Emc

King of the Hill
LMC has long been the kingpin of storage. But a tech slowdown and fierce
competition is threatening its position. Now, it's out to dispel any doubt about its
supremacy.
By Heinz Bulos
March 2003

torage is not sexy. In íact, it`s quite
boring. Some ·enture capitalists
used to reíer to the sector as
snorage`. It`s just a box that stores data,
aíter all.

But storage happens to be a >48 billion
industry. lorget ser·ers, íorget PCs,
storage is one oí the hottest growing
sectors in the tech industry. Up until its
peak, it has been growing 22 percent e·ery
year, around twice the growth rate oí the
I1 industry.

It`s easy to understand why. 1here has
been an explosion oí data in the past íew
years. Consider this: the world produced
about 1.5 exabytes in 1999 and 3 exabytes
oí data in 2000. Between 1 and 2 exabytes
oí unique iníormation is produced each
year, roughly equi·alent to 250 megabytes
íor e·ery man, woman, and child on the
planet. Soon, with the ad·ent oí rich
media, it will grow to 1 terabyte oí data
per person. By now, according to a study
by the School oí Iníormation
Management Systems at the Uni·ersity oí
Caliíornia, Berkeley, more new
iníormation has been created than what
has been produced o·er the entire history
oí mankind ,estimated at 12 exabytes,. 1o
better appreciate this little íactoid, please
note that an exabyte is equi·alent to a
billion gigabytes. 1hat`s a 1 with 18 zeros
aíter it, or 50 thousand times the ·olume
oí the Library oí Congress. 5 exabytes is
equi·alent to all the words people ha·e
e·er spoken. Ií you store 12 exabytes on
íloppy disks, they would stack 24 million
miles high.

It`s quite ob·ious how it has come to this.
1he ad·ent oí computers, the Internet,
and digital technologies has allowed not
just organizations but more so indi·iduals
to produce and consume an enormous
amount oí content. 93 percent oí
iníormation produced each year is stored
in digital íorm, and digital is the íastest
growing íormat. Just think about your
typical day. \ou send and recei·e dozens
oí e-mail, a good number with attached
íiles, and sometimes to se·eral people.
\ou download MP3 íiles and upload
digital photos. \ou pass around \ord
documents and PowerPoint presentations
to colleagues. \our ía·orite newspaper
comes to you on your doorstep and your
inbox. \ou buy this magazine on a
newsstand or browse it on the \eb.

Now, think about the amount oí data
produced by organizations. Bank
documents, hospital records, utility bills,
tele·ision programs, digital photographs,
legal contracts, court records, oííice
memos, the list is endless. According to
research íirm IDC, the amount oí
corporate data doubles e·ery 6 months.
By now, companies ha·e consumed some
1.4 million terabytes oí data annually. And
all these data, oí course, has to be stored
somewhere. Now you see why storage has
suddenly become a sweet spot in the tech
industry.

And in the world oí storage, LMC
happens to be the king oí the hill.

S
Irom obscurity to supremacy
MC Corp. was started in 19¯9 as a
íamily business by Richard J.
Lgan and Roger Marino ,hence
the L and M in LMC, in Newton,
Massachusetts, manuíacturing memory
boards. It was only 10 years aíter when
the company entered the storage business.
1he company would ha·e íaded away in
contractor obscurity ií not íor one
Michael C. Ruettgers, who was name
CLO in 1992. In less than a decade,
Ruettgers transíormed LMC into one oí
the hottest technology company in the
world. lrom sales oí >386 million in 1992,
it has grown to >8.9 billion by the time he
stepped down as CLO. Proíits likewise
increased írom >30 million in 1992 to >1.8
billion in 2000.

1oday, the company employs 1¯,000
people worldwide and has 100 sales
oííices and distribution partners in 50
countries. In the Philippines, it has been
operating since 1995 through ·alue-added
reseller 1otal Iníormation Management
,1IM,, and íormally established a
subsidiary, LMC Computer Systems
Philippines, Inc. in 2000, appointing IBM
·eteran Ronnie Latinazo as country
manager.

