Now you understand why executives at large tech companies like Intel, IBM, Hewlett-Packard and Cisco Systems get so excited when they talk about places like Brazil, India and elsewhere.

Brazil in particular is just a big part of a surging Latin American region, Gartner says, where spending will total $326 billion; nearly half of that in the professional sector, the other half in consumer.

By adding Mexico, Gartner also adds a fifth member to the four-country BRIC club comprised of Brazil, Russia, India and China. The five countries that make up the BRIMC club will account for 17 percent, or $658 billion, of IT spending this year, the firm says.

The Asia Pacific Region will account for the most among the emerging economies: $496 billion. The Middle East and Africa will account for $244 billion in spending, more than a third of that coming from Saudi Arabia, Turkey and South Africa. Central and Eastern Europe, led by Russia and followed by Poland and the Czech Republic, will account for $158 billion.

Luis Anavitarte, the Gartner analyst who led the study, says that while that seems like an awful lot of healthy spending, buyers are still cautious. He said in a statement that he expects to see aggressive efforts made to go after new consumer buyers in all of these countries, which brings to mind Apple’s aggressive retail push in China. Also, expect to see a lot of spending on cloud computing and mobile technologies at the office.

(Image taken from what someone thinks a trillion-dollar bill might look like. Of course, no such bill exists.)

Well, today we heard from another bank, and its opinions about Intel’s Romley chip and what it means for data center spending couldn’t be more different. Chris Whitmore, an analyst with Deutsche Bank Market Research, published a note to clients today, arguing that Romley will indeed spur a new round of spending in corporate data centers, and that it will have an equally strong secondary effect on the fortunes of enterprise storage companies, specifically EMC and NetApp.

One of the things that Romley will encourage, Whitmore writes, is a growth in the density of virtual machines running in each server. (Remember that, more often than not, a physical server is virtualized or subdivided into many virtual servers, allowing each machine to act like several machines.) More virtual machines allows you to consolidate your physical machines and add more in the same footprint if you want, which in turn means more computing work getting done overall. Whitmore estimates that, in general, data centers will boost their workloads by 20 to 25 percent by the end of next year.

Roughly 26 percent of Romley chip purchases will be used in these virtualized environments, Whitmore estimates. And that tends to spur demand for storage to support the virtual machines. In fact, the growth of terabytes worth of storage products shipped mirrors closely the unit growth of servers. (See the graphic, below, which I screen-grabbed from the report; click to see it bigger.) In short, it’s good news for NetApp and EMC. Whitmore says both are taking share from other vendors, including IBM, Hewlett-Packard and Dell, with sales growing at north of 20 percent a year — a growth rate that’s higher than that of the overall market, which grew 14 percent last year. He rates shares of both EMC and NetApp a “buy,” with price targets of $35 and $60, respectively.

Great news for EMC and NetApp, but what does it mean for Intel? Whitmore says to expect a mixed bag. Companies wanting to boost their use of virtual machines will be buyers. Companies that aren’t into virtualization so much, maybe not. “We believe our estimate of x86 servers shipped into virtual environments growing from 21 percent in 2011 to 26 percent in 2013 could prove conservative,” Whitmore writes. “As a result, although we expect Romley to have a relatively muted impact on overall server unit demand, we do expect it to drive another leg of virtual machine growth.”

Shares are down more than $4, or about 13 percent. The freakout appears to be coming from gross margins that shrank to 51 percent from almost 59 percent in the prior quarter, and despite the fact that sales more than doubled sequentially to $84 million from $31 million before.

CEO David Flynn called me up a little while ago to talk about the results, and he reminded me that Fusion launched its new IO Drive 2. It’s a transition to a new product line that’s proving tricky. New products built on new technologies are always a little more costly to build up front, and that’s compounded by the fact that early adopters, when they buy the new stuff, take the lower-end version and not the more expensive and more profitable one.

Also, enterprise customers who buy the new stuff are always conservative and take longer to decide whether they want to buy it or not, he says. Even so, the company has sold 10,000 of the new drives.

But? There’s a new customer of record: Salesforce.com is now a Fusion-io customer, and has joined the likes of Apple and Facebook, which is using the flash-based chips in the servers running in its data centers around the world.

And Salesforce isn’t buying it directly from Fusion, but rather through one its OEM partners, which include Hewlett-Packard, IBM and Dell, though Flynn wouldn’t tell me which one it is.

Salesforce is one of six customers who bought more than a million dollars worth of Fusion’s stuff this quarter and of those, four were repeat customers, Flynn told me.

The Salesforce win is also important, Flynn says, because some have wondered whether Fusion’s technology, while popular with high-end enterprises like banks and Facebook, would make sense for applications that tend to be used in mid-tier businesses, which Salesforce’s mainline CRM application often is. The lower end of the enterprise software market is moving toward cloud-based software, which is often referred to as Software as a Service, or SAAS. “By helping those companies, we are indirectly driving business in the mid-range of the market. Apple and Facebook are in the SAAS business too, it’s just that their customers are consumers.”

One interesting fact that Flynn shared with me: His first job out of college was working for Oracle. His boss at the time? One-time Oracle exec and now Salesforce CEO Marc Benioff. A small world it is, indeed.

First, Acer introduced what it is touting as “the world’s thinnest ultrabook” (it will be interesting to see if Acer can still lay claim to that title by week’s end): The Aspire S5, which measures just 15mm at its thickest point. It weighs less than three pounds and comes with a 13.3-inch LCD display screen. It also comes with an interesting “MagicFlip” port panel that’s hidden below the hinge of the laptop. Users can open the hinge to reveal a panel of ports, including HDMI, USB 3.0 and a 20 gigabyte Thunderbolt port.

The Acer Aspire S5 Ultrabook

The Aspire S5 laptop has an Intel Core processor, a solid state drive, extended battery life and a chiclet keyboard. It’s expected to ship in the second quarter of 2012; the expected price is still TBD.

