The OEM storage space is extremely competitive with vendors such as Xyratex, Engenio, Dot Hill, Hitachi, NEC, and others competing fiercely for low margins (less than 15% Gross). This will force industry consolidation to improve the supplier strategic power in the marketplace. Dot Hill has a substantial amount of cash which makes their enterprise value very compelling. However, they have a systemic lack of cash flow and falling revenue levels. I believe that one of their competitors will force consolidation of the industry and acquire Dot Hill. Enacting a deep expense reduction plan while consolidating their revenues will be valuable to one of the players that understands that scale is necessary.
$2.35 (12/13/07)
