Does IBM have a grand new strategy?
By Joha Markoff
The New York Times PALO ALTO, California
There are people who believe Silicon Valley is a misnomer. For Al Hoagland,・Iron Ferrite Valley・would be a more appropriate way of capturing the spirit and the history of the U.S high-technology heartland.
As awkward as the name sounds, it reflects the reality that for four decades the valley has been as dependent on magnetic disk drives chips made of silicon.
Since International Business Machined Corp. announced April 16 that it intended to sell much of its business in magnetic disk data storage to Hitachi Ltd., critics say the company has abandoned its historic role in advancing disk-drive technology.
The disk drive not only had a crucial role in IBM's early dominance of mainframe computing. Two decades later, it was a factor in the role the IBM PC XT had in corporate acceptance of personal computing.
IBM had a unique situation in essentially having a product that no one else had, Hoagland said. at revolutionized the computer industry, and IBM systems rapidly gained market position.・br>
Hoagland, who is the director of the Institute for Information Storage Technology at Santa Clara University and who in the 1950s was one of the developers of the original IBM Ramac hard-disk drive, recalls a technology era that began before either the chipmaker Shockley Semiconductor Inc. or its first offspring, Fairchild Semiconductor Inc, arrived on the scene.
The valley was once bounded to the north, in Redwood City, by Ampex Inc., which made magnetic tape recorders for storing computer data, and to the south by San Jose. There, a half-century ago, IBM began research that would lead to the first rotating disk system for storing computer data.
Tucked away in the hills south of San Jose, IBM'S Almaden Research Center has long been considered one of the company's and the country's science and technology jewels.
Researchers at the laboratory have routinely made industry-leading technological advances in magnetic-drive data storage. Now, a still undetermined part of that research laboratory will become part a joint venture to be 70 percent owned by Hitachi.
So there was some quiet grumbling in the days after the announcement of the multibillion-dollar IBM-Hitachi deal, as many technologists wondered whether the computer maker was mortgaging its future.
Does IBM actually have a grand strategy in data storage, or has the company's new chief executive, Samuel Palmisano, simply opted for an expedient way to improve IBM's balance sheet?
One theory is that IBM blinked in the face of tough competition and management mistakes that have caused its disk-drive business's market share to dwindle from nearly 25 percent in 2000 to less than 10 percent in the first quarter of 2002.
It may take a peculiar kind of company to stay alive in a fast-paced industry that has now had the second merger among its leaders in the past two years In October 2000, Maxtor Corp., the No.2 disk-drive maker, acquired the hard-disk operations of Quantum Corp.
The technology is changing even faster. The real density of disk drives ・the amount of data that can be squeezed onto the spinning platter of a dist drive ・has been doubling annually. At the same time, prices have been in free fall. The price that computer makers have paid for simple single-platter drives has fallen to less than $70 from $150 in fjust five years.
Execution of each new generation of technology has to be flawless, or market share can collapse overnight. In fact, IBM'S capitulation to Hitachi appears to have been at least in part precipitated by a disastrous stumble the company made while shifting the manufacturing operations of its highest-margin disk-drive business market to Fjisawa, Japan, in 1999. The delays caused IBM to more or less miss an entire product generation and sales cycle.
Numbers from Gartner Inc., the information technology consulting firm, show that in a single year IBM's own storage system business went from buying 80 percent of its drives from the IBM subsidiary to buying 10 percent. In handing off much of its disk-drive business to Hitachi, IBM may have simply given up trying to keep pace.
There is, however, a more intriguing possibility. For decades, critics have been predicting the imminent obsolescence of hard-disk drives as technologies such as optical disks and flash semiconductor memory come to the fore. IBM may have finally decided that the writing is indeed on the wall.
The computer maker, in other words, may be taking a big gamble that its research in molecular-scale electronics and other so-called nanotechnologies will in a decade or so make spinning magnetic storage disks obsolete.
With a sleight of hand, IBM might be telegraphing a new data storage world that will open vistas even more remarkable than an Iron Ferrite Valley.
But if IBM is betting more than a decade into the future, it is keeping a poker face. We've been working on all these things,・Robert Morris, director of the Almaden lab, said of the experimental storage technologies. They're all interesting, and they all have promise, but there isn't anything on the horizon that is certain to replace the hard-disk drive.