With its Aspire Timeline Ultra laptops, Acer says it is expanding on the Ultrabook it rolled out in September. The Timeline Ultra is available in 14-inch and 15-inch models; the laptops are 20mm thin, boast eight hours of battery life, have solid state and hard disk drive options, as well as HDMI and USB 3.0 ports. They feature an Intel Core processor. So again, not totally different from other Ultrabooks we’ve seen and are expecting to see more of. The Timeline Ultra does, however, have a DVD-Super Multi optical drive, which some Ultrabooks do not have, depending on their thinness and innards. The Aspire Timeline Ultra is expected to ship this quarter.

But Acer’s cloud service offerings looked a lot like a “me-too” to what Apple showed off at WWDC last June. Due to a technical glitch during the press event — and the greatest ironies of tech conferences, aside from dependably terrible cellular and Wi-Fi service, are the technical glitches — we weren’t able to get a good look at Acer’s cloud media service for syncing music and other entertainment files.

Acer’s PicStream (demonstrated via a slide that looked like Apple’s iCloud slide), promises to share photos seamlessly from smartphones to Windows-based PCs and other devices; AcerCloud Docs is designed for syncing and sharing personal and professional documents via the cloud (although it seemed Acer was mainly targeting professionals with this service). Acer stressed that these services will support Windows-based and Android devices.

Lastly, in an odd but not uncommon press conference move, Acer’s Campbell Kan quickly showed off one more tablet and offered just two bits of information about it — it has a quad-core processor and a 1080p display — before concluding the event. Last week, my colleague Ina Fried wrote about Acer’s efforts to remain relevant in the tablet market by introducing a budget-priced, 10-inch, Android-based tablet, the Acer Iconia A200.

MORE CES NEWS:

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Today, on its Web site, the Korean electronics company unveiled the Series 5 Ultra, a 14-inch, 20.9mm aluminum laptop that’s large enough to accomodate an optical disc drive. It offers up to a terabyte of hard disk space, as well as solid-state drive storage options, reports The Verge.

It’s not the most lightweight of ultrabooks, though, in an emerging category of laptops known for thinness and portability: It weighs 1.8 kg, compared to the standard 1.5 kg. But the Series 5 Ultra comes equipped with both HDMI and Ethernet ports, as well as an option for a Radeon HD 7550M GPU.

The 14-inch model costs $1,345; Samsung is also offering a 13-inch Series 5 Ultra, just 14.9mm thick, for $1,300. The laptops are launching first in Korea, and are expected to ship in late December. No word on when these will become available in the U.S., but with the annual Consumer Electronics Show coming up in January, more info can’t be far behind.

In October, Box CEO Aaron Levie told AllThingsD that it was planning to eventually work with Hewlett-Packard to get the service installed on HP personal computers sold to businesses. Today the companies will announce that deal.

Depending on the machine, HP will offer a year of Box storage for free or for a reduced rate on certain Compaq-branded business PCs. Buy an HP Compaq 8200 Elite through the Smart Buy program and you get a Box.com account with unlimited storage for a year. Buy an HP Compaq 6200 or 6205 Pro series machine through Smart Buy, and you can get a free Box account with 10 gigabytes and the option to upgrade at a reduced rate.

It’s the second time that Box has announced a collaboration on HP hardware. The first was on the ill-fated TouchPad tablet that HP killed over the summer. Box has also recently announced collaborations with other cloud services like Yammer and Salesforce.com’s Heroku, among others.

The country is now beginning the arduous job of cleaning up from the floods that killed upwards of 600 people and dealt a body blow to its industrial and manufacturing base.

One industry hit especially hard is the computer business. The world relies on factories in Thailand to turn out critical components used to build hard drives, and factories there are out of commission for now. This is not a trivial problem — the factories in question are not easy to replace, retool and restart once they dry out. Nor is the answer simply for the hard drive manufacturers to build new factories somewhere outside the flood zone.

This is the kind of supply chain disruption that the computer industry hasn’t seen in many years. I had a chance to talk with Steve Luczo, the CEO of Seagate Technology, for his view of the situation. Seagate has been relatively lucky in that its factories haven’t been directly impacted like those of Western Digital and Toshiba. But many companies that supply Seagate with necessary components have been hit, and it will be some time before they’re back on their feet.

Luczo told me that the computer industry as a whole — including companies who make PCs, servers, workstations and any other device that contains a hard drive, whether a set-top box or an enterprise storage device — can expect acute supply-chain disruptions to last well into 2012, and that it will take until the end of 2013 for the industry to return to its pre-flood operating posture. You read that right: It will be two years before the supply of hard drives is anywhere near “back to normal,” and there are simply no easy solutions for getting it fixed.

An estimate by the market research firm IHS iSuppli pegs the available supply at 125 million units, which is about 29 percent short of demand of 175 million units. By its reckoning, more than one-quarter of the world’s hard drive manufacturing capacity has been disrupted in one way or another, including 45 percent of the capacity devoted to making hard drives for personal computers. I spoke with Luczo by phone yesterday, and tossed in an extra eighth question because of the importance of the subject.

AllThingsD: Steve, at a high level, I think everyone understands the problem. There’s been a terrible flood in Thailand, and a lot of factories that make crucial parts for hard drives are out of commission. To that end, I think people expect this to be a temporary problem that works itself out in a couple of months. But you say it’s a much more complex problem than most people realize. You’re tracking this situation day to day, and probably hour by hour. So, how bad is it, really? And what’s likely to happen?

Luczo: What’s surprising to us is that even with all the data out there — we’re six weeks into it — there are a lot of fairly sophisticated companies that haven’t fully come to grips with the depth of the problem and the duration that is likely to occur. What is going to happen in the next couple of weeks is that the real shortage begins to show up right about now. There was already a lot of built inventory and a lot of finished goods moving through the system. And now all that is gone, and I think customers are starting to see shelves of parts go empty, and realizing that they’re not going to be filled for anywhere from one to two months. So the concern is heightened.