LMC`s growth was phenomenal. By 1994,
it has already exceeded >1 billion in sales,
marking its entry into the lortune 500 list.
1he íollowing year, it has surpassed IBM
as the market leader in mainírame storage.
In 1998, its soítware business reaches
almost halí a billion dollars, making it the
íastest-growing major soítware company
in the world. lrom 1995, it grew an
a·erage oí 3¯ percent per year.
At its peak in 2000, LMC led in practically
all storage segments. In the external
RAID market, it held 26.1 percent market
share. In networked iníormation storage,
it had 30.5 percent. In the UNIX external
RAID segment, it held 29 percent. In the
S,390 mainírame storage market, it had
50.3 percent. LMC controlled ¯1 percent
oí the proíitable upper end oí the market.
And then came the crash

lot has already been said about
the reasons íor stock market crash
and subsequent downturn in I1
spending. 1here was the excessi·e
·aluation oí dot-com companies, the
o·erspending during the \2K scare, and
the e-commerce hype. But it was thought
that storage would be spared írom the
carnage. Aíter all, data was still increasing
at breakneck speed.

But cut back companies did. L·eryone
was aííected by the economic slump.
lrom a >31.2 billion market in 2000, it
dropped to >25.5 billion in 2001, an 18
percent decline. 2002 was another bad
year, with the worldwide storage market
shrinking by 10.6 percent.

Compounding the decrease in tech
spending was a sharp increase in
competition, and a consequent price war.
IBM, Sun Microsystems, lP, litachi
Data Systems, and Network Appliance
joined the íray. And so has Dell and Cisco
recently. Suddenly, e·eryone was out to
get LMC`s lunch. I1 buyers, on the other
hand, íinally ha·e credible and cheaper
alternati·es to LMC, which one
competitor reíerred to as Lxcessi·e
Margin Co., íorcing the company to slash
prices ,and seeing its margins íall írom 60
percent to 30 percent,.

1he result: LMC posted in 2001 a 21
percent drop in re·enue and a net loss oí
>508 million. L·en in the íast-rising Asia
L
A
Paciíic market ,share to global re·enues
went írom 6.5 percent in 1999 to 12.5
percent in 2001,, LMC íailed to meet its
target oí >1 billion in 2001.

As expected, its stock price plunged írom
an all-time high oí >103 in September
2000. As oí the end oí January 2003, it`s
ho·ering at >¯.¯0, or 93 percent oí its
high. 1o think that in the nineties, it
ballooned to a staggering 119,000 percent,
making it that decade`s best-períorming
stock on the New \ork Stock Lxchange.
Now, people reíer to LMC`s stock as one
oí the most spectacular ílameouts. Ií you
like a more graphic example, say you
in·ested >1,000 in LMC stock ,at >0.¯3
per share, at the end oí 1992, when
Ruettgers became CLO. Ií you sold your
shares on the last trading day oí
September 2000, you would ha·e ended
up with about >132,800. Assuming you
bought at that same time, your >1,000 will
now be around >¯¯.

Crossing the threshold

oe 1ucci is just as unlucky. It was at
this cusp in LMC`s history when 1ucci
became CLO. le went in at the height
oí the company`s dominance, íinding
himselí a íew months later besieged by
íalling re·enues, thinning margins, intense
competition, demanding customers, and
disappointed shareholders.

But it was just as well. 1ucci is no stranger
to crisis. 1he íormer CLO oí \ang
Laboratories Corp. is known íor turning
around that company írom bankruptcy
and selling it íor >2 billion. le is also a
salesman, and can thereíore be expected
not just to cut costs to the bone but push
the top line aggressi·ely.

So íar, it seems he`s been doing a íine job.
lor the past two years, the company
underwent a restructuring. 1ucci cut the
number oí employees írom some 24
thousand to the current 1¯ thousand. It
trimmed down in·entories and testing
time. lor 2002, it doubled quarterly cost
sa·ings to >316 million, equi·alent to
annualized cost sa·ings oí >1.25 billion. It
lowered its breake·en point by >336
million to >1.3¯ billion.

