Tech News - IBM, Hitachi Agree to Collaborate on Storage, Disks

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IBM, Hitachi Agree to Collaborate on Storage, Disks

04/16/2002

ARMONK, N.Y. (Reuters) - IBM Corp. and Japanese electronics giant Hitachi Ltd. on Tuesday said they have agreed to collaborate on developing open data-storage systems as they take aim at industry leader EMC Corp.

Separately, IBM and Hitachi also said they plan to combine their various hard disk drive operations into a new, stand-alone joint venture. Hitachi would own 70 percent of the joint venture and pay IBM for its hard drive assets, subject to the completion of negotiations, the companies said.

Hard disk drives, similar to other components for computers, have experienced dried up demand and sharply reduced pricing.

Analysts have pressured IBM to sell its hard disk drive business, which is part of its OEM technology group. IBM pointed to the OEM group last week as a reason for its poor first-quarter performance.

"The disk drive industry is extremely competitive and coping with many issues," said Nicholas Donofrio, an IBM senior vice president. "There, the winners will be companies that can combine true technical leadership with global economies of scale."

IBM and Hitachi said they expect to source a major portion of their hard disk drive supply from the joint venture, which will be based in San Jose, California.

Data storage, however, is seen as the sweet spot in the information technology industry because of its relatively lofty profit margins, especially from software management products.

The data-storage alliance calls for IBM and Hitachi to develop products such as software that will allow data-storage machines made by different companies to talk to each other within a network.

Industry leader EMC has a similar initiative underway as corporations move away from proprietary hardware and software and shop for flexible data-storage systems to house the critical data generated by their computer networks.

The data-storage industry has become increasingly competitive over the past year as IBM and Hitachi's U.S. subsidiary, Hitachi Data Systems, have taken some market share from EMC. Several companies are racing to develop software that will manage multiple storage devices and allow corporations to lower the cost of running their data centers.

"On the high end, customers of storage systems are increasingly demanding interoperability, ease of storage management and better cost performance," Donofrio said.

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