Seagate's Pulsar drive uses single-level cell NAND flash, and is the first of what analysts expect will be many solid-state products from the storage giant. Image: Seagate.

Flash memory – the stuff that stores data in consumer gadgets like phones and digital cameras – is also finding its way into more corporate data centers. It turns out that while flash is still far more expensive than trusty old hard drives, it uses less power and serves up information quickly. That makes it well suited for tasks like data mining, business information and any other situation where time is money.

That’s why Seagate (STX), the world’s largest manufacturer of hard drives, is getting into the flash game. Seagate today is expected to unveil Pulsar, a new flash-based storage product that looks like a hard drive and holds up to 200 gigabytes of data. The drive is designed for a mainstream server – the kind that handles e-mail and basic databases – and is the first of many flash-based products Seagate hopes to release soon.

Seagate has one big advantage as it breaks into the enterprise flash market: it’s already the big dog in data center hard drives, selling to the likes of Google (GOOG), Microsoft (MSFT) and EMC (EMC). Because Seagate’s sales folks know how businesses buy storage, they’ll be able to quickly muscle their way to the front of the flash supplier line.

But there are also challenges. For one, smaller companies like Fusion-io have been selling enterprise flash drives for quite a while – and from what I’ve heard, some of them arguably have edgier technology based on the SAS and PCI interfaces. After my chat with Seagate sales exec Dave Mosely, I asked Gartner storage analyst Joe Unsworth for his take on Pulsar.

“The Seagate drive is a decent start considering that they are indeed late to the game,” Unsworth wrote in an email. “However, the product itself does not differentiate itself compared to what is out there – after all, it is really only targeted at the server market and is based on the SATA interface.”

There’s also the question of where Seagate’s going to get the flash for its drives, and for how much. In its hard drive business, Seagate rules the supply chain. In flash, not so much. Top flash manufacturers Samsung and Toshiba sell most of their stash to companies like Apple (AAPL), which gobble it up for gadgets like iPods and iPhones.

Seagate at least won’t be buying the same kind of multi-level cell flash that’s in most consumer devices; instead it will use the lower capacity but higher-endurance single-level cell variety. Still, though, flash prices can swing wildly, and by getting into this market Seagate will be increasing its exposure to that volatility. That’s not much of a concern for now, but over time the company will have to ink deals that guarantee its flash supply at manageable prices.

So bottom line: It’s good to see Seagate out there with its own enterprise flash storage, and it’s sure to do fine out of the gate. But to have the kind of success here that it’s had with hard drives, Seagate will have to get busy innovating – and maybe also acquiring smaller outfits that specialize in flash.

Forget the dollar and the yen. People value their cold, hard content.

By Pete Steege, product marketing manager, Seagate Technology

Steege looks at information as legal tender. Photo: Seagate

Earlier this year there was a bit of buzz that the US dollar was at risk of being dethroned as the world's default currency. I'm not a financial expert, so I can't weigh in with any authority on the US dollar's continued hegemony vs. other monetary currencies. But I do think the there is a new global currency looming on the financial horizon that will change how we transact business. The new legal tender: information.

Driven by the content Gang of Five (Google (GOOG), Facebook, Microsoft (MSFT), Apple (AAPL), and TiVo (TIVO) ) and their peers, our day-to-day lives have turned irreversibly digital. We collect television shows and movies instead of just watching them. We download songs instead of just listening to them. We don't talk on the phone so much as we manage our messages.

Along the way, information has become a consumable. More than that, information is a commodity that we increasingly equate with a specific dollar value. How much does a movie DVD cost? It depends on who's selling it and whether or not it is on sale. Not so with online content. A digital song is $1, (well, more like $1.29)  a movie is $10, an ebook is $10, more or less.

This convergence of the value of digital content affects consumers' other possessions and purchases as well. For example, how much a personal computer is worth to its owner depends more on what is stored on it than what was paid for it. Two thousand songs stored on the hard drive? It's worth at least $2,000.

In fact, in a Harris Interactive poll commissioned by Seagate U.S. consumers were asked, “If you had to put a price tag on your digital content (photos, documents, movies, music, etc.), stored on your computer(s), how much would that be?” Forty-one percent said their content was worth $5,000 or more. That's more than the average cost of a high-end computer. Will computers become just a means to an end?

