Start-Up Bets There Is Room For More in Storage Ellison-Backed
Pillar Data Enters a Crowded Market With Plenty of Cash, Buzz A start-up funded by software billionaire Larry Ellison plans to boldly go where many have gone before, and vanished. The question it faces: Does the world need another supplier of data-storage hardware, even one with deep pockets? Some answers are expected soon from Pillar Data Systems Inc., a long-secretive Silicon Valley company that began generating buzz in 2002 when $100 million in funding by one of Mr. Ellison's investment firms was disclosed. His commitment was subsequently boosted to $150 million. Mr. Ellison didn't respond to requests for comment. But such an investment is easily within the means of Oracle Corp.'s chief executive officer, whose stake in the software company is valued at about $16.7 billion. It is also far from a record sum in the storage industry, where some companies with promising technologies have disappeared before selling a single system. The business has attractions. The tide of data generated by computers seems to rise incessantly, filling up disk drives and the cabinet-sized boxes and software that companies use to manage them. Market-research firm Gartner Inc. puts sales of such devices at nearly $13.5 billion in 2004 and expects sales to rise 10% this year. Venture capitalists have poured nearly $5.8 billion into 142 storage-hardware companies since 1999, according to VentureOne, a research firm owned by Dow Jones & Co., publisher of The Wall Street Journal. Inspirations include the success of EMC Corp., the biggest maker of storage hardware, which currently has a market value of about $34 billion. Network Appliance Inc., which leads one market segment, is valued at more than $10.5 billion. But most companies' technology budgets haven't increased much, even though data storage is now a critical concern. Many are reluctant to go beyond trusted suppliers to experiment with start-ups. "You have to convince them not only about the product and the technology, but a lot of other things," said Gianluca Rattazzi, executive chairman of BlueArc Corp., a storage start-up in San Jose, Calif. Concerns include suppliers' customer service and financial viability. BlueArc has raised $175 million since 1998, and has been doubling sales, Mr. Rattazzi said, but still isn't profitable. Pillar's strategy had been a mystery until recently, when it began providing technical details on its Web site. Mike Workman, its chief executive, elaborated in an interview yesterday. The company, also based in San Jose, hopes to ease customers' frustration with having to buy different storage equipment -- sometimes with extra software charges -- for different business tasks. Pillar's new Axiom system is designed to economically handle several chores, from high-speed processing of financial transactions to making archival copies of business records, Mr. Workman said. It can serve as either or both of the two dominant hardware categories -- known as storage-area networks and network-attached storage -- and scale up to store vast amounts of information, the company said. "It's like a liquid, self-morphing storage device," says Steve Duplessie, an analyst at market researcher Enterprise Strategy Group. The venture isn't Mr. Ellison's first flirtation with hardware. In 1990, he bought a majority stake in a supercomputer maker called nCube Corp. That company shifted to systems for delivering video on demand and was sold late last year to C-Cor Inc., another technology provider to cable and phone companies. He has controlling stakes in several other companies, including toy maker LeapFrog Enterprises Inc. and NetSuite Inc., which offers applications software using a service model. Pillar, with 350 employees, started in Israel as Digital Appliance Corp., taking that name from Mr. Ellison's vision of replacing personal computers with low-priced devices connected to central information utilities. Company officials have said it started its current mission in 2001 after Mr. Ellison recruited Mr. Workman, a veteran of International Business Machines Corp.'s data-storage business and of Conner Peripherals Inc., a disk-drive maker. Outsiders differ on Pillar's originality. Axiom, among other things, writes data with the highest priority on the outermost track of storage disks, where it can be reached quickly, inscribing lower-priority data on the inner tracks. 3PARdata Inc., another storage start-up that has raised $153 million since 1999, uses a similar approach in high-end systems it sells against the likes of EMC and Hitachi Ltd.'s storage unit. "If that is Pillar's major area of differentiation they are really bringing a knife to a gunfight," said David Scott, 3PARdata's chief executive officer. Mr. Workman says the algorithms Pillar uses to store and fetch data by priority are unique, and its pricing of $50,000 to $500,000 per system is a bargain compared to competing products with similar capabilities, he said. "There is room for us," he said. "We offer a huge advantage to many people." Some industry executives argue that Pillar might have done better to target market niches. That strategy has been paying off for start-ups that include Isilon Systems Inc., a Seattle-based company that provides hardware for storing big image and data files at media, entertainment, sciences and energy companies, and Netezza Corp., of Framingham, Mass., which makes hardware for analyzing customer information. But Geoff Barrall, a former BlueArc chief technology officer who has formed a new company called Storage OS, said Pillar's broad approach and funding are what make the company interesting. "They've got the ability to do something you just couldn't do with venture capital," he said. "If Larry Ellison continues to fund the company at these levels, anything is possible." |