But great turnaround CLOs are more
aíter the mold oí IBM`s Lou Gertsner
rather than the notorious Chainsaw` Al
Dunlap. And in Gertsner íashion, 1ucci
struck a new strategy, not unlike that oí
IBM in the mid-nineties.

lirst, he is pushing LMC towards
soítware and ser·ices. Contrary to what
people think, LMC is not just a hardware
company. It has already been selling
soítware. But hardware dominated its
business. 1ucci wants to change that.
lrom ¯0 percent oí sales, by the end oí
2004, he wants the ratio to be 50 percent
hardware, 30 percent soítware, and 20
percent ser·ices. LMC is now getting
closer to its goal.

1hat`s really a no-brainer. Gross margins
íor storage hardware is íalling down by
halí since the start oí 2001 and 36 percent
annually since 1999, ho·ering between 25
and 30 percent oí sales, while íor
soítware, margins can go as high as 85
percent. Soítware is also the íastest-
growing segment in the storage market,
around 25 percent, growing to >11.8
billion by 2005, according to research íirm
Gartner. LMC happens to be leading the
segment as well, with a 30 percent market
share.

LMC already has an edge in soítware
anyway. Latinazo notes, \hat are the
stars oí LMC· One is the in the area oí
remote mirroring, essentially ensuring that
you ha·e the exact copy oí your data at
any point in time in a remote site. And
J
that product is SRDl. \ou can also do it
in a local position. \e ha·e a product
called 1imelinder. Both products address
business continuity, ensuring whate·er
happens, you`re going to continue your
operations.`

Second, 1ucci wants to expand LMC`s
market. Known primarily íor its high-end
Symmetrix systems, LMC is now pushing
aggressi·ely towards the mid-tier market,
through modular storage systems. 1he
company is betting on its CLARiiON
product line, a technology acquired írom
its >1 billion acquisition oí Data General
in 1999.

Lxplains Latinazo, \e need to grow our
market. \e need to open up new markets
íor us. \hen I joined LMC, and I`m
asked, \hat`s your target segment·` I
normally say, 1he top 50 corporations.`
\hy· 1he Symmetrix works best on the
bigger companies with more complex
en·ironments. But with the introduction
oí CLARiiON last year, it opened up new
markets íor us. \e cannot anymore just
talk to the top 50, we can now talk to the
next 500, because we ha·e a product that
spans the lower to mid-tier range oí the
market.`

1he company has also struck a potential
pot oí gold when it launched Centera,
which addressed another underser·ed
market - íixed content, also called
reíerence or archi·al content, as opposed
to transaction-based data. 1his includes
X-rays, MRIs, CAD,CAM designs,
cheques, archi·ed e-mail, and the like.
Research group Lnterprise Storage Group
estimates that reíerence data will represent
54 percent oí all iníormation by 2005,
growing at a 92 percent compounded
annual rate, equi·alent to a >28 billion
market by 2006.

LMC calls this new segment content
addressed storage, or CAS. Latinazo says,
CAS is a new space that we`·e car·ed out
oí the market. \e were the íirst to
introduce this product. It`s disk-based.
1raditionally, people were using optical
disks ií they`re going to do archi·al. \hat
we`re predicting is that the price points oí
disk and tape will probably cross maybe in
2003 or 2004, which means there`s no
price ad·antage íor tape. And disk has
higher shelí liíe and íaster períormance.
So we`re expecting a shiít to disk-based
archi·al and backup. 1he Centera line
addresses the íixed content segment.`

According to Latinazo, 1here`s a latent
demand íor the Centera. 1raditionally, it`s
been the optical disk. People ha·e been
archi·ing on tape and it`s only last year
that we came out with Centera. 1here`s a
huge market. And it`s going to be dri·en
írom how íast the country mo·es írom
tape to disk, írom paper to digital content.
1he go·ernment sector is an ob·ious
segment íor that. All the legal documents,
all the imaging applications íor example
banks and go·ernment would be
candidates íor that.`

Already, Centera has been winning ra·es.
1he company has built a reputation íor
cutting-edge products. Says Latinazo, In
1991, we were the íirst to come out with
the concept oí external storage. In the
mainírame space, we said ,to our
customers,, \hy don`t you come up with
using external storage·` In 1995, we said,
\hy don`t you connect all your ser·ers to
our storage·` So that`s the concept oí
enterprise storage. 1hen in 1999, we said,
\ou can connect to any network, to SAN
and NAS.` And then now, we`re the íirst
to say, \e will manage all your storage
products, be it LMC or otherwise.``

Aside írom introducing break-through
products, LMC is also íorging key
partnerships. One such deal is co-
branding storage products with Dell íor
the midrange market, currently dominated
by lP. It`s also partnering with
consultants such as Accenture and LDS
íor implementation projects.

