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2/1/2008
08:12 PM
Terry Sweeney
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Economy To Test Storage Vendors' Durability

Is the U.S. economy in a recession? With the Fed cutting interest rates like a tailor on speed, a streaky stock market, and no good news on the employment front, it's safe to say we're at least hip-deep in a contracting economy. And decent financial results from EMC, HP, and others have led some to conclude storage is recession-proof. That may be tr

Is the U.S. economy in a recession? With the Fed cutting interest rates like a tailor on speed, a streaky stock market, and no good news on the employment front, it's safe to say we're at least hip-deep in a contracting economy. And decent financial results from EMC, HP, and others have led some to conclude storage is recession-proof. That may be true, but here's why we'll know a lot better in 60 days.This message board post makes the point that storage vendors have already lowered estimates -- last summer -- perhaps in response to some dark clouds on the horizon. In addition, the 4Q '07 results getting reported out in the last week only illustrate that IT departments were blowing through whatever was left over from the quarterly and annual budget. Apparently, spinning disks make great stocking stuffers.

The message poster adds that more telling data will come sometime in April when first-quarter numbers come out and we can better gauge how much of last year's bullishness bled into 1Q '08. It's a good point, and one that's easy to overlook on a day when a $45-billion bid for Yahoo makes some industry observers see only a huge upside in the deal for storage vendors.

I had written a few weeks ago that one sure sign of a recession would be Starbucks closing some stores. The king of coffee chains said two days ago it will close "100 underperforming locations," and discontinue those Egg McMuffin knock-offs. So it's not all bad news.

But unlike a cruelty-free, double-mocha chai soy latte, storage has increasingly come to be known as a nondiscretionary budget item. Award quarterly merit bonuses to data center personnel, or purchase more storage capacity to comply with federal data archiving statutes? Not much of a discussion there for most IT shops. That may save the big storage vendors' bacon for the next quarter or two, but the years always tell us more than the days and the months. Stay tuned on this one.

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