We heard Meg Whitman talk about this on HP’s earnings call Monday. She said HP stepped in and started doing some strategic buying. She says HP is going to see effects at least through the first half of next year. Apple talked about it on its earnings conference call, too. Are you hearing from them?

Tim Cook at Apple was way in front of this. I saw Tim the first week it happened, and took him through the situation, and in 15 minutes he understood the magnitude of it. Meg was on the second week of her job as CEO when I went to see her, and she got it right away. HP’s procurement VP, Tony Prophet, was also early to understand this. Companies like that reached out to us early on, because they understood that this is going to be an extended problem. They started asking for longer supply agreements. Deals that would typically last about a year, they’re now asking for two years.

How bad is it really going to be? What’s your outlier worst-case scenario, and then what do you think is a little more realistic?

If you think pre-flood, a mix [of products] that the customers need, the industry had the capacity to ship about 190 million units a quarter. Pre-flood, we expected the demand to be pretty consistent at about 180 million a quarter, with a bump in September 2012 for Windows 8. We now believe the March quarter is going to much more difficult than the December quarter, and December is going to be about 120 million or so. We think the March quarter will be about 120 million, in the best-case scenario. And that’s with customers mixing down pretty aggressively; and by that, I mean companies like Western Digital, who don’t have access to the sliders [a critical component in a drive], are shipping one- and two-headed devices so they can ship more units. So instead of shipping a drive that contains two disks and four heads, which is what the market needs right now, they’ll be shipping a one-disk, one-head or one-desk, two-head product. They’ll be maximizing the units they can sell, rather than shipping the product the customer actually needs. … So we see something like 130 million for March on the optimistic side, and then 150 million for June, 170 for September and then 190 million for December. And so by the end of 2012 you’re back to being close to industry demand. But even then, you’ve not included the impact of that missed 100 million units. And that will take another year to absorb, because it’s not like the industry is building new factories to chase that demand. We can’t over-invest to meet some bubble and then get stuck with excess capacity.

I think, intuitively, people expected companies like Seagate to just build more factories outside of the flood zone, but it’s not that simple, is it? Would this not be a moment to add capacity?

There are some in the investment community who think that’s what is going to happen, and that there will end up being a supply glut after all this is over, but it’s not the case. For us, it’s more a function of how to recover the supply chain and then work with the customer to get a good read on what their needs are for the next several quarters. If we see a multiquarter shortage that goes beyond what I described before, then we would think about maybe putting some capital in place. But we’re not going to do that to solve a temporary problem, because we end up being stuck with the excess capacity. Now if it turns out there is no recovery, and then the industry is more constrained than I first described — and that, by June, the industry is still 30-40 million units short and looks like it will be for the next six quarters — we might revisit. But then we’d want longer-term commitments to make sure we’re not overinvesting. But we’re not to that point yet.

What is this doing to prices? And what does that mean to the person who wants to buy a computer or server this year or next year?

If you look at a 10-year moving average trend, the industry has in general seen prices come down about 2 to 3 percent a quarter, and that is for a particular product. In 2009, there was a little price erosion, and that was because the storage industry recovered quickly from the recession. And there had been massive capital cutbacks, so there were big shortfalls through all of 2009 and into 2010. Then, when the Greece crisis happened, that put a big flatline on a lot of growth, and the industry had put in a lot of capital because everyone expected there would be growth. So, since spring of 2010, the price erosion has been higher than normal, which would show that supply is greater than demand. And what this flood has done is drive the supply curve down, while the demand curve has stayed constant. For OEMs [original equipment manufacturers, or the PC and server manufacturers like Apple, HP and Dell, who buy directly from Seagate], you’re seeing an average increase of about 20 percent, and in the channel [resellers who sell parts to smaller PC and server vendors], probably much higher. So all the sensational quotes you see about pricing are about those that occur in the channel, where we have no control whatsoever.

The markups in the channel are much higher? Are the channel guys taking advantage of this?

Yes, they’re higher, but I don’t think they’re taking advantage. I’ve heard stories about drives that we sell to OEMs for $60 that show up in the channel at $105. Normally the channel price is within about 10 percent of the OEM price. It’s just the law of supply and demand. They can’t get supply. The channel is getting about a third, at most, of the supply they would typically get. The OEMs are the ones with the supply agreements, so everyone in the channel is way short. In some market segments, supply is about 70 percent below what the demand is. And so those shortages are very acute. The channel is selling the few drives that are out there to whoever needs them the most and is willing to pay for them.

So what does all this mean for Seagate, specifically?

For us it’s a different story, because we’re going to be driving more volume than our competitors, because we’re not as directly affected, and we’re going to be making some  technology transitions. When we do that, it lets us take cost out of our product, so we can offer more capacity for the same or fewer parts. That helps us drive down pricing. Our goal is to recapture some of the more aggressive pricing of the last eight quarters, in order to sort of get our business back in balance. Our long-term business model calls for gross margins of 22 to 26 percent. And we use our manufacturing expertise to drive down our costs and then pass that on to our customers. This quarter, end users really won’t see it, because product has been built and has been on the shelves. As the shortages just started occurring, you’re starting to see prices increase in the channel. And then at the OEM there will be shortages in some high-value areas like enterprise storage or cloud computing. You’re going to have to see price increases, because there’s such big shortages.

One thing that occurred to me when I first wrote about this a month or so ago is that it represents an opportunity for the flash memory chip companies to make some inroads against hard-drive guys like you, mainly on notebooks. Is there a threat that flash could pick up some of the demand?

