EMC, Seagate -- Everyone Wants a Storage Company. Here's Why

Even without the news that Google (GOOG) is developing its own storage technology, the storage industry is turning topsy turvy. Seagate Technology (STX) has a buy-out offer from a private equity firms TPG and Kohlberg Kravis Roberts. And there is a rumor that Oracle (ORCL) eyes EMC (EMC) as an acquisition target, even as EMC challenges the database giant in big scale computing appliances.

This is another one of those a-lot-going-on-all-at-once-but-not-so-surprising moments. HP (HP) and Dell (DELL) vying for 3PAR was another example, with an eventual acquisition by HP at an enormously inflated value. The entire IT industry is doing loop-de-loops on an economic zeitgeist rollercoaster. Here's a quick summary:

  • Cloud computing will temporarily lift major computer technology sales, but will ultimately screw them to the wall as resources, used at an unheard-of level of efficiency, provides computing for millions with a fraction of the equipment than was needed in the past.
  • Even given that most corporations are experimenting with cloud computing at best, they are still looking to use similar techniques to reduce their equipment and software purchasing in-house.
  • Hardware has become a commodity, even for much of what appears in data centers. After all, one x86 server really does seem like another, no matter how much the vendors insist that the differences are immense.
  • Tech companies are well into the mature stage. They are big and can't easily grow by percentile leaps and bounds, even though that's what investors still expect, so they have to enter each other's territory in hopes of gaining more revenue.
As companies look for new territories, some areas are more natural candidates for expansion. Although there have always been separate storage vendors, it is a type of technology that dovetails well for any business selling servers or networks. Oracle clearly want market leader EMC to control server technology to rivals like HP and IBM. In addition, EMC owns 85 percent of top virtualization vendor VMWare (VMW).

Seagate, on the other hand, is a major name in hard drives, which are important in clients and servers alike. From a private equity view, that's a chance to buy the company, "improve" its financial performance (though that doesn't necessarily mean leave the company better off), and then sell it to either another hard drive manufacturer or to a PC company that wants more control over its parts supplies.

This is just round one. The panic and desperation for securing additional business, no matter how, will only increase.


Image: Flickr user Random Activity, CC 2.0.