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Storage VARs report healthy quarter

Almost 40% beat plan; many comfortably ahead even before traditionally strong Q4.

Storage resellers generally experienced a very positive third quarter, with nearly 40% above expected revenue projections, and most believe that the fourth quarter, as well as 2007 as a whole, will continue to show positive returns.

These findings, from a recent report by Milwaukee-based financial advisory and market research firm Robert W. Baird & Co., are just a few indicators that the storage market remains strong for most VARs, both in North America and in Europe.

The report, which surveyed 60 resellers with a combined $15 billion in annual IT spend, noted that Q3 was positive for most storage resellers, with large resellers somewhat more positive than for smaller resellers. According to the report, most storage-centric value-added resellers (VARs) had strong third quarter sales; survey respondents generally more optimistic about Q3 than Q2. All in all, 38% pulled in revenues that beat their projections, versus 23% last quarter.

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Those results were generally echoed by most of the resellers contacted by

Bill Cassidy, vice president of technology for reseller IT Partners, a said the Phoenix, Ariz. company had its highest quarter ever — up about 50% to Q3 last year. Although Cassidy attributed some of the growth to good, old-fashioned legwork, he said there was plenty of luck involved. In one case an opportunity he expected to bear fruit in nine to 12 months, happened considerably earlier.

"We had some unexpected customer opportunities come up that weren't on our radar, and they really drove the numbers higher," he said. "Either they had some funds free up and wanted to do some things they were going to put off until next year, or they had unexpected data storage needs."

West Coast Technology, an Aliso Viejo, Calif.-based VAR, also had a great third quarter, doubling its numbers from Q2. Executive vice president Dave Holloway attributes the growth to new technologies, a hot iSCSI market, and an uptick in purchases of disk-based backup.

HorizonTek Inc., a Huntington, NY-based VAR, made enough money during the first three quarters that President John Zammet called Q4 "gravy."

He expects sales to be up about 27% over 2005. Zammet attributed his company's extensive growth to a change in product lineup. During the year, HorizonTek all but dumped EMC products for NetApp, which he said is much more reseller-friendly.

But not everybody has been so fortunate in the revenue department. Rich Boccinfuso, Chief Technology Officer of MTI Technology Inc. of Irvine, Calif., said this past quarter was on par with the rest of the year so far, perhaps up slightly.

Those numbers were due in large part to the trend toward commoditization of storage products, which reduces margins. Because of this trend, the company is working to change its business model to focus more heavily on applications. As a result, Boccinfuso expects margins to grow over the next quarter and into 2007.

The Baird report also found that both Q4 looks strong for VARs, with most respondents indicating that Q4 will be above normal. That's typical of the fourth quarter, according to many resellers, who credit surges in seasonal buying.

The surge is so strong, in fact, that many resellers rely on the fourth quarter to make up any shortages they have experienced during the previous three quarters.

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