Dot Hill: Troubles and prospects
Rejiggery pokery with Xiotech
Comment Dot Hill sold 125,000 entry-level array subsystems - good news. The bad news is it's restructuring and sacking a tenth of its workforce to staunch losses - and it's partnering with Xiotech in an opaque technology agreement with no clarity over which of them will deliver product. So what on earth is going on?
Dot Hill sells drive array subsystems to storage array OEMs, such as Sun, in competition with LSI. In early May it reported first quarter 2010 revenues of $60m, up $6.1m year-on-year, but still made a loss of $6.4m, nearly double the $3.3m loss of a year ago. So sales up and losses up; that's the basic problem. It also missed Wall Street estimates, disappointing analysts who felt management had let the company down.
It's announced a restructuring plan geared to get itself back to break-even before income tax, etc, by the fourth quarter. A profit will have to wait until 2011. A tenth of its workforce will go and a Carlsbad facility will be closed down.
It has announced a 10 per cent cut in the base salaries of its VP and executive-level management teams, including the CEO and president, Dana Kammersgard, and CFO, and a five per cent cut in the base salaries of certain of its employees below VP level.
It wants to break even with revenues of between $60m and $65m. Second quarter revenues are expected to be between $62m and $65m, on the button, but costs have to go down before the magic break-even point, and revenues go up, probably past $70m, before good profits can be made.
Its product strategy is to move into higher-margin software as a complement to the basic disk enclosure subsystem core. That's why it bought Cloverleaf Communications in January. This is going to take time to bring results and so it is doling out as much good news as it can in the mean time.
Thus we hear that it has shipped 125,000 units of its small and medium business array, the 3000 RAID series, which come with volume copy and snapshot facilities.
That's good, but it obviously isn't good enough - witness the quarterly results, and Sun as a customer is liable to reduce its order rate, given Larry Ellison's dislike of OEM deals.
We also heard about a new OEM customer, transtec AG, a German company active in virtualisation, high-performance computing and general IT infrastructures. There was another new OEM deal with Kyocera. Channel expansion is a good thing, even in small steps.
Yesterday we heard about a technology partnership with Xiotech which puzzlingly didn't make clear which company, Dot Hill or Xiotech, would be shipping product using technology from the other. Neither company was able to answer questions about this yesterday but we can probably tease out what's afoot by looking at the Cloverleaf acquisition.
Dot Hill paid $2.5m cash and used 9.5m shares in the acquisition of Cloverleaf, a privately-held company with a base in Israel and office in Woodbury, New York. The main technology is iSN, the intelligent Storage Network.
This is software-based, running on standard Intel architecture hardware. It provides unified management and support of any vendor's storage arrays and includes features such as storage virtualization and pooling across mixed vendor SAN (block) and NAS (file) storage, thin provisioning, automated tiered provisioning, data migration, advanced snapshot, FCDP (Frequent Consistent Data Protection), synchronous and asynchronous replication and remote disaster recovery at host speeds of up to 24GB/s rates.
Cloverleaf's virtualization and data management services support both file and block I/O with Fibre Channel and NFS/CIFS protocol support. The iSN products can be clustered for near linear performance gains with up to 12 controllers being deployed in a single configuration, and 2PB of back-end storage supported.
Dot Hill and Xiotech
What did the announcement with Xiotech entail? It said Dot Hill: "has signed a letter of intent to enter into a technology partnership with Xiotech to enable new virtual storage solutions … involving the Intelligent Storage Networking (iSN) software platform."
Xiotech's CEO and president Alan Atkinson said: "End users deploying desktop and server virtualisation, or implementing cloud storage solutions are demanding a high-performance, versatile storage platform that eliminates the traditional boundaries of physical storage architectures and first-generation virtual storage systems.
"We are looking forward to collaborating with Dot Hill to bring exciting new innovations to market to meet these customer requirements."
ESG senior analyst Mark Peters said: "Xiotech has been a leader in highly reliable storage solutions with its Intelligent Storage Element (ISE) technology and the CorteX environment based on standard Internet access and management interfaces. The Dot Hill/Xiotech partnership should result in powerful, innovative solutions that meet many of today's most critical business needs."
What have we got here? A wannabe high-margin, disk array HW company with a virtualising storage management controller software platform on the one-hand, and a supplier of highly reliable and high-performance sealed canisters of disk drives, Xiotech's ISE, on the other.
The ISE is positioned as a new kind of array building block needing and wanting to be told what to do by super-controller functions positioned in the storage stack above the traditional array controller, witness its deal with Symantec and its FileStore product.
CorteX interface to iSN
What El Reg sees here is Xiotech and Dot Hill building an ISE CorteX interface so that an iSN controller can manage and co-ordinate groups of SE storage "bricks", along with Dot Hill's own array products, so that Dot Hill customers, the smaller storage OEMs generally, can build more sophisticated storage arrays that enable them to compete with the seven big players: EMC; Dell; HDS: HP: IBM; NetApp; and Sun.
Xiotech's chief strategy officer, Jim McDonald, confirmed this in an email today, saying: "By integrating CorteX in to the iSN (the Cloverleaf software) we have the ability to manage a virtualised SAN in the same way that we would manage individual ISE. We are working away on extending the reach of CorteX by implementing it in a number of areas and are pretty excited about the early results. Just having the same API to create a volume on storage and servers, for example, massively reduces provisioning effort"
There is the prospect here of Xiotech actually supplying the upper-level storage controller software.
It's our assessment that the big players are unlikely to use Dot Hill's iSN as they already have clever controller software, lots of legacy customers to keep happy, and are moving to X86 controller hardware platforms too.
The bet by both Dot Hill and Xiotech is that storage array suppliers outside the top seven can and will use an iSN/ISE combo to win lots of business by providing equivalent functionality, performance and reliability at lower prices. It's all upside for Xiotech. CorteX interfaces are easy to write, witness the iPhone demo, and extra sales are great, with continuing ISE sales into customers once the first order is placed.
Dot Hill has a possibly steeper hill to climb as iSN is new technology but it does have its existing OEM Channel, soon to be open to Xiotech, we think, to use.
If Xiotech or another Dot Hill iSN partner can bring in sexy flash enclosures with the glamour that very high IOPS performance brings, plus enough reliability and endurance to satisfy the cynics, and do this faster than the top seven suppliers, then Dot Hill's strategy could succeed. Its OEMs would bring out new array products, suiting virtualised servers very well indeed, rather than me-too array products - and that would be interesting and potentially very profitable for Dot Hill. ®