Some of it, but not very much. I think to the extent that there is a high value purchaser who can afford to pay $200 for 100 gigabytes, then that market will expand from 1-2 percent to 3-4 percent. Of the 35 to 40 percent shortage that exists, could you see a little of that get absorbed by silicon? The answer is yes. But there’s a cap. There’s just not enough of a raw supply of silicon to meet all the demand. Our industry will ship 400 exabytes this year. We would have shipped 450, were it not for the floods. Of that, 180 exabytes is notebooks. Reduce that by 30 percent, and you get about 55 or 60 exabytes. If you were to take all of the capacity from Samsung’s newest state-of-the-art flash factory, and dedicated it just to notebooks, it would only put out 7 exabytes a year. Plus, there are already other markets demanding flash, like  tablets and cellphones and other things. So it’s not like you can steal from those other markets. You’re not going to take a $32 product and replace it with a $350 product. Can you do it at the edges of the market? Sure. But the threat is capped by the amount of silicon available and the price point for flash storage, which is still an order of magnitude higher.

Fusion-io shares closed at $38.10 — up 9.17 percent — during the regular session, and continued to climb by an additional 1 percent in after-hours trading. The shares have increased by more than 100 percent since they debuted on the New York Stock Exchange at $19 early this summer.

The main news came in the form of a new product, and the publication of news that Fusion-io technology was used in a high-performance computing project at the Lawrence Livermore National Lab.

People tend to think of Fusion-io as building traditional storage, but its main mission is to get data closer to the processor in a server, so that that processor doesn’t have to sit around waiting. Processors are super speedy and super impatient. Think of the processor as the impatient Miranda Priestly — played by Meryl Streep in “The Devil Wears Prada” — and how Anne Hathaway’s character, Andy Sachs, is never fast enough for Priestly about handing her something she needs right away. Microprocessors hate nothing more than waiting for a hard drive to serve up the data they need.

Fusion-io’s drives try to speed that process up — and make microprocessors happier — by using flash memory built into an insert card and installing it close to the processor in a system. The news, announced at the Supercomputing conference in Seattle today, is that Fusion-io debuted a 10 terabyte version of its high-end ioDrive Octal product. You can now pack four of these into a single server, and have 40 terabytes of data right up close to those impatient processors. Companies like Hewlett-Packard, IBM, Dell and Supermicro build Fusion-io’s products into their own products.

The other news also had a supercomputing wrinkle to it. A machine that Lawrence Livermore called “Leviathan,” packed with Fusion-io cards and Intel processors, broke a record in processing a graph with more than 68 billion nodes. Well, it didn’t just break the record, it shattered it, as that number of nodes in a graph is four times the prior record. What that means, in English, is that the computer plotted a mathematical graph with more than 68 billion points of data.

Apparently — and I’m just learning this now — there’s a separate version of the Top 500 list called the Graph 500 which focuses on simulating 3-D problems.

It’s a lot to take in, but the main point is that Fusion-io seems to be showing that it has a going business. Critics of the company have argued that it relies too heavily upon its biggest data-center customers like Facebook and Apple, and that it will be vulnerable to slowing sales when those companies are through building their infrastructure. The problem with that argument is that there’s always another impatient processor throwing an impatient diva fit while waiting for data.

Also, I should note that today’s 9 percent move comes after Fusion shares fell about the same amount on word last week that the company is planning a $350 million secondary offering. When investors heard about that last week, they sent the shares plunging by more than 8 percent, territory it has since reclaimed. It has been a bumpy, volatile ride for Fusion-io, no doubt. In the five months since the debut, the stock has traded as low as $15, and almost as high as $40. That’s IPO investing for you.

Western Digital CEO John Coyne warned yesterday on a conference call with analysts that the company expects significant impact to its hard-drive manufacturing operations in that country. It is one of several tech companies that has suspended operations in Thailand amid the worst flooding there in a half century.

Seagate, which reported earnings yesterday, also has operations in Thailand and said those are running at full capacity, but that some of its component suppliers have been affected by the floods.

“Given the severity of the situation and the extensive supply constraints caused by the disruption … the effects on our industry are likely to be substantial and will extend over multiple quarters,” Seagate said in a statement.

With the prospect of an industrywide shortage of hard drives affecting one vendor but not the other, shares of Seagate today shot up by $3.36, or more than 27 percent, to $15.42; Western Digital fell nearly 10 percent yesterday, but recovered today.

I checked in with Fang Zhang, who tracks storage for IHS iSuppli, the research firm that covers the electronics supply chain. While it’s too early yet to know the full impact, her initial estimate says that the worldwide production of hard drives will drop by about 30 percent, from 176 million units projected pre-flood to 125 million drives in the fourth quarter.

Apple CEO Tim Cook addressed the potential for a shortage on Apple’s earnings call with analysts on Tuesday because, naturally, it will affect his ability to turn out Macs this quarter and probably into next year. “I’m virtually certain there will be an overall industry shortage of disk drives as a result of the disaster,” he said.

One question I have is whether this could turn out to be an opportunity for the solid-state storage companies — the main supplier that comes to mind here is Samsung — that are popularizing flash-memory based storage drives in PCs like the MacBook Air and other machines. Will they boost production to fill that gap?

(Image via Consumer Queen.)

The Hopkinton, Mass., company, which sells data-center products, has posted strong results of late as customers seek efficient ways to store and access mounting troves of documents and media. But worries have emerged that macroeconomic conditions are causing softness in tech spending.

Read the rest of this post on the original site »

But given the widespread adoption of tablets like Apple’s iPad, coupled with everyone under the sun vying for a piece of the tablet market, it’s easy to see that consumption of content will continue to explode. And that’s the point — with that explosion comes the aftershock of storage demand. As more users adopt tablets as mainstream, more storage from hard drives will be needed from the backend servers and in the cloud to serve them. So while flash is appealing for use in consumption devices like tablets, let’s not let this obscure the main fact about tablets in the big picture of the storage market, which is that tablets aren’t hurting hard drive sales — in fact, they are helping.