1he company is also expanding its
channel, adding to its direct sales íorce a
number resellers to lower o·erhead. LMC
Philippines, íor instance, now counts
three resellers ,1otal Iníormation
Management, ABBL 1echnology
Solutions, Sandz Solutions, and one
distributor ,MSI Digiland,, segmenting the
market based on size. Says Latinazo,
\e`·e segmented the market. \e ha·e
enterprise accounts or tier one, which is
LMC-led. In the tier two account, it will
be jointly handled by our resellers and
LMC. And in tier three, it`s essentially by
resellers. \e need to mo·e írom a one-to-
one relationship model to a le·eraged
model, which means the ability to co·er a
bigger market. Our CLARiiON line is
marketed through a distributor model
whereas Symmetrix continues to be sold
through a ·alue-added reseller model.`

But more than anything else, LMC is
hinging his bet on two concepts that
could make or break the company. One is
networked storage and the other is open
systems.

LMC calls it Automated Networked
Storage. It embraces the concepts oí
network attach storage ,NAS,, storage
area networks ,SAN,, and content
addressed storage ,CAS,. LMC oííers
Symmetrix íor the high-end market and
CLARiiON íor the mid-market íor its
SAN solutions, Celerra íor its NAS
oííering, and Centera íor CAS.

Basically, ií you want a high-períormance
storage íor database applications like
OL1P, data warehousing, and LRP, you
go with SAN, which uses liber Channel
to connect storage with ser·ers. Ií you
want íile access íor sharing iníormation
írom any network connection, íor use in
soítware and product de·elopment as well
as workgroup applications, you go with
NAS, which connects to an IP network. Ií
you want access to íixed content, such as
e-mail archi·es, you go with CAS.

Networked storage is the logical next step
in the e·olution oí storage aíter direct
attach storage ,DAS,. As organizations
grew their I1 inírastructure, they`re bound
to come up with mishmash oí disparate
ser·ers, storage, operating systems,
management soítware, and applications,
or what`s called as a sto·e pipe
inírastructure.

Automated networked storage promises
increased producti·ity through ser·er
consolidation, higher storage utilization
through ser·er consolidation, better back-
up procedures, business continuity, and
lower total cost oí ownership ,1CO,, not
just through high-períormance hardware
but more importantly through centralized
soítware that can automate most oí the
processes oí managing storage systems,
such as replicating data, backing up data,
and allocating resources.

Latinazo notes, Networked storage will
be the dominant inírastructure as Gartner
and IDC predicts. Lnterprise storage
management is becoming increasingly
important because oí the complexity.`
Indeed, it is the íuture oí storage. IDC
sees a >21.5 billion market by 2005 ,others
see it at >41 billion,, growing 15 percent
annually, while DAS would ha·e
decreased to a >10.1 billion market.

Latinazo explains that the needs oí
customers point to networked storage,
1he customer is looking íor
pro·isioning, meaning ií you put
e·erything into one system, you want to
be able to mo·e and allocate resources on
the íly. 1hey`re looking íor agility to mo·e
data írom one point to the other as íast as
they can. 1hey want it not only timely but
e·ery time it`s needed, so a·ailability
becomes an issue. And íor some reason
something happens, they don`t want to
lose data. 1hey should be able to reco·er
and protect that iníormation. And do that
at the lowest possible price. 1hat`s a tall
order.`

1he concept oí open systems is embodied
in what LMC reíers to as its AutoIS
íramework, which incorporates its suite oí
soítware products, including
ControlCenter, Replication Manager,
StorageScope, and \ideSky, its
middleware that`s designed to work with
storage hardware oí other ·endors.
Already, LMC has sold more than 13
thousand licenses oí its ·arious
management soítware.

