Is Sun looking to get rid of its StorageTek business entirely?
Sun has had a good quarter. It made a profit. Intel came on board plugging Solaris in return for Sun building Intel kit. It got a $700 million investment and access to cheap money from KKK. One slight problem; like HP, storage did not perform as it should have, except Thumper, the X4500 superNAS (hybrid server) box which recorded a thumping $20 million in sales.
Server sales rose 14 percent to $1.63 billion, 46 percent of Sun's revenue. Services revenue rose 6.3 percent to $1.31 billion. And storage? Sales fell 6.6 percent to $626 million, around 18 percent of Sun's revenue.
The appointment of David Yen has not stopped the rot. StorageTek is not working as it should for Sun. One quarter does not make a financial year. Also StorageTek was said to have had a strong Q2 fy06 quarter making the comparison look bad. But you might equally ask why Sun storage did not have a strong quarter in Q2 fy07. The Sun CFO said that there had been integration issues in the quarter between StorageTek systems and Sun's systems. Hmm, there has been quite some time to identify and work on these issues.
Sun welcomed private equity house KKK on to the board, saying it was great at raising value for shareholders and Sun valued its expertise. Fresh acquisitions might be on the cards.
HP's response to its StorageWorks underperformance is to get a new head for it and move Bob Schultz sideways. That boss changeover has already been tried at Sun with Mark Canepa changed for David Yen.
What will the KKK people be saying about the storage business and its underperformance? Will they be saying dump the dead end parts of the business and grow the live wood? Will they be saying your cash cow is in danger of turning into a dog. Cut your losses and get out. OEM storage form storage specialists. It is not your core busness.
The light response to the storage troubles is to get rid of parts of the business that don't have an upside potential for Sun. That would chime in with the persistent 'HDS is buying the 6920 business' rumours.'
The strong response is to bite an awful, awful bullet and sell the whole storage business to a white knight. There are the first stirrings of stories about such a strategy, with HDS mentioned as the white knight, and an announcement in days.
HDS wants to be a huge storage player. But does it want to be that huge?