When examining the storage market, we can look at present and future projections for HDD unit sales and by volume of capacity (in petabytes) shipped as per the chart below:

But we can also look at the data trends for consumption. In 2005, the world generated 150 exabytes (one billion gigabytes) of data. This year, it’s estimated that we’ll create and store 1,200 exabytes, and in 2020, a staggering 35,000 exabytes!¹ That’s 30x growth over the next 10 years.

This isn’t the first time that we’ve heard in the HDD world that the sky is falling. About a decade ago, MP3 player manufacturers shrank the device footprint and switched from hard drive storage to flash. Not long after, smartphones came on the scene, and those in the know posted that users would discard their PCs in favor of smartphones and, again, the hard drive industry would suffer. But the sky never fell, and neither MP3 players nor smartphones caused hard drive sales to decline. In fact, sales actually grew 14 percent between 2000 and 2005, and continued to grow 12 percent from 2005 to 2010.¹ The reality is that the more content consumption devices hit the market, the greater the demand for hard drive storage capacity, even when it is not local to the device.

Now let’s delve into some logic. Consumers didn’t discard their PCs for smartphones, and they aren’t going to chuck their PCs for tablets — the devices just aren’t that interchangeable. People are using their tablets for content consumption: to watch movies, browse the Internet, check email, play games, etc. But they aren’t really using their tablets for content creation, and certainly don’t rely on them for heavy duty applications. So logically, it follows that most people who own a tablet need a PC as well.

But just for argument’s sake, let’s assume users worldwide tossed out their PCs and replaced them with tablets. Right out of the gate, we would have a capacity problem. The bottom line is that all the flash in the world isn’t close to enough to meet the worldwide need for storage capacity, and that fact will remain true for a very, very long time. Here are some numbers to consider: In 2010, all the content created and replicated grew past a staggering zettabyte (one trillion gigabytes), and is expected to reach 1.8 zettabytes in 2011. Yet in 2010, the entire NAND flash memory industry manufactured just over 11 exabytes (you would need 1000 exabytes to equal every one zettabyte) of storage. Even with forecasts predicting that NAND flash production capacity will grow to 21 exabytes in 2011, only nine percent of that, or about two exabytes, will go to the flash memory used in tablets.² That’s not nearly enough capacity to meet demand.

Tablets with flash storage simply don’t have the onboard capacity to store the massive volumes of digital content that users want to access — anytime, anywhere. So all that data needs to be stored externally, in either local attached, networked or cloud storage — and all those formats rely on hard drives. So, once again, tablet popularity doesn’t hurt hard drive sales. In fact, some pundits see tablets as a net gain for hard drives: “For now, IDC sees the rise in demand for iPads/tablets as additive … for HDD makers in terms of the growth of information and digital content that has to be stored somewhere. That content and information consumed by these devices most likely will be stored on hard disk drives in data centers, cloud infrastructures, or on USB or network-attached personal storage devices in homes.”³

So in the end, even if some users do opt to replace their PCs with tablets, hard drives will still be in high demand. Content will continue its growth and storage will always be needed. Because nobody is saying worldwide demand for storage capacity is decreasing. Now that would be an ugly rumor!

Mark Wojtasiak is a Senior Manager in Product Marketing with Seagate Technology. For the past 5 years, Mark has been based in Seagate’s Shakopee, MN, design center where Seagate lives and breathes enterprise storage. Though Mark works in the middle of everything enterprise, his role at Seagate enables him to listen, learn, discuss, and share anything and everything related to storage. From the traditional desktop to external drives to the cloud, he develops insights on the latest storage technology, trends, customers, and users.

^{1 IDC Digital Universe Study, June 2011}

^{2 Gartner, Forecast: NAND Flash Supply and Demand, Worldwide, 1Q10-4Q12, 3Q11 Update, page 2, Table 15-3, September 2011}

^{3 http://storageeffect.media.seagate.com/2010/11/storage-effect/a-tablet-with-a-side-of-storage-please/}

Given the recent feuds between the management teams at the two companies, Oracle’s acquisitive history and HP’s sudden weakness, it doesn’t take much for a popular narrative of Oracle buying HP to emerge. It would be a dramatic denouement to the events of the last year that have found HP and Oracle at increasingly caustic loggerheads. Oracle CEO Larry Ellison would take some kind of victory lap and mount HP on the wall like a of trophy.

The idea gained some currency with an Aug. 21 story in the New York Post (which, like this Web site, is owned by News Corp.) arguing that HP’s $11.7 billion bid for the British software firm Autonomy, having caused shareholders to knock $12 billion and change off HP’s market cap, would therefore make HP more attractive to Oracle.

The meme gained further currency with a Bloomberg News story saying that HP’s board was “concerned” that its weakened condition had left it vulnerable to Oracle.

Let me put it like this: No. Just, no.

The first problem with the notion is this: What parts of HP would Oracle want to own? Answer: Practically none.

First, let’s look at the condition of Oracle: Its mainline software businesses are showing healthy returns, while its hardware business, built on the foundation of Sun Microsystems, the IT hardware concern it acquired last year for $7 billion, is ramping up to full speed. But here’s a fundamental truth: Software carries a higher profit margin than hardware, so when software companies buy hardware companies, they can’t avoid seeing their overall profitability erode.

Consider Oracle’s operating margin during its fiscal fourth quarter — its seasonally strongest quarter — during the last three years. In 2009, before the Sun deal was closed, it was 43.4 percent. In 2010, after the Sun deal was closed, it was 38.3 percent. In 2011 it was 41.6 percent. And during Oracle’s most recent conference call, CFO Safra Catz said Oracle hopes to get back to “pre-Sun” operating margins soon.