Data can be stolen. Can it be turned into currency?

This trend has spawned new industries for the care and feeding of this pseudocurrency – much like banks and other financial institutions surround more conventional forms of money. There is software to help you manage your content assets, backup services to safely vault them, and data recovery services – the "insurance" of the data world. Data theft is becoming common, as is government regulation on how it is handled. People are even suing each other over their data.

Thinking of information as legal tender raises questions. Does it depreciate? How is it affected by inflation? Is there a practical use place for information-based debt? Will we see an Information Futures market form?

I'll leave these questions to the more financially savvy. What I do know for certain: information will continue to look and act more and more like cold hard cash.

Steege is a global segment manager at Seagate Technology based in Shakopee, MN. Pete blogs for Seagate on The Storage Effect and Inside IT Storage blogs.

Our correspondent goes to a geekfest and reports back on five new tools you need now.

Catch that mouse. Logitech's Performance Mouse MX is one to love. Photo: Logitech

I was in gadgetry heaven.

The Pepcom Holiday Spectacular in New York Thursday night was buzzing — and it wasn't just the sensation of mobile devices on vibrate mode.

With 80 companies — from Hewlett-Packard (HPQ)  to Samsung — showing off their goods for the holiday season, the room pulsated with enthusiasm, competitiveness and innovation. It was like the recession didn't exist!

I can't go through everything I saw, but here are my top five picks of the most interesting, unique technology solutions for business (and then some honorable mentions).

Photo: Seagate

What: Seagate's Free Agent Dock Star
How much: $99. For external access, the first year is free, and then $29/year.
When it hits stores: October
Why it's cool: Usually, when a company rep tells me something is going to be a "game changer," I shrug it off, but I was thinking the same thing this time. Seagate (STX) has produced something incredibly simple for file sharing. All you need is an Ethernet connection and a storage device — of any brand — and you can pretty much share your files with anyone, anywhere. It doesn't matter the size or type.

Just think about that for a second, because it's pretty incredible. You just log into your account to access your storage device(s) and send your boss that huge file that's too big to attach in an email. Your boss will receive an email that says "click here," and it'll reroute her to the page where she can download those files straight to her desktop. It's that easy. With lingering concerns of cloud computing and network limitations, this might be the product that'll revolutionize the way we share files — both at home and at the office.

Photo: Pong

What: Pong iPhone cover
How much: $59.95
When it hits stores: Available now at pongresearch.com
Why it's cool: The debate of whether cell phone radiation causes cancer has been ongoing for years. Now after the advent of new technology from UCLA physics professor Alfred Wong, Pong Research has made an iPhone case that actually reduces the radiation transmitting to your brain by 60%. The cover basically bounces the radiation waves back into the air, away from you. It's the first Federal Communications Commission-certified product to do so.

Now some of you might question whether this will affect reception quality during all those important business phone calls. I made a quick 10-minute phone call with the cover on and the quality was normal, if not perfect. It's a hard case with the technology pressed on the inside cover, making it look like any other case. (It's available in black and lime green.) Considering how much cases for Apple's (AAPL) iPhone cost, this is a very competitive offer. And don't worry BlackBerry folks, a case will be coming your way in November — along with most smartphones next year if sales are good.

Photo: Duracell

What: Duracell My Grid
How much: $85
When it hits stores: October
Why it's cool: Basically, Duracell has made a charging grid that's compatible with the iPhone, BlackBerry and most Motorola (MOT) and Nokia (NOK) phones. From far away, it kind of looks like a solar panel. But a typical "grid" can hold four phones and all you have to do is attach a special clip onto your phone, and then you can throw your phone on there and the clip will create a conductive connection with the phone and start charging. Some phones will require an actual case, which you have to buy separately — which is a pain.

But it's still a good idea, especially if you have multiple phones in the household or at your desk and don't want to deal with tangled cords. The grid charges pretty much at the same rate as a regular charger and is even a bit more energy efficient since it's coming from one power source.

