Data Storage Firms Look To Asia for New Markets By SHELLY GARCIA Senior Reporter Developers of data storage solutions, eager to expand their businesses, are looking to the East. Asian markets, and China in particular, not only present a new frontier for many of these manufacturers, they can also provide a more immediate sales boost than can American and European markets. “Most of the larger computer companies are pretty much entrenched in Europe and Japan,” said Dennis Waid, president of Peripheral Research Corp., Santa Barbara-based industry analysts. “The emerging markets seem to be China, India, Malaysia and Singapore.” Not that these makers are foregoing Europe. But most have been selling in the U.K., Germany and other parts of Europe for a number of years, and growth in these markets has leveled off. Just as important, European markets have pretty much followed the American marketplace, which has softened considerably with the decline in information technology spending. Many parts of Asia however are just beginning to catch up to the information age. “China is just now building a major technology center on par with Silicon Valley,” said Waid. Qualstar Corp. has been marketing internationally since the company was founded in 1984, said Bob Covey, marketing vice president for the Simi Valley maker of tape storage solutions. But about a year ago, the company began spending more effort and resources on marketing to Asia. “It is a market that is growing in sophistication very rapidly,” Covey said, “and the demand for our products becomes greater and greater.” JMR Electronics, which just inked a deal with a German distributor hoping to expand its presence globally, is also eyeing China. “China is a hotbed for network storage, and we’re actively pursuing the possibilities,” said Duran Alabi, director of strategic marketing and business development for JMR, a privately owned maker of fiber channel and SCSI storage solutions. Data storage, which allows users to back up, protect, access and otherwise manage data in a variety of ways, varies by the type of application, such as disk, tape and fiber optic systems, and, by the way, the type of industry telecommunications has different needs and systems than does, say health care. Most data storage companies provide customized solutions to address those differences. The segmentation in the business also means that most companies must find overseas partners knowledgeable not only in the geography of the particular country, but also in the different industries and applications. Most data storage developers handle the problem using a complex network of partnerships, distributors and dealers and their own foreign offices. Chatsworth-based JMR, for example, has had offices worldwide for 20 years, but continues to seek partnerships like the one it just signed with German-based distributor MCE. “Most of the other countries we’re penetrating today, we’ve been there before,” said Alabi. “But we didn’t feel we had the right people. The technology evolution is now demanding that we bring more qualified people.” Medea Corp., a relative newcomer to the data storage market that began selling disk storage systems in 1997, has distributors or dealers worldwide, and last year added sales offices in Tokyo and the U.K. through the acquisition of another company, Storage Concepts. Medea uses the sales offices for OEM sales, but it uses partnerships it develops with other vendors, as well as distributors and dealers to sell its content creation applications to end users. “Most of the companies that make the systems we attach to are based in the U.S.,” said Roger Maybon, vice president of channel marketing for the Calabasas-based company. “So they qualify storage systems out of the U.S. and recommend things. If you’re not on the list, people don’t buy you, so the preferences for vendors is on these qualified lists.” Medea, which has focused its efforts in Europe, also sells worldwide via the Internet. About 35 percent to 40 percent of its business comes through those European countries. At Qualstar, which sells internationally through resellers (companies that then sell directly to the end user), overseas business accounts for about 25 percent of sales. (Qualstar earned $2.8 million on sales of $37.6 million in fiscal 2001.) “The individual markets are small,” said Covey. “The market potential in aggregate is huge, but I don’t think we’ll see that become monstrous for some years.” Others anticipate that at least some foreign markets will move the business ahead more quickly. Unlike Europe, which has experienced a sales slump similar to the U.S., demand in China, for example, has been growing as the population has become more technologically savvy. Estimates are that about one-third of China’s population of 1.2 billion uses computers, opening the market for data storage and other peripheral products as well as computers. At the same time, new entrants in Asia are still catching up with advances in technology, another factor likely to drive sales. Overseas sales at JMR have grown to represent 40 percent to 45 percent of sales from 30 percent three years ago. “With new emerging interfaces things are changing in the industry,” Alabi said, “and those changes are happening in all those other parts of the world compared to five years ago when it was just happening in the U.S.”