Now let’s look at HP and its operating margins: In its most recent quarter ended July, HP’s enterprise, storage and networking business turned in operating margins of 13 percent, which were down from 14 percent in the prior year’s period. The story was the same in practically every other HP business unit: Operating margins in services fell from 15.7 percent to 13 percent; in software they fell from 28 percent to 19.7 percent; imaging and printing margins fell to 14.6 percent from 16.9 percent. The only place they increased was the personal systems group — the PC unit that’s being considered for a spinoff — where they grew year on year from 4.7 percent to 5.9 percent.

Conclusion: Owning HP would do nothing good for Oracle’s profitability, especially at a moment when the stated goal is to nudge them up.

There’s more. As Mark L. Moerdler, an analyst at Bernstein Research, argued in a research note to clients on Sept. 26, software accounts for about 2 percent of revenue at HP. And what software it has is not the type that Oracle typically likes. When Oracle does acquisitions, it grabs companies that make applications that plug holes in its own product portfolio. The majority of HP’s software offerings — Autonomy nothwithstanding — deal with infrastructure management, not exactly a priority for Oracle. It is, however, a business where IBM and Computer Associates participate.

And there are two historically important business units at HP that would be outliers at Oracle: PCs and printers. Oracle has no interest in either one, and it’s hard to see that changing. Combined they make up more than half of HP’s annual revenue. In the hands of Oracle, they would probably end up being spun out, either together or separately, but why buy a whole company only to chop off more than half of it — a half that’s shrinking at that — at what would have to be unfavorable terms.

Let’s not forget the valuation estimate of HP’s $40 billion PC business: Analysts have expected that a hypothetical buyer might pay as little as $8 billion for it, or about one-fifth trailing revenue. Why go to all that trouble?

Further: Why would Oracle buy a company that’s roughly one-quarter exposed to the consumer market. Sure, HP has a retail distribution network that’s the envy of the PC industry. But Oracle would rather sell those retailers systems to help them manage their businesses, not the PCs they in turn resell at razor-thin margins.

If that’s not enough, then there’s one key bit about HP that Oracle would actively dislike. HP, by virtue of being the biggest distributor of Windows-based PCs and servers, is the world’s largest reseller of Microsoft Windows. If there’s anything more utterly antithetical to Oracle’s core values than helping put money in Microsoft’s pocket, I haven’t heard of it.

Finally, there’s the issue of cash. Even in its weakened state, HP is trading at a market cap of $45 billion and change. Assuming a premium for the whole thing, that pushes a hypothetical price tag to $60 billion. That’s too rich, even for Oracle, whose balance sheet as of Aug. 31 contained a combined $31.6 billion in cash and marketable securities. It would have to take on a tremendous amount of debt — amounting to 82 percent of fiscal 2011 sales — to get such a deal started, let alone closed.

HP’s directors and shareholders can rest easy. They have many worries about the Silicon Valley icon and the troubles in which it finds itself. But being acquired by Oracle isn’t one of them.

Chegg — best known for online rentals of textbooks to college students — said it has just bought Zinch, a start-up that links high school students and college recruiters.

Terms of the deal were not disclosed.

The purchase of the San Francisco-based Zinch, said CEO Dan Rosensweig in an interview earlier this week, is part of a larger plan involving a series of acquisitions aimed at “how we move from two-day relevance to relevance all year around for students.”

By that, he meant the short time period when students either buy or rent their textbooks for the semester.

That’s certainly been a good business for Chegg, which is the leader in the online textbook-rental arena, including digital distribution.

But to further solidify its relationship with students and expand its market base to include high schoolers along with college consumers, Chegg has picked up a number of start-ups like Zinch, using its stock and also the whopping $220 million in funding from a number of venture firms, including Kleiner Perkins.

In late September, for example, the company bought CourseRank, which helps students share course schedules, take classes with friends, and read and write reviews on classes and professors, as well as find out how they grade.

Also scooped up by Chegg: Notehall, which is a student-to-student note-taking trading market; Cramster, a social homework helper; and Student of Fortune, a homework-answers site for student questions (which a recent filing by Chegg noted was bought for $5.9 million in stock).

Also being tested are such offerings as deals for students and other ways to leverage the original textbook relationship.

“This is the beginning of a connected student network that we hope to build into a giant platform,” said Rosensweig. “We want to have a student using us all the way through for a 10-year span, from high school on.”

In related news, Chegg said it has hired former Palm CFO Andrew Brown as its new CFO. Prior to Palm, he served as the CFO of Pillar Data Systems Inc., a storage start-up funded by Oracle’s Larry Ellison.

While a CFO hiring often indicates a soon-to-happen IPO, Rosensweig said that Chegg has more than enough capital, needs to focus on building up its offerings and is in no rush to go public.

We’ll see, but here’s the official press release from Chegg about Zinch:

Chegg Plans to Expand into $7 Billion College Recruiting Market and Increase Student Base By Over 3.5 Million

Chegg enters into a definitive agreement to acquire Zinch, the leading digital network that helps high school students research, connect with and pay for college

SANTA CLARA, Calif., September 15, 2011 – Chegg today announced it has entered into a definitive agreement to acquire Zinch. The acquisition is subject to standard closing conditions and is expected to be completed by the end of this month. The acquisition will expand Chegg’s social education platform into high schools. Zinch, founded in 2007, connects prospective college and graduate students to scholarships, admissions officers and other students who have been through the same process.

The acquisition of Zinch, with over 3.5 million members, $1.9 billion in scholarships and over 5,000 school profiles, will significantly expand Chegg’s customer base and its social education platform. Colleges and students will be able to connect more effectively for less through Chegg, helping to streamline the college recruiting process globally. In addition, unlike any other company in the education space, Chegg will provide resources to students at every major milestone before, during and after their college career — including bridging the gap from high school to college.

“Our mission has always been to save students time, money and help them get smarter,” said Dan Rosensweig, president and CEO of Chegg. “With our acquisition of Zinch, we’re extending our mission to high school students through the $7 billion college recruiting market, while continuing to break down the barriers of a college education, from the high cost of tuition and textbooks to helping students make money, pick their courses and get the academic help they need.”

