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November 27, 2005

NEC signs 10-year fault-tolerant server deal with stratus

Fault tolerant server specialist Stratus Technologies Inc has signed a new 10-year agreement with existing server partner NEC Corp through which NEC will become its hardware design and manufacturing supplier and Stratus will focus on fault-tolerant software and services.

By CBR Staff Writer

Tokyo, Japan-based NEC is also making a new $9m cash investment in Stratus as part of the deal, increasing its stake in the Maynard, Massachusetts-based private company to about 3%.

Stratus and NEC have been close partners since the two companies entered into an OEM agreement in 1990, with NEC signing up to Stratus’s fault-tolerant server line. NEC currently sells Stratus-designed fault-tolerant servers under its NEC Express brand.

Under the new deal NEC will be responsible for hardware design and manufacturing for Stratus, which will provide its high-availability software expertise to the joint development deal.

Stratus will also continue to add its own features and functionality to the new server line, which is expected to debut in late 2006, but is also expecting the deal to enable it to reduce costs and headcount and enable it to focus on software development and consulting services.

Our agreements with NEC enable us to increase our focus on high-value, high-availability solutions services for the enterprise, increase investments in fault-tolerant software development, and continue providing industry-leading, fault-tolerant servers to customers and partners, said Stratus president and CEO, David Laurello.

In August Laurello told Computer Business Review that the company was looking to put more emphasis on high-availability solutions and build up its solutions and consulting offerings. More and more applications have the need to be continuously available, but the definition of availability includes applications, the environment, changes to the environment, and disaster-recovery, Laurello said at the time.

We’re looking at bringing in solution services, or professional services, levels of capability, he added. We do need to bring in the human capital around delivering services, and will be partnering until we do.

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Stratus’s worldwide VP of filed operations, Greg Enriquez, told Computer Business Review that the company would look to retain staff with expertise in high-availability and fault-tolerance and also noted that the deal only related to the Intel Corp processor-based ftServer line. Stratus will continue its own development of the Continuum line of servers and its VOS Virtual Operating System.

The Continuum line remains important to Stratus in serving its existing customer base despite moving the majority of ongoing R&D to the ftServer server hardware in August 2004.

While NEC will design and manufacture the new ftServers from late 2006 onwards, Enriquez maintained that the development would be a collaboration and that the two companies will jointly own product quality and testing. We will continue to have the Stratus brand and there will be continuity in the market, he said.

While Stratus is looking to focus on solutions, NEC has been busy in recent months redefining its relationships with Western server vendors. In September it sold the majority of its shares in Groupe Bull SA, which resells NEC’s Express line of fault-tolerant servers in Europe, but began exploring a potential new 20m euro ($23.5m) investment in Bull’s access management software business and an expansion of their server partnership.

Then in October NEC struck a memorandum of understanding with Unisys Corp to collaborate in a number of areas, including a converged high-end server platform that will incorporate technologies from both Unisys’s ES7000 server and the NEC Express line.

Computer Business Review wondered at the time why NEC did not just buy Unisys outright, speculating that it was a lot cheaper for the company to partner rather than acquire. Nevertheless, it is interesting to note that NEC will by late 2006 be providing the majority of the hardware technology behind Unisys, Bull, and also now Stratus. How long it makes sense not to own at least one of those vendors remains to be seen.

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