What about some others? HP is certainly a competitor, as is Dell. They both are server vendors.
Right. And so the first acquisition that we did outside of the RAID area to facilitate our move into external storage was Eurologic. And when we did the Eurologic acquisition, I talked with a number of our OEM customers, because I wanted to make sure, to your point, that they were comfortable with our direction.
They were very comfortable -- both IBM and Dell, to be very specific. HP was a little equivocal, to be candid with you. Six months later, when HP looks at it, it says, "Well, this makes a lot of sense." What it was looking at wasn't immediately obvious to it, in the context of the architecture. What we're really taking about here is not proprietary external storage, and that's what's different.
Companies' thought process in entering the small-business space was maybe as pedestrian as, "We will build the product, and we will provide it to the channel, and they will come." And no one came. To give you an example of this, if you go onto the Intel Web site, there is a white paper about Adaptec's approach to external storage, using Intel's (input-output processors) and standard Intel architecture. We were the first ones to do that. We can save our OEMs 30 percent to 35 percent just in development efficiency -- in being able to move products seamlessly from the host environment to the external environment.
So you are claiming that you guys are good at using a very standards-based approach of putting off-the-shelf components together in an inexpensive way with some server expertise behind it.
Absolutely. And what's magical about it is that the same RAID code and the same storage manager run from the component level all the way through the external platforms. So if you are an IT manager, you bring up your screen, you can look at your storage array -- both direct-attached storage and fabric-attached storage -- and manage it in precisely the same way.
You guys are talking a lot about going into the small and medium-size business market, but what makes you think you know what it takes to sell products there?
If you take a look at the last couple of years, maybe go back four years, there has been some wreckage in that space. A number of companies have looked at the market in the context of the (distribution) channel, and the thought process was maybe as pedestrian as, "We will build the product, and we will provide it to the channel, and they will come." And no one came.
We did not acquire Eurologic for a distribution channel footprint. We acquired it for an OEM footprint, because 95 percent of its business was really with OEMs. Now, you might think because we have a very significant channel position and a terrific brand that it would be a natural corollary for us to drive storage array-based products in the channel. But it's a different set of VARs (value-added resellers) that buy this product than our traditional VARs.
That's why we acquired Snap. We felt that its footprint in the channel would be a tremendous advantage. It has about 1,200 to 1,500 VARs that buy system-level products. It has a terrific brand. It has been No. 1 in NAS (network attached storage) for four years, in terms of volume. Snap was exclusively a distribution channel business. It did not even look at the OEM side. We think that that is really the key to major success -- having a presence both on the OEM side and the channel side.