At Zinch, over 3.5 million students have built online profiles to showcase themselves as “more than test scores” to shine in the admissions process, and to be matched with schools and scholarships that might be a good fit. Colleges and universities worldwide, including more than half of the US News top ranked national universities, use Zinch for cost-effective student recruiting and outreach.

“Getting in and paying for school is daunting. Together, Chegg and Zinch can not only make higher education more affordable and accessible, it gives students an edge in finding the right school, getting admitted and reducing the cost. Students can put their best foot forward, be recognized for their achievements and be discovered by programs that fit their interests,” said Anne Dwane, CEO of Zinch.

The acquisition is subject to standard closing conditions and is expected to be completed by the end of this month.
To learn more about Chegg’s social education platform and its network of services, go to www.chegg.com.

With Apple joining other big names like Google and Amazon in offering cloud storage, the time seemed opportune to press the standalone companies on whether the market they pioneered would get gobbled up by the big guys. Not surprisingly, they all felt there was room to compete.

Of course, we also chatted about security and reliability in the wake of some high-profile glitches and collapses, and my favorite topic, mobility.

The panelists were Box.Net’s David Lee, SpiderOak CEO Ethan Oberman, CX CEO Brad Robertson and Cloudera’s Bala Venkatrao.

It has taken a bit, but for those who missed it, there’s now a video of the event, which was put on by SecondMarket:

Data Storage & the Cloud from SecondMarket on Vimeo.

Next we saw Violin Memory — which makes flash-based storage arrays that are intended to make enterprise applications run faster — land $40 million in venture capital funding.

Now we see a third player entering the “flash madness” narrative. Pure Storage is coming out of stealth today, announcing its plans to sell flash-based storage arrays. It is also announcing that it has landed a $30 million C-round led by Redpoint Ventures, with Samsung Venture Investment joining. (Yes, that would be the venture capital arm of the South Korean electronics giant that happens to be the world’s biggest manufacturer of flash memory.) Greylock Partners and Sutter Hill Ventures also participated. The latest round brings Pure’s total funding raised to date to $55 million.

So what is Pure Storage all about? I met up with CEO Scott Dietzen last week and got the download.

The fundamental problem with enterprise storage is that hard drives just can’t keep up with everything else that’s gotten faster in the data center. Flash memory is fundamentally faster, it uses less energy and it takes up less space. We all know this.

The problem with flash is that it has always tended to be more expensive than hard drives. Today, you can buy a one terabyte hard drive for $100 or less. But just try getting that same amount in flash memory and see if the price isn’t, well, a lot higher.

The same principles apply in the data center. CIOs would love to convert to flash-based systems, as long as they’re reliable and affordable and work with the applications and other hardware they already have.

Pure Storage is essentially promising to deliver just that, Dietzen says. The company’s first product is an all-flash storage array that is 10 times faster and 10 times smaller than hard-disk-based systems. It’s called the Pure Storage FlashArray, and it is being aimed at mainstream enterprises in a manner that’s easy to deploy.

Pure’s founders are John Colgrove — one of the founding engineers at Veritas, now part of Symantec — and John Hayes, a founding engineer at Bix, which was ultimately swallowed up by Yahoo. Dietzen hails from Yahoo as well, by way of its acquisition of Zimbra, where he was CTO.

An early key hire was Michael Cornwell, who was lead technologist for flash at Sun Microsystems (now part of Oracle). Cornwell also worked at Apple, where he was Manager of Storage Engineering for the iPod division, and oversaw that product’s transition to — you guessed it — flash memory. Remember the first iPod nano? That was his baby.

Another key name: Greylock venture partner Frank Slootman, the former CEO of Data Domain, is on Pure’s board.

So what’s so special about a storage array built on flash memory? “Disks get slower every year,” Dietzen says. “Intel says processors have gotten 175 times faster over the last 15 years.” Disks just keep getting more data packed onto them, which doesn’t really make them any faster. The mechanical arm inside the disk that grabs data from the platter really can’t go much faster. “Disks today are comparably slower than tape was 15 years ago,” he says.

This creates a problem. Storage needs are going up, but hard drives are slowing data centers down, preventing them from reaching their full potential. It’s only because of cost — about $5 per gigabyte — that hard drives are still appealing. Enterprise-grade flash, on the other hand, tends to cost $40 to $100 per gigabyte, and because flash is historically less reliable, you have to buy double what you really need.

Pure’s play is to get over the cost hurdle. Dietzen says the company can get the cost down to $5 per gigabyte and less.

How does it do that? By reducing the amount of data you actually store. What happens in enterprise environments is that various bits of data get copied and recopied, over and over. Imagine a big filing cabinet with 50 copies of each document scattered around in different folders, when you really only need one. Suddenly the size of that file cabinet need not be so big. The same applies in data storage: Why bother having 10 copies of the same block of data, when one or two will do?

Using a technique known as deduplication, a system can eliminate all those unneeded copies and thus streamline the whole operation. Deduplication, combined with compression, was the primary principle behind Slootman’s Data Domain, which is now part of EMC.

But deduplication is expensive on hard drives, and really doesn’t make sense. Because the mechanical arm in a hard drive is always searching around for where its next needed block of data is to be found, if you employ deduplication, you end up with a bunch of reference signs telling the arm where to go, Dietzen says. The end result is that the disk has to spin more, not less. Flash memory chips don’t have that problem. “We make that process fast, because there’s no performance hit to the deduping process,” he says.

On top of that, Pure has created some algorithms that make the process a lot more granular than on hard-disk-based systems, by working with smaller disk-sector sizes. How small? He wouldn’t say exactly.

Unlike other storage companies — like, say, EMC — Pure’s array, Dietzen says, is built from the ground up for running flash. “The disk-centric companies are slotting flash into places where disks used to be, but they’re not changing the software to take advantage of the flash, to protect the flash from uneven wear and other things.”

