EMC Investment Signals Move into Smaller Storage Systems Market

Implications: * Iomega had previously entered into an agreement with ExcelStor Great Wall Technology owned by the Chinese government  * Iomega terminated this purchase agreement with ExcelStor  * Iomega entered into an agreement to merge with EMC  * EMC will probably use Iomega as a means to move into the small business and perhaps even the home storage market

Analysis: Personal storage and storage from small businesses is now dominating the growth in new digital content.  Since there are a great many more small businesses and individuals than larger corporations and since the costs of storage is decreasing and the need for storing increasing amounts of personal and small business content increases this trend will grow even more in the future. 

As a consequence of this growth in storage demand for small business and homes the market for external storage products to serve this market will grow as well.   As "Digital Storage in Consumer Electronics 2008", Coughlin Associates (www.tomcoughlin.com) projects over 60 M small external storage devices are likely to ship annually by 2010 with a total shipped storage capacity of about 42 Exabytes.  Many of these devices will be used to back up or aggregate content on home and small business desktop or laptop computers. 

EMC has experience in this area and has offered versions of its Retrospect backup software to the small storage device market for years.  It makes sense that the next move would be to invest in a company making external storage products.  

Although only a shadow of the former Iomega, inventor of the Zip and Jaz cartridges and drives, the company has a well known brand and offers some innovative devices based upon external storage.  These products include direct attached storage as well as network attached storage devices. 

Recent Iomega introductions have included media server boxes and other more innovative home storage based technologies.   EMC’s acquisition may be initially targeting small business storage but I believe over the next few years we will see more large storage systems companies making moves to establish themselves in the small business and home storage systems market. 

This will be a major growth area in the future and there will be tie-ins between storage in a small office and home and potential backup to larger storage systems on-line.  This will make the small storage system market more competitive and it may result in more strategic acquisitions of small storage system companies by larger ones.   Once again small is getting bigger!