Photo: Logitech

What: Logitech Performance Mouse MX
How much: $99
When it hits stores: Available now
Why it's cool: Logitech (LOGI) has always been one of those companies that have produced solid computer accessories, from mouses to webcams. And now it's continuing to champion what it's known for by creating a mouse that actually tracks on glass. And here I thought its cordless air mouse was cool (it basically functions like a remote for your computer).

It is powered by the company's Darkfield laser technology; although the Darkfield seems like a necessary evolution in mouse technology, Logitech's attention to detail is what makes this product stand out. Take the programmable buttons that'll give you easy access to whatever you'd like. Or the adjustable scroll, which can move with clicks or can spin freely — making editing long spreadsheets all the more easier to navigate. There's also a mobile, smaller version of this product for $20 less, if you want a cheaper option.

Photo: Asus

What: Asus AiGuru SV1
How much: $269
When it hits stores: Available now
Why it's cool: The Taiwan-based company has made a seven-inch touchscreen video phone for Skype users. It's kind of clunky and is about a foot tall, but my goodness, it's a video phone! Asus says it's trying to target older folks who don't like messing with technology. But there's a strong possibility for business here, especially since more companies are making Skype-based phone calls for video conferences. Asus has to work on the video quality, for sure, but if it were to improve that and open up to other messengers in an different model, businesses could latch on.

Honorable mentions
What: HP 5310 Probook/Toshiba Portégé R600
How much: $699/ $2,099
When it hits stores: October/Available now

Why they're cool: HP debuted its new line of laptops for the holiday season that'll go with Windows Live 7 last night. It was a solid line-up as always. But the Probook was its notebook targeted specifically for professionals. With a 13.3-inch screen, it's only 3.7 pounds, 0.9-inch thin but yet has a full-performance processor. That's pretty cool. Considering the portability, I wish the battery life would have been more than six and a half hours, but it'll do. The coolest business feature is definitely the HP Quicklook, which allows you to sync your office calendar to your computer and edit at your convenience with a push of a button.

The other notebook worth mentioning is Toshiba's Portege R600. Now, unless a computer will cook and clean up after me, any price tag of more than $2,000 is absurd these days. Regardless, it was a neat product. At 2.4 pounds, Toshiba still managed to keep the optical drive in the unit. That's unheard of. It's under an inch thin, as well, and has a seven-hour battery life with a 12.1-inch screen. The two coolest features? It has no moving parts, and you can still see all your work even if direct sunlight is hitting the screen.

What: HTC Hero
How much: $179.99 with a two-year Sprint contract
When it hits stores: October
Why it's cool: It's been talked about for awhile, but this was the first time the HTC Hero has appeared in the public. It has a touchscreen interface that's similar to the iPhone (no keyboard), has a scroll wheel like the BlackBerry Curve and has a desktop that's reminiscient of the Palm Pre — not to mention it's running Google's Android. Could the HTC Hero be the love child of all other smart phones? Maybe, but it was user-friendly, has a full HTML browser (of course), a 5.0 megapixel camera and vibrates when you type, giving it a nice, simple tactile feel. And it was probably the most comfortably smartphone I've held, so it's got that going for it.

What: Jawbone Prime
How much: $129.99
When it hits stores: Available now
Why it's cool: Oh, the Jawbone. With a new line the company refers to as "ear candy" and a hefty price tag, it's obvious what kind of consumer Jawbone wants to appeal to. But it's a good product. The Prime is a sleeker version of the original Jawbone — now available in seven colors! The Jawbone Prime has improved sound quality and now reduces noise and wind. It's known to be uber comfortable, resting inside your ear instead of having to do that hook business and agitating your skin. What caught my attention was how it could connect to two phones, so you can easily switch from your personal to professional phone without having to take off your headset.

With a line of stylish new drives and a TV marketing campaign, Seagate hopes to make digital backup more popular than … well, flossing. Image: Seagate

Aaron Levie runs his own online storage and collaboration company, so he sounds a little sheepish when he admits that, before he founded Box.net, he didn't back up the files on his computer. He's not alone. Recent studies show that at most, 17 percent of PC owners use external storage for backup, slightly higher than the percentage of people who floss daily.

This statistic, as you might imagine, annoys storage executives as much as the flossing number annoys dentists.

