar to the gains IBM once saw when it introduced a new mainframe computer.

"Assuming good customer acceptance, we calculate Symmetrix sales could enjoy a double-digit rise, to over $2 billion," Milunovich said.

However, a boost in EMC's network storage revenue is needed, he said, given the expected declines in the direct-attached storage market. Sacconaghi agreed the new products should have a positive impact but said the benefit might only last one or two quarters.

Also unclear is what the arrival of the new Symmetrix line will mean for pricing in the storage market, Seyrafi said. Recently the price per gigabyte of storage has been dropping at a rate of 40 percent or 50 percent a year, up from historical averages more in the range of 30 percent.

"It will be interesting to see if EMC's new product cycle can be a catalyst" for more stable pricing, Seyrafi said.

The overall storage market has been limping along, with total revenue down 2 percent in the third quarter as compared with the prior quarter, according to IDC.

On a recent conference call with analysts, EMC CEO Joe Tucci said he expected a slight increase in storage spending this year even as overall information technology spending remains roughly flat.