Networks Driving Data Storage Growth

EMC and Hewlett-Packard (HPQ - Cramer's Take - Stockpickr) held onto the two top spots in the market for network attached storage, according to IDC.

But IBM and Dell chipped away at their lead and were the only two companies among the industry leaders to make incremental gains in market share.

Dell is a relative newcomer in the storage market, while IBM has been aggressive in designing products for virtualized environments.

Shares of IBM were recently trading down $1.93, or 1.6%, to $115.69 amid a broad downturn in the markets. Dell shares tumbled $1.28, or 4.5%, to $27.18.

EMC's subsidiary VMware (VMW - Cramer's Take - Stockpickr) has become the face of virtualization. Many storage vendors are making their products compatible with VMware's virtualization software, says Nesbit.

Data storage for virtualized server environments still accounts for a small portion of total sales for these companies. Estimates for the proportion of servers that are virtualized range from 2.5% to 4% of the roughly 25 million servers in operation around the world.

But virtualization is gaining speed. VMware's revenue rose 82% in 2006. Analysts and investors are betting that sales of storage equipment will rise in tow.