HDS and NetApp get close

Hitachi Data Systems will market and sell Network Appliance's networked storage systems as a link to its own storage products in a deal that puts pressure on rival EMC.

Beginning in the first quarter of 2003, HDS, a subsidiary of Hitachi, will sell Network Appliance systems that will act as a front end to HDS' top-end Lightning storage systems, the companies announced on Wednesday. The product will give Hitachi a competitor to EMC's Celerra product while giving NetApp a lift into more lucrative customer accounts.

Network Appliance specialises in network-attached storage (NAS), essentially high-end computers that can store files such as email. EMC and HDS, in contrast, have storage systems that store data on disk arrays that appear to computers like a single mammoth hard drive, an approach that's better for storing information in databases. EMC and HDS systems can be attached to servers either directly or through a special-purpose storage area network (SAN).

Under the deal announced yesterday, the NetApp products will provide a NAS interface to the HDS systems. In addition, the companies are working together so the NetApp systems can be managed with HDS' HiCommand software.

The deal is likely to add a few cents per share to NetApp's fiscal 2004 earnings, said Goldman Sachs analyst Laura Conigliaro in a research note on Wednesday, "but more important is NetApp's increased ability to engage tier one storage buyers and generate sales across its growing product line", she said.

NetApp in October began an assault on the SAN market, taking on EMC and HDS. Wednesday's deal won't eliminate competition for those customers.

"I would expect to compete vigorously with HDS in other opportunities," NetApp CEO Dan Warmenhoven said. And HDS won't sell NetApp's new combination SAN-NAS device, he added.

Analysts had expected a deal between the two companies. Conigliaro said she believes NetApp is pursuing similar work so its systems can be used as a front end to storage systems from EMC and IBM.

Warmenhoven declined to comment on such further deals in a conference call on Wednesday, adding NetApp would require formal partnerships with IBM or EMC before any product was viable.

"We are receptive to those opportunities but we cannot execute them without the full cooperation of the other party," Warmenhoven said.

Stephen Shankland writes for CNET News.com.