Tuesday, May 12, 2009

Are Dot Hill's shipments hurting Xyratex sales

Many years ago NetApp purchased their disk arrays from a company called Eurologic. These arrays known as the NetApp FC7, FC8 and FC9 were quite reliable and Eurologic was working on a new set of arrays when Xyratex came out with a variant of their RS1600 with 14 disks for NetApp. These disk arrays known to NetApp customers as the DS14 have been quite reliable and Xyratex has been selling quite a few of them.

NetApp has been looking to cut costs though and Dot Hill came in with a product that is significantly cheaper than the DS14 variants. According to Dot Hill:.

Pursuant to our Development and OEM Supply Agreement with NetApp, we are designing and developing general purpose disk arrays for a variety of products to be sold under private label by NetApp. We began shipping products to NetApp under the agreement for general availability in the third quarter of 2007, and net revenue from NetApp increased significantly during 2008.

In this tough market NetApp is going to have to find significant ways to cut its costs on hardware sales. I have heard rumors of a significant scaling back of NetApp Sales Engineers in the field. This will be a pity, since NetApp has some of the finest field engineers in the industry. In my opinion, if they cut back on their service and support there is not much to differentiate NetApp from every other hardware company. This may cause NetApp sales to erode further over time.

If NetApp sales are down, that would mean that Xyratex sales are down, and if Dot Hill is the new low cost vendor to NetApp it would be a double hit to Xyratex gross revenue numbers. The Xyratex folks were a loyal vendor to NetApp, I hope things turn out well for them over time.

I'll bet someone is pitching a cheaper array to NetApp to take Dot Hill's place currently.

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