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  Exceptional 2Q08 External Storage Systems Growth In China
September 3, 2008

China's external storage systems shipments in 2Q 2008 jumped 43.0% YOY. Despite global economic sluggishness, China's enterprise data demands, applications convergence, virtualization and simplified IT management drove storage systems growth. China's small and medium enterprise (SME) sector continues to help drive growth as well.

Most sales still come from China's more developed regions, although the West region has the potential.

In 2Q08, demand for storage systems came mainly from China's more developed North, East and South regions. Recovery from the Sichuan earthquake will stimulate some storage demand. Vendors are focusing on less developed regions, as EMC has set up offices in China's western regions.

Competitive vendors in China.

IBM leads in shipment share for 2Q08, and delivers innovative and green (energy efficient) products. IBM and HP have strong advantages in large-scale storage targeted to enterprises and industry sectors.

EMC continues to execute its strategy targeting China's fast growing SME sector, which also has a spillover effect into other sectors, and the company has the largest share in network storage. EMC promoted its bi-directional replication products, and is the fastest growing storage vendor in China.

As an iSCSI SAN leading vendor, NetApp also does well in the quarter. Inspur launches new product lines which targets audio and video to sustain its competitiveness. Price drops in products drive vendors to a more integrated solution-oriented approach.

The strong drivers for demand.

Vendors are promoting green and innovative products, and China's vertical industries are listening. Financial services—including banking, insurance, and securities—and telecom, which are more resource-rich, are driving demand with great interest in data security. Multinational banks are increasing their investments in China, and are driving demand for storage as well. 3G will also enable more networked storage demand.

The Beijing Olympics has spurred demand in China's North region, in municipal traffic monitoring, control, and recording, which in turn drive storage demand. The Olympics has also spurred demand in China's media industry.

Vendors are focusing more on service in China.

Customers are increasingly purchasing product through channels, which are able to provide integrated solutions and services in addition to product. Systems integrators and value-added channels in China are playing more important roles, providing not only sales, but also professional services and technical support. This is a natural outcome as products are becoming more sophisticated, and require such services. Shipments through distributors and channels increased slightly in 2Q08.

Acquisition is the keyword for vendors to better realize their competitive advantages.

In 2Q08, IBM completed its acquisition of FilesX, a storage software company specializing in continuous data protection and nearly instant data and application recovery software.

HP bolsters its data center solutions and services with its acquisition, near the end of 2007, of EYP Mission Critical Facilities, a consulting company specializing in strategic technology planning, design and operations support for large-scale data centers.

In 2Q08, EMC acquired Iomega to strengthen its position in consumer and SME sectors. To strengthen EMCs consulting and services, the company also announced its intention to acquire Conchango, a technology consulting firm specializing in the design, development and delivery of custom applications and digital experiences.

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