Article

EMC buys virtual tape library company

Jo Maitland, Senior Executive Editor

BOSTON -- EMC Corp. confirmed Tuesday that it has bought the assets of struggling virtual tape library (VTL) vendor NearTek Inc. The acquisition is a warning sign to users to proceed with caution

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if purchasing EMC's existing VTL product, which is based on software it OEMs from FalconStor Inc.

During a meeting with SearchStorage.com at the Storage World Conference in Boston, EMC executive vice president and chief development officer Mark Lewis confirmed the acquisition, calling it a "tactical buy" that would provide EMC with a "backup set of technology available more directly." Lewis declined to say how much EMC paid for the NearTek assets, but anecdotally he noted that asset sales are like garage sales. "The unknown thing in the corner for $100 could actually be hiding a million dollar gem," he said. NearTek had raised close to $80 million in funding but was unable to gain significant market traction.

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Robert Stevenson, managing director and analyst at TheInfoPro, said he believes EMC more than likely bought NearTek's intellectual property as part of a sourcing strategy. "They probably want to keep their existing pricing and current contracts in place [with FalconStor]," he said. "With these assets, they can squeeze FalconStor." Stevenson added that NearTek's VTL was "not the most sophisticated product on the market."

Lewis said EMC has "no plans to change what we're doing" right now with VTL, adding that NearTek is "good technology to have on hand." He likened the deal to EMC's acquisition of Cereva Networks Inc. for $10 million in 2002 for "patent coverage." However, a cursory search of NearTek's Web site and the patent database of the U.S. Patent and Trademark Offices turned up nothing on NearTek winning any patents. The company is located down the road from EMC in Westborough, Mass.

According to an upcoming study from TheInfoPro, out next week, VTL technology is in use at over 30% of the Fortune 1000, and its adoption is growing. Simply put, VTLs are an archival storage technology that make it possible to save data as if it were being stored on tape when it is actually being stored on disk. The key benefit is faster backup and recovery times.

EMC's share of the Fortune 1000 VTL market has gone from 4.6% in the fall of 2004 to 17% in the spring of 2006, according to preliminary numbers from Stevenson. FalconStor's share has hovered at around 1% over the same time period. This is its percentage of direct sales and does not include sales from OEM partners, including IBM, Copan Systems Inc. and its biggest partner from a revenue standpoint, EMC. Stevenson suggested FalconStor does not have the visibility it needs as its software is firmly embedded in its OEM partners' products.

FalconStor and NearTek did not return calls for comment by press time. According to industry sources close to NearTek, the company's CEO, vice president of business development and vice president of marketing all recently left the company.

Other VTL suppliers include: Copan Systems, Diligent Technologies Inc., Hewlett Packard & Co. (HP), IBM, Network Appliance Inc. (NetApp), Quantum Corp. and Sepaton Inc.


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