That explains why Seagate (STX), the world's largest hard drive maker, is hoping to reverse the trend. Though the company traditionally had been content to sell raw storage to others for use in their wares (everything from Xboxes to data centers), executives are pushing to get their own branded backup products onto retail shelves. They were eager to show me stylish new plug-in FreeAgent drives for Macs and PCs that they announced this week, and to explain why they're launching a TV marketing campaign during football games and Oprah to tout them. (Seagate studies found that, once reminded of backup's virtues, people were twice as likely to say they'd buy drives.)

Honestly, backup's virtues are easy to appreciate. After all, what if you have a power surge that fries your home appliances, or your hard drive fails or a hurricane hits? Do you really want to lose all those digital photos and baby videos? Of course not. But as in that scene from Jerry Maguire, the storage industry's pleas to help us help ourselves seem to fall on deaf ears. "Even in Silicon Valley," says Box.net's Levie, "I think if you ask the average person at a tech company, they don't back up."

This reluctance hasn't stopped tech giants from getting into the consumer storage game. Just this year, enterprise heavyweight EMC (EMC) bought Iomega for about $213 million, and online storage provider Mozy for $76 million. Security specialist Symantec (SYMC) bought SwapDrive for $124 million. Hewlett-Packard (HPQ) launched its Upline online storage service this spring, and Dell (DELL) partnered with Box.net this summer to provide online backup on its Inspiron Mini 9 laptop.

Why the sudden surge into storage? In the age of broadband, digital downloads and online sharing, companies have noticed that more of the stuff people care about is getting stockpiled in bits rather than in boxes. Consider the proliferation of iPods, iPhones, Tivos (TIVO), photos, and video on sites like YouTube.

Analysts estimate that 70 percent of this content will be stored by individuals, not corporations – suggesting a market ripe for backup drives that often start at around $150, and paid online services that start at about $5. "We had to either decide we were going to ignore this whole thing," an EMC executive told me, "or jump in."

But the fact that big companies are leaping into online storage doesn't mean consumers will. New marketing campaigns notwithstanding, most PC users seem to have rejected the traditional plug-in, back-up process that Seagate and some others have begun selling. And it's not clear whether online backup services will fare much better; though Wi-Fi makes online backup easy to do, most home Internet connections are so slow that the first session can take hours.

Though no one has yet solved the backup hassle, the closest thing so far may be Apple's (AAPL) most recent efforts, Time Capsule and Time Machine. A wireless router and hard drive in one, Time Capsule works with Apple's latest operating system to invisibly archive your files, so that if you lose something, software called Time Machine lets you drive your computer backward, Back to the Future-style, to the day when you know you last had it.

When Apple studied backup habits a couple of years ago, it found that more than 90 percent of its customers failed to regularly copy their data for safekeeping – even though they were storing more sentimental content on their Macs. Why? "It's not because they didn't know that backup was important," says Jai Chulani, senior product manager for Time Capsule. "It was 'Oh, it's too hard to do. I have to constantly plug things in.' "

Apple says Time Machine is one of the most popular features in its latest operating system, OS X Leopard; and in Apple's online store Time Capsule is the 5th most popular Mac-related item, ahead of the Mac mini and Mac Pro computers.

But don't expect those features to become common for the masses of Microsoft (MSFT) Windows users anytime soon. Because Apple controls both the hardware and the software in its Mac universe, its engineers could more easily invent an automatic backup system. (UPDATE: A reader reminds me of Microsoft's Windows Home Server, which has many features of Time Capsule, plus remote access. Thanks for jogging my memory; I wrote about it here.)

For others, it would be more difficult to build – though one can imagine a Windows-based system that marries Google's (GOOG) desktop search program with a wireless external drive for automatic data protection. Such a solution would be nifty – and even easier than flossing.

Iomega's Rev drives compete with portable hard drives from Seagate and Western Digital; EMC hopes to buy the company and turbocharge the brand. Image: Iomega

What happened to Iomega (IOM)?

It was a gravity-defying technology stock during its best run a decade ago. At its peak in 1996, the company's nearly $6 billion valuation meant many investors were betting it would be the future of digital storage.

