Storage Computer Fights the Goliaths

Tiny Storage Computer (SOS ), a provider of data-storage systems, with 2001 sales of only $9 million, is doing battle with the giants of the industry--companies such as Hitachi and Veritas Software. Storage has sued both for patent infringement. And Storage may take on even bigger foes, such as Hewlett-Packard, EMC, and IBM. Storage has been emboldened by its success with Seagate Technology, which settled in December on an infringement suit that Storage filed in March, 2001, against Seagate's XIOtech unit. Storage said XIOtech violated its patent on specific data-storage methods. Seagate agreed to pay $2.5 million for licensed use of a Storage patent. "This first win brings huge pressure on other defendants, such as Hitachi, to settle," says John Faessel, publisher of On the Market newsletter.

Storage is lining up more lawsuits, says Mike Kicera of McDonald Investments, an affiliate of multiregional bank KeyCorp., which has bought shares. A top Dallas law firm, Sidley Austin Brown & Wood, is handling Storage's lawsuits.

Seagate's settlement was based on a 5% royalty on patent-related sales, so Kicera figures the Hitachi case might mean a win of $250 million--or $13 a share. "That's significant for a small company like Storage," says Kicera, who believes Hitachi and Storage are in talks for a settlement. Storage, now at 6.31 a share, could run up to 25 in 18 months, says Kicera--taking into account a Hitachi settlement, which he expects. Storage CEO Theodore Goodlander declines comment on the lawsuits. Hitachi couldn't be reached.

By Gene G. Marcial

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