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IBM N Series dropped from NetApp OEM deal, E Series stays

IBM says it will stop selling NetApp FAS arrays as the IBM N Series to concentrate on its own branded systems; keeps OEM deal for NetApp E Series.

IBM this week went public with its plans to stop rebranding NetApp FAS arrays as the IBM N Series, although it will continue to sell NetApp E Series storage.

A statement from IBM confirmed a Bloomberg report from last week that said the vendor would end its OEM relationship for NetApp FAS arrays after steep declines in sales. IBM's statement attributed the move to a "shift toward software delivery models and storage repositories that enable multiple use cases, such as object, big data and file."

IBM began selling NetApp arrays as its N Series in 2005. Although FAS systems support SAN and NAS, IBM positioned the N Series as file storage while pushing its own arrays for customers looking for block storage.

The IBM-NetApp OEM relationship expanded when NetApp acquired LSI's Engenio storage business in 2011 for $480 million. IBM relied on LSI systems for the bulk of its midrange storage until it launched its Storwize platform in 2010.

A statement from IBM released Wednesday said the firm will continue to sell two storage arrays in NetApp's E Series: the DCS3700 and the DCS3860. Both are dense storage drawers for high-performance computing that integrate with IBM's System x, BladeCenter and Power Systems servers.

The N Series Release 30, announced in February, will be IBM's final enhancement to that product line. IBM will take orders for the N Series through the end of August, with equipment upgrades available for 12 months after purchase. IBM will provide system support for N Series configurations through 2018.

IBM Global Technology Services will continue to resell FAS arrays under the NetApp brand.

NetApp did not respond to requests for comment.

NetApp CEO Tom Georgens discussed the IBM relationship during his vendor's earnings conference call last week. NetApp reported a 34% decline in OEM revenue from last year, and IBM is its largest OEM customer. Georgens said during the call that IBM was emphasizing sales of its own storage, and pointed out that IBM storage revenue declined more than 20% last quarter.

NetApp forecasted a 40% decline in OEM revenue this quarter, with IBM's N Series decision likely playing a big role in that prediction.

According to research firm Gartner, N Series storage accounted for between 5% to 6% of NetApp's total storage revenue in 2013.

New products expected from IBM

Arun Taneja, consulting analyst at Taneja Group in Hopkinton, Massachusetts, said IBM is seeking to take more control over its storage business.

"The fact that IBM made the categorical statement that it's cutting the cord with NetApp tells me they must internally have a series of additional products in the pipeline that are file-based. The last thing IBM wants to do is get rid of NetApp and have no NAS product to sell," Taneja said.

The IBM Scale-Out Network-Attached Storage (SONAS) system is based on its general parallel file system. SONAS is considered more of a high-performance product than mainstream NAS, but IBM does provide a SONAS gateway to work with its Storwize, XIV and DC3700 arrays.

IBM's statement also suggests it plans an object storage system.

Greg Schulz, a senior advisory analyst at consulting firm StorageIO in Stillwater, Minnesota, said the split with IBM could benefit NetApp. It provides an opportunity for NetApp to sell directly to customers who might have purchased FAS arrays through IBM.

"If NetApp is agile enough with its business partners, they'll pick up the business being left by IBM and potentially even more," Schulz said.

If resellers know their customers like NetApp's FAS system, "they may find themselves busy taking orders or supplying new price quotes to fill the IBM void," he said.

Schulz also pointed out that the IBM-NetApp partnership is not dead because the E Series deal continues.

"Everyone is saying IBM has dropped NetApp, but it's important to remember that IBM will continue to OEM the E Series," he said.

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