A few early companies have tried the hardware, among them the law firm of Fenwick & West, whose CIO Matt Kesner is quoted in Pure’s press release as saying that the data used for various workloads was reduced from 50 to 90 percent.

One key thing that’s going on in the data center these days is virtualization — running several virtual computers within one single physical computer. When you run a lot of virtual machines, you have a lot of data that, like the paper in that big file cabinet, is essentially the same. Dietzen says that Pure’s flash array is able to eliminate a lot of that data. “Even if those virtual machines are a mix of Windows and Linux, there are a lot of commonalities between them,” he says. It’s not uncommon to see the data footprint for virtual machines reduced by a factor of 15 or 20 to one.

And that has caused some interesting reactions among early customers trying out the array. “Some people try it and are shocked when they put 15 terabytes on it and see there’s only one terabyte and think we’ve lost a lot of their data,” Dietzen says. “It’s a little scary at first, but then they run all their workloads and see all the data is there.”

That was around that time of the initial public offering of Fusion-io, the Utah-based start-up that speeds up servers and storage networks. Having opened trading at $25.30 a share on June 9, its first day of trading, its share price has held steady since, and it closed Tuesday at $28.35. It will report quarterly earnings for the first time as a public company on Thursday.

The summer is proving equally interesting for Violin Memory, another company with flash memory based technology that is intended to replace the traditional hard drive based storage arrays that allow enterprise applications like those made by Oracle to run fast. Having raised a $40 million Series C funding round from Toshiba and Juniper Networks at an implied valuation of $440 million in June, the company has been bulking up its staff.

Today Violin will announce that it has named Jonathan Goldick — the former CTO of OnStor, now a unit of chipmaker LSI — as its CTO of Software. Goldick has been knocking around the computing industry for about two decades as an expert on file systems and storage, and his resume includes stints at IBM and Microsoft.

So what does it mean to be CTO of Software at a chip company? Goldick’s job will focus on solving problems related to data management that go beyond the speeding-up that Violin’s technology offers. Once hard drives (which, for all the progress they’ve made in five decades, are still essentially platters of glass; even when spinning at the speed of sound, they are subject to errors and inefficiencies that make them still too slow for the fastest computers) are out of the picture, new problems arise.

“The early adopters, they care about speed because they’re in application hell. But once you get past that, the problem becomes one of data management,” Goldick told me. “Once you make anything 100 times faster or cheaper, you have to revisit how you manage data.”

It’s a big enough problem that Goldick was being heavily recruited by other companies working on bringing flash technology to their own hardware. Goldick wouldn’t name the companies directly, but the hints he dropped suggest he turned down offers from both EMC and Oracle.

Goldick is Violin’s second recent hire. Last month it quietly hired Garry Veale, a former vice president at Hewlett-Packard’s StorageWorks division, as its new managing director for the EMEA region.

There’s a reason that Violin is bulking up its team: The opportunity is potentially huge. Remember, if you will, the December day that Oracle CEO declared that its SPARC T3-4 Supercluster had achieved something of a land speed record of more than 30 million transactions per minute. This was the same speech in which Ellison, in one of his numerous bits of trash-talking, likened HP’s competing product to a turtle. It’s often called “the turtle speech.”

That speech got Violin CEO Don Basile all excited. One of the things that made that Oracle machine so fast was that it was packed with a couple hundred terabytes worth of flash memory. As Basile told me last week: “We loved that speech because they proved us right. It was a big validation for what we want to do.” It also means there’s no end in sight to the flash madness.

Now, though many investors continue to pile into the data-center business, one of the few hot spots in real estate, others fear the peak may be past.

In key markets from New Jersey to Silicon Valley, there are signs that supply is catching up with the needs of the telecommunications, Internet and other companies that rent space from data-center landlords. Adding to the concern, some large tenants, such as Facebook Inc., are building their own facilities and avoiding paying rent to outside developers.

Read the rest of this post on the original site »

It was for Hewlett-Packard another of those sudden, jarring shifts where the course of the company diverges from being one thing, to something new entirely. Léo Apotheker’s remaking of the company, which began with January’s purge of four board members, is now well underway. Ann Livermore’s departure from head of the enterprise business to a seat on the board of directors is making way for a new power trio of executives who will report directly to Apotheker: Dave Donatelli, executive vice president, Enterprise Servers, Storage, Networking and Technology Services; Bill Veghte, executive vice president, Software; and Jan Zadak, executive vice president, Global Sales. I’ve already taken to calling them the DVZ Trio.

Shaw Wu, a tech analyst with Sterne Agee, in a note issued to clients this morning, said he likes what he sees. Donatelli is effectively the new head of the enterprise business, succeeding the legendary Livermore who had more than once been considered a serious contender for the CEO job. He says that given HP’s renewed emphasis on software Veghte will play a key role as well. “While we believe it is too early to judge whether these changes are for the better or not, we do believe they make sense in streamlining operations and increasing accountability,” Wu writes.

Wu said he’s maintaining his “Buy” rating on HP shares based on their growth prospects in networking, storage and software. He notes that in the most recent quarter, the server business grew 11 percent, networking grew 14 percent and software 17 percent, year on year. “In addition, we now see opportunity to expand services margin back to its previous industry leading levels.”

With HP trading at a valuation of 6.5 times its projected earnings for the 2012 calendar year, he likes the risk. His price target of $53, which would amount to an 18 percent improvement in the share price, is based on the assumption that HP should be valued at closer to 10 times its estimated per-share earnings for 2012. He writes: “In addition, we view HPQ as a fairly defensive play with its recurring profit streams, broad portfolio and geographic exposure and room for operating leverage.”

So far the market is agreeing with him. In pre-market trading, HP shares were up 15 cents to $34.80 as of 8:30 am New York time this morning.