Customers ha·e been urging storage
·endors íor interoperability, an issue that
has írustrated I1 managers who ha·e a
hard time making all the ser·er and
storage systems they bought írom
diííerent ·endors work together. 1he
industry established the Storage
Networking Industry Association ,SNIA,
and has been working on standards that
will allow an LMC storage work with an
lP storage, and so on. 1hat standard is
called Storage Management Initiati·e
,SMI,, pre·iously known as CIM,Blueíin.
Progress is under way, but LMC is already
pushing íor \ideSky as the middleware
that can do that now ,and still be
compatible with SMI,, showing that it`s
mo·ing íaster than the industry.

LMC`s ability to mo·e íast comes írom a
history oí inno·ation, supported by R&D
in·estments and a war chest oí some >5.¯
billion in liquid assets, representing some
60 percent oí its total assets. It spent >¯80
million in R&D, or 14 percent oí
re·enues, which is more than what its
competitors dedicate to their storage
solutions. Since 1990, it has in·ested >5.4
billion in research and >2 billion in
cumulati·e interoperability in·estments. It
also more than 3,000 engineers íocused
on storage R&D. Ií you look at the
IBMs, the lPs,` Latinazo points out, it`s
probably 5 percent oí their business. Ií
you look at the relati·e R&D spent by
these companies, you would see the huge
gap between LMC`s R&D in storage as
against theirs. 1his strategy will dri·e us
íorward in the coming years.` le also
notes that while LMC in the Philippines
has a head count oí just 1¯, as opposed to
the hundreds employed by IBM and lP,
those 1¯ dedicated to the storage business
is more than what LMC`s local
competitors ha·e allotted íor their storage
business.

\e`re number one in networked storage,
we`re number one in network soítware,
and we`re number one in storage ser·ices.
\hy· Ií you look at the íigures, the
considerable in·estments we ha·e in R&D
are íar greater than any oí our
competitors. \e made an in·estment on a
huge interoperability lab that ensures our
products will connect to the most number
oí ser·ers, the most number oí operating
systems, the most number oí databases
and applications. In 2001, we did >1
billion oí R&D. Last year, we did some
>¯80 million. \ou`re gonna see it bear
íruit in terms oí the richest set oí
announcements in both hardware and
soítware in the next íew months.`

And what LMC can`t do quick enough, it
can buy. Its >5.¯ billion cash and other
liquid assets allow it to buy companies
such as Prisa recently ,the eighth small
company LMC bought since the 2000,,
which gi·es it immediate access to
intellectual property and new technology.

Bearing fruit?

ll the eííort is bearing íruit.
Recently, LMC reported its íourth
quarter results, with re·enues up
by 18 percent compared to the pre·ious
quarter. lardware grew 21 percent,
soítware, 22 percent, and ser·ices, 11
percent. It still, howe·er, posted a net loss
oí >64 million in that quarter. lor the íull
íiscal year oí 2002, re·enues amounted to
>5.44 billion, down írom >¯.09 billion in
2001. But net loss signiíicantly decreased
írom >119 million in 2002 compared to
>508 million in 2001. Gross margins ha·e
impro·ed at 39.4 percent. 1ucci is
coníident LMC will be proíitable in all
quarters oí 2003.

In terms oí market share, LMC still
dominates the major storage segments, as
oí 2001. It led networked storage ,SAN
and NAS, at 43.3 percent share, SAN at
41.9 percent, NAS at 48.5 percent,
external RAID at 25.3 percent, and
storage soítware at 30.4 percent.

lowe·er, as oí the third quarter oí 2002,
LMC`s íortunes ha·e changed slightly.
According to IDC, lP has grabbed the
lead oí the total hardware storage market,
with 2¯ percent market share, íollowed by
IBM with 20 percent, and LMC with 11
percent. Network Appliance dislodged
LMC in the NAS segment, with 38
percent share. lP nudged LMC out oí
the top spot in the open SAN market,
with 30 percent. But íor the combined
networked storage market, LMC still leads
with 28 percent re·enue share.

