Features - Enterprise Data Insights:

STORAGE, COMPUTING SPACE TO CONSOLIDATE IN 2005

Fabric computing -- the marriage of storage and security computing -- will continue to grow through consolidation and could see some significant acquisitions this year, according to the RBC Capital Markets Fabric Computing poll.

Nearly 67 percent of executives polled believe that consolidation will increase during the balance of the year and be one of the leading trends of 2005. Twenty-two percent of those polled expect to see a greater number of technology companies from other sectors entering the market, followed by a slowdown in IT spending.

The poll of 300 company executives and institutional investors was taken this week at RBC Capital Markets Fabric Computing Forum in New York. Nearly 50 enterprise storage and computing companies made presentations at the conference.

"The datacenter market is entering an 'Age of Optimization' as customers increasingly drive for optimal return on investment in information and IT assets," said Tom Curlin, managing director and fabric computing equity analyst at RBC Capital Markets. "We believe these evolving customer requirements will drive further consolidation among vendors in 2005, continuing the trends seen in 2004."

Given the outlook for M&A activity in the storage and computing space, those surveyed believed Brocade Communications Systems and McDATA Corporation were the most likely acquisition targets over the next few years. Additionally, they believe that Cisco Systems and EMC Corp will be the most likely acquirers of companies in the space.

With IPO activity gaining strength in 2004, a majority of respondents surveyed expect that trend to continue in 2005. Of those surveyed, 54 percent forecasted a slight improvement in IPO activity, followed by 20 percent who felt it could get significantly stronger this year.

When asked about the attractiveness of the Fabric Computing sector as an investment vehicle relative to the broader technology market, 51 percent of those polled felt the space was more bullish than other areas of technology, whereas 26 percent of survey respondents indicated weakness in the space compared with the broader technology market.

Respondents were also polled on what storage-related applications and initiatives they felt presented the greatest opportunity for growth in 2005. Disk-based backup was expected to offer the greatest growth potential, followed by e-mail retention and compliance, and server consolidation.

The "Fabric Computing" theme of this year's RBC Capital Markets conference reflects the ongoing evolution of the enterprise data center, and can be segmented into three markets: Fabric Systems, Information Lifecycle Management, and IT Lifecycle Management.

The poll was taken of participants at the RBC Capital Markets 2005 Fabric Computing Forum. The questionnaire was distributed to all attendees. Respondents were asked about a wide range of topics regarding their outlook for the Fabric Computing and broader technology sectors.