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Contributors: Douglas McIntyre Jon C. Ogg

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Thursday, October 19, 2006

Potential Government Regulation Could Benefit Data Storage Companies

New government regulations usually tend to deemed as bad if you are a free citizen or if you are a civil libertarian, but there is often a silver lining if you know what you are looking for. Data storage technology companies would get another upgrade cycle. There is an article on Slashdot that will take you through an endless link system that will ultimately go back weeks and months if yo want to delve further into this. Now keep in mind that there is no mention of data storage companies benefitting anywhere in the links, but someone has to actually provide the physical products and technology for this.

On Monday, Homeland Security Chief Michael Chertoff told a group of International police chiefs that the Internet was being used to spread radicalism without having to even physically go incite new recruits. And on Tuesday, CNET reported that FBI director Robert Mueller said that Internet Service Providers often do not save web traffic and digital data long enough for law enforcement to be able to track terrorists and criminals. Even Attorney General Gonzales has pushed for longer periods of data retention.

Unfortunately we know what happens when data is kept lingering around for too long. It gets exposed, leaked, or used for unintended actions. Ask AOL, ask Equifax, ask the IRS, ask dozens of retailers. Data ends up in the wrong hands. But for business regulation does often have a silver lining. Most data storage technology companies do not really like to disclose how much of their business comes from the government, but in reality it is likely quite high. If you recall seeing storage farms inside government buildings or the endless tape libraries full of personal data in the 1980's and early 1990's, that is essentially what it is and they already keep vast amounts of data from irrelevant to quite personal. Throw in much longer data storage laws for corporations, and you have what could in effect be a new upgrade cycle for storage technology companies.

If all ISP's, Search Engines, Portals, Telecoms, Fiber Providers, Cable-cos, web hosts, and other communication infrastructure companies were forced to keep data for say 10 years instead of a few months, this would be a windfall for storage companies to the likes of EMC (EMC) Symantec (SYMC), Network Appliance (NTAP), Quantum (DSS), Brocade (BRCD), Overland (OVRL) and a dozen other larger diversified tech companies that have storage units. It certainly wouldn't hurt Sun Microsystems' (SUNW) or IBM (IBM) feelings.

Companies have argued that it would ultimately be against the consumer to maintain data for too long, but if you look past the "love and respect of fellow man" the answer as to why data isn't kept very long is more likely than not the actual dollar cost. It costs a lot to go buy endless and redundant data systems, and companies (and the government) could spend endless dollars converting old data still on tape libraries and data buried in the old legacy system codes that are still used in many of the companies that have been around for decades.

While you and I probably wouldn't want our history kept around for years and years, the government sure would. And you can guess what the storage makers think. There may or may not be legislation on this, and you have to know the outcome of the elections in November could impact this. This isn't yet going to be the next windfall for storage technology companies, but remember this reference for companies to invest in if you are reading in your paper about new proposed regulations or legislation on extending storage time requirements.

This is something we will be following closely.

Jon C. Ogg
October 19, 2006

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