In Asia Paciíic ,excluding Japan,, it`s a
similar story. As oí third quarter oí 2002,
according to IDC, lP leads with 28.2
percent share oí total end-user re·enues,
íollowed by IBM, lDS, and Sun
Microsystems. LMC is only íiíth with ¯.5
percent, in íact, declining 14.8 percent
írom the second quarter. Asia Paciíic is
the third largest geographical market íor
LMC, with >1¯5 million or 12 percent oí
total, during the íourth quarter oí 2002.
But keep in mind that total storage
includes all hardware storage products,
including DAS or internal storage. \hat
matters ultimately is networked storage
and storage soítware ,excluded in the IDC
study,, the two íastest-growing segments.
LMC spokesman Da·e larmer
commented on the report, 1hese market
share results only reílect three months oí
2002, are hardware only, and do not
represent LMC leadership and in·estment
in open storage soítware. LMC leads the
most important segments oí the storage
market. On the hardware side, where
these numbers íocus, year-to-date IDC
data shows that LMC is the re·enue share
leader in external RAID, NAS, SAN and
networked storage.`
Latinazo gi·es his take, \ou need to read
in the íine line whether it`s measuring
hardware, hardware plus soítware, or
hardware plus soítware plus ser·ices.
Most oí the studies are pure hardware
studies. \ou might wonder ií this is just
the business oí LMC íor example in
South Asia. No, because our business
in·ol·es hardware, soítware, and ser·ices.
And then you might say lP or IBM is
bigger than LMC, again you need to
qualiíy that in terms oí terabytes, in terms
oí just hardware. \ou need to look at the
total because we don`t sell hardware alone,
we sell the whole solution package.
Number oí terabytes doesn`t mean you
sold the most re·enues because what`s
more important - re·enues or terabytes
sold· I`d argue it`s the re·enues. lP and
A
Compaq traditionally look at it írom a
terabyte standpoint, because they also
count what`s inside their ser·ers.`
Indeed, market share reports are oíten a
see-saw ride. And the race, really, has only
just began. But clearly, there`s no longer
any comíortable lead. And the ride will
only get wilder.
1ake íor instance LMC`s bet on AutoIS.
Many experts agree this íramework is at a
more ad·ance stage than the competition,
but it lends to potential problems íor the
company, or íor competing ·endors with
similar ambitions, such as IBM, lP, and
Veritas.
Latinazo argues, \hile a lot oí
companies will say ·irtualization`, it`s still
·aporware. \hile a lot oí people talk
about it, ·ery íew people ha·e actually
done it. \e think it`s going to take them
longer than what our competitors think,
because what we`re le·eraging here is
intellectual property that we`·e already
had in the past. Ií you look at IBM, lP,
Compaq, they started out selling ser·ers,
whereas we didn`t ha·e ser·ers. So we
were íorced to connect to their ser·ers. So
since 1990, we ha·e been putting our
money into that interoperability. Our
Symmetrix line probably connects to íorty
ser·er types and a typical competitor
would connect to nine, se·en, íi·e,
depending on the brand. So that same
intellectual property was used in this
product. \e know how to connect to
them, now we can manage them, we can
draw data írom them. Out oí our >¯80
million R&D in·estment, ¯5 percent was
poured into soítware, because that`s
where the growth is and that`s where
diííerentiation is. \e announced o·er
íorty new and enhanced products in 2002
alone.`

Soítware that manages a heterogeneous
en·ironment, meaning it works with
storage hardware oí other ·endors, could
later be at the expense oí hardware sales.
I1 buyers get the cheapest boxes at an
acceptable le·el oí períormance írom
other ·endors, and use LMC`s soítware to
manage them. But LMC doesn`t mind
that, it seems.

Lxplains Latinazo, 1here are two ways oí
looking at it. People say, ley, it might
cannibalize your hardware.` On the other
hand, you can look at it írom a standpoint
oí ley, it`s opening up new segments íor
us.` And I`d like to think it`s the latter.
1he reality is a lot oí companies ha·e
heterogeneous storage inírastructure.
1hat`s one market we should be attacking.
1hat`s one market where we think we
ha·e an ad·antage. Ií you look at our
business model, we`re shiíting to soítware.
So ií customers buy our soítware, it`s
aligned to our strategy that our growth
comes írom soítware and ser·ices rather
than hardware, because that`s where
diííerentiation and better margins can be
realized.`

And while its new products are break-
throughs, it might take awhile beíore it
gains wide acceptance, particularly in
emerging markets like the Philippines. In
the country, DAS is still the dominant
inírastructure in most companies. And
with only a íew companies that can pay
se·eral million pesos in storage
installations, and a good number oí
competitors íighting íor the same small
market, it`s not a surprise that LMC didn`t
expect phenomenal growth in the
Philippines in the last íew years.

