Solid-State Market Continues Slow and Steady Pace

The solid-state market has gone through its share of growing pains—pains that show no signs of letting up.

The solid-state market has gone through its share of growing pains—pains that show no signs of letting up.

The technology has a long and varied history, starting life in the mainframe world led by vendors such as Storage Technology Corp. (StorageTek), EMC Corp. and what is now Hitachi Data Systems. But over time, solid-state technology in the mainframe world became obsolete, replaced by storage systems with more intelligent cache that could manage that cache via the operating system.

The technology then migrated to the open-systems world, where it resides today, helmed by niche vendors like Texas Memory Systems Inc., Solid Data Systems and BitMicro Networks.

Although it may seem like the solid-state market has found its way, the market leaves a series of defunct vendors in its wake, victims of razor-thin margins and market share. In the past two years alone, Imperial Technology Inc. and Platypus Technology Inc. have shuttered operations, although its rumored that Imperial Technology may resurface in some form or another.

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Reasons for consolidation in the solid-state market include the relatively small size of the market, the expense of the technology, infrequent demand and the lack of differentiation between products.

"The regular disk drive business has been commoditized, such that if you can make it cheaper, you win. But the solid-state market has thinned out for the opposite reason. Its just not that big a market, and there isnt that much difference between one application of solid-state technology and another," said Michael Karp, senior analyst at Enterprise Management Associates, of Westboro, Mass.

It all comes down to dollars and cents, said Randy Kerns, senior partner at Evaluator Group Inc., of Greenwood Village, Colo.

"Its a niche market, and companies in this market funded by venture capitalists are looking to make 40 percent gross margins or more. Thats tough to do, and the market may not be as lucrative as what some investors may want," he said.

The surviving vendors, however, seem to be humming along, finding customers for their technology. The main use of solid-state technology today is to house a databases metadata—the tables that are referenced every moment the database is in action. It could be useful in scientific situations where a large volume of data must be used in the calculation at high speeds, or on Wall Street, where a foreign currency trader must make lightning-fast trades before exchange rates change. A third use might be as part of the cache behind a Web portal to enable companies to access some aspects of their data more quickly.

As for the future of the solid state, Karp doesnt rule out acquisitions to further consolidate the market.

"Some of the vendors that are left will probably be acquired by some of the larger companies," he predicted. "Or we might see some of the memory companies—the companies that produce the chip behind the memory—buying up these vendors so they can put it all together to make all that memory act like a disk drive."

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