But that`s now changing. Asked to
comment about pre·ious
pronouncements oí LMC oííicials on the
modest expectations oí growth in the
Philippines, Latinazo jests, \ith my
targets this year, not anymore.` le íurther
explains, \hat`s dri·ing in·estment in
I1· It`s a íactor oí the economy and
in·estment. Pre·iously, you see the larger
companies in the likes oí Singapore.
\ou`re now seeing in·estments ílow into
China, India. Naturally, that aííects the I1
spending in the Philippines. But in terms
oí maturity oí the ·arious countries, that
also play a role in determining I1
spending. Came the crisis, we think some
countries which used to experience high
growth may not experience high growth,
such as Singapore. Companies plan and
in·est based on a high growth scenario.
Most oí these companies ha·e already put
their money in Singapore. So ií you look
at in·estment ílow, it`s going to China. So
we think that in South Asia, we won`t be
experiencing high growth in Singapore as
we used to.`

As íor the Philippines, Latinazo belie·es
the big growth dri·er would partly be
írom the traditional growth írom its
installed base but a big portion is expected
to come írom the new segments that will
open up. SMLs, íor one. Because oí the
big push we ha·e on the CLARiiON
line,` he notes. 1he mo·ement we saw in
that space last year was ·ery encouraging.
\orldwide, we practically sold e·ery
CLARiiON product we produced. 1he
acceptance oí the market was
phenomenal. Ií you look at South Asia,
where is the SML market· It`s not in
Singapore. It`s in the likes oí 1hailand, the
Philippines, India. So we`re expecting
signiíicant growth írom these countries,
including the Philippines, in 2003.`

Latinazo enumerates its other growth
areas, Our traditional installed base is
banking and telco, but what we`re seeing
is a resurgence in the semicon industry.
Retail seems to be a promising industry.
Lducation is also one area. And, oí
course, manuíacturing. \e ha·e
go·ernment but it`s a íunction oí íunding.
1he President came out with promising
news on planned spending and íocus on
I1, but it`s still dri·en by ,the, pri·ate
,sector,. Global accounts is another area
where we`re seeing mo·ement.`

Latinazo remembers the time he íirst went
on board LMC and how things ha·e
changed. 1he product sets were
diííerent. 1he segments that we were
targeting then were diííerent. 1he
requirements were in the Symmetrix
standpoint. In recent years, you`ll see that
there`s a changing importance oí
applications. In the past, e-mail íor
example wasn`t mission-critical. Now, it`s
as mission-critical as other applications,
because the CLOs oí companies are
dependent on e-mail. 1here`s a need in
the mid-tier space íor high-períormance,
high-reliability, high-a·ailability storage
inírastructure. \hereas beíore it was
more íocused on the high-end side oí the
market. 1hat íollows also the global
trend.`

lrom 2000 to now,` he adds, there`s
more íocus on cost. 1here`s more
challenge íor I1 shops to look at how to
manage and reduce cost in their
inírastructure more than e·er. \ithin the
country, there`s also a greater appreciation
oí an enterprise storage inírastructure.
\hereas beíore, when we started, most oí
the customers had a traditional mindset.
More than our competitors, the bigger
challenge íor us was changing the mindset
oí the market. It`s the thinking that
storage is peripheral to the ser·er whereas
our ·iew we`re looking at an iníormation-
centric inírastructure where storage plays
a central role in one`s I1 inírastructure.
People continue to see storage as just as a
disk, not knowing that there`s a lot more
they can do. I think the market has shiíted
signiíicantly. I`d like to think that our
in·estment in the market in terms oí
educating the customers and introducing
new technologies ha·e made a diííerence.
Now, you`re seeing customers as seeing
storage as a separate and critical piece oí
the inírastructure, rather than just as
peripheral.`

LMC also has to contend with con·incing
CIOs that sticking with just one ·endor
that can oííer end-to-end solutions isn`t
always the best option. IBM and lP in
particular can rightly claim they`re a total
solutions pro·ider with the breadth oí
their oííerings, írom PCs and ser·ers to
storage and soítware. Latinazo says,
1hat`s the traditional ·iew: \hy do I
need to separate this· I don`t want that
headache. I don`t want to go through that
eííort. I`ll just talk to my ser·er ·endor.`
And it`s only aíter you`·e walked them
through the ·alue oí an iníormation-
centric inírastructure that they start to
open up and realize here`s a more eííicient
way oí doing this.`

le adds, Ií the customer realizes that
storage is an important piece oí the
inírastructure and it warrants a separate
decision, then there`s no ad·antage íor the
ser·er brands. Companies, as what we`re
seeing now, are taking a separate decision
on storage. In íact, our being ser·er-
agnostic positions us better in the market,
because we oííer customers ílexibility and
in·estment protection. As a ser·er ·endor,
you`re expected to sell your ser·er and
your storage. \hereas we go in there with
an open mind and oííer ílexibility to the
customer to choose the best ser·er, the
best application, the best database, and
the best inírastructure.`

Another potential cause íor worry is
LMC`s stock price. It`s a great company at
a cheap price, a períect acquisition target
íor the likes oí IBM and lP, or e·en
Cisco and Dell. But we`re already toying in
the realm oí speculation.

Are you ready for LMC?

ertainly, no one`s writing LMC oíí.
Many experts still contend that
LMC remains the superior
pro·ider oí storage solutions. As Latinazo
stresses, \e`re the only storage player
who can pro·ide an extensi·e line oí
storage solutions, írom DAS to SAN to
NAS to CAS.` le points out that the likes
oí Net Application only has NAS while
the rest either has DAS or SAN only.
Most oí them don`t ha·e the soítware.`

And the trends point to their ía·or. Ne·er
mind the single digit growth in the storage
sector in the last two years. Analysts agree
it will e·entually get back to its galloping
growth rate ,although not until 2006,.
Ne·ertheless, the industry is still in its
early stage. 1oday, ¯0 percent oí storage is
still DAS. But by 2005, it`s possible
ser·ers would totally be separate írom
storage. Gartner predicted that by 2005,
80 percent oí all storage will be networked
storage.

Storage ser·ices, on the other hand, will
grow írom >26 billion in 2002 to >41
billion by 2005. And storage management
soítware will reach >1¯ billion by that
year.

In Asia Paciíic alone, networked storage is
expected to account íor 52.3 percent oí
total disk systems storage re·enue in 2005,
while the storage management soítware
market in the region will reach >1.1 billion
in 2006, at a compounded annual growth
rate oí 25.8 percent.

And as LMC likes to say, it`s the only
company dedicated to 100° automated
networked storage solutions. 1ucci has
·owed to gain market share in both high-
end and mid-tier hardware, soítware, and
ser·ices. 1he better-than-expected íourth
C
quarter íinancial results point to LMC`s
turnaround.

Latinazo enumerates LMC`s strengths:
more new products than at any time in its
history, the íull breadth oí storage
solutions, proíessional ser·ice oííerings,
the highest customer satisíaction and
loyalty ratings, strong partnerships,
increased price competiti·eness, and huge
market lead.

Just recently, the company announced a
major upgrade to its Symmetrix line,
marking the complete reíresh oí all its
products. 1he new releases are more
modular, like its CLARiiON line, rather
than monolithic. In contrast to the old
bus-based architecture, the new models
use a matrix switched-loop architecture
that connects to up to nine trays
containing disks to storage controllers, íor
íaster períormance. LMC is expanding the
capabilities oí both platíorms, thus
making them attracti·e to a wider market.
1he new Symmetrix DMX line, íor
instance, is aimed at mid-tier customers in
need oí high-end storage capabilities. And
it is doing the same íor its soítware
oííerings.

Ií the market buys into the new products
churned out by LMC at such breakneck
speed and heady pace - and no one really
argues against the beneíits oí networked
storage and open systems - then the
company can indeed extend its lead. LMC
has pro·en itselí beíore and shows strong
signs it`s capable oí adapting to the
changing en·ironment. It may be an uphill
climb but LMC is determined to solidiíy
its íooting as the king oí the hill.