Iomega seemed to be at the right place at the right time; broadband connections and music downloads were not yet common, and few tech companies recognized that storage would be a growth market. Meanwhile Iomega's proprietary Zip disks and Zip drives provided the capacity of a computer hard drive and the portability of a floppy disk, making it a snap to move chunky files like digital images or huge spreadsheets from one PC to another.

It wouldn't last. Even before the dot-com bubble burst, consumers found reasons to ditch the San Diego company. New e-mail services were making it easier to transfer text files to another computer, and CD-burning drives were making it cheaper to swap images and music. By early 2000, when other tech stocks were just starting their slide, Iomega had already fallen to a quarter of its peak value. Its attempts to sell more standard fare like hard drives and MP3 players didn't help much; the stock's slide continued into this year, as SD cards, Apple (AAPL) iPods and flash drives redefined the storage game. Iomega has been trading near $4 per share, giving it a bargain-basement valuation under $250 million.

That's when EMC (EMC) smelled opportunity. The Massachusetts storage and security firm has a healthy business selling services to larger companies, but is clueless about how to attack the growing consumer market, which is generating 70 percent of new data. That's why EMC last month bid $213 million for Iomega, 20 percent more than it initially offered to pay.

EMC believes that the Iomega brand, paired with EMC's global reach, will be able to capture consumer storage market share in places like Asia, where Iomega is weak; and in the United States, where it has been out-dueled at retail by companies like Seagate (STX) and SanDisk (SNDK). EMC certainly has the financial firepower to make an impact with the Iomega brand –- its $32 billion market capitalization is three times bigger than Seagate's and five times that of SanDisk. But it's still not clear whether an EMC-backed Iomega will succeed where Iomega failed alone.

To improve the odds, EMC executives are already crafting a marketing plan to boost the Iomega brand, assuming the deal passes shareholder muster. (Iomega's management supports the bid, and EMC's tender offer for Iomega shares concludes May 21.) After that, we'll see if EMC's backing helps Iomega reclaim its old Zip.

Lenovo's critically acclaimed ThinkPad X300 laptop does without a hard drive. Image: Lenovo

While munching on a reuben at Birk's, a steakhouse in Silicon Valley, Seagate (STX) CEO Bill Watkins is explaining why he's not too worried about a these trendy new laptops that have everything but a hard drive.

On the surface, this would seem to be a big problem. Seagate, after all, is the world's largest hard drive maker with expected sales of more than $3 billion this quarter – so Watkins likes to see his wares go into more gadgets, not fewer. It's easy to see why he tends not to favor devices like Lenovo's sleek ThinkPad X300, which is winning raves for its light weight and silent operation, and its 64-gigabyte flash storage drive.

And the X300 isn't the only laptop that's doing without a hard drive in favor of a flash solid state drive, or SSD. A version of Apple's (AAPL) MacBook Air also comes with 64 gigabytes of flash. And there are other defectors, like the diminutive Eee PC from ASUS.

But the key thing, Watkins argues, is that SSDs are just too expensive, and will be for a long time. Just look at the MacBook Air. There are two versions of the Apple laptop, one with an 80 GB hard drive for $1,800, and one with a 64 GB SSD for $3,100. Why pay so much more for less storage? It's not a difficult choice.

"Realistically, I just don't see the flash notebook sell," Watkins says. "We just don't see the proposition."

But in case flash prices continue to plummet and the flash drives really do catch on, Watkins has something else up his sleeve. He's convinced, he confides, that SSD makers like Samsung and Intel (INTC) are violating Seagate's patents. (An Intel spokeswoman says the company doesn't comment on speculation.) Seagate and Western Digital (WDC), two of the major hard drive makers, have patents that deal with many of the ways a storage device communicates with a computer, Watkins says. It stands to reason that sooner or later, Seagate will sue – particularly if it looks like SSDs could become a real threat.

Watkins might want to keep his lawyers on speed dial. The price of flash has been dropping so fast that it's surprising even the pros. Intel CEO Paul Otellini had to promise investors earlier this month that he wouldn't let the losses from Intel's flash businesses sink the whole company's profits, after flash prices greeted 2008 by dropping almost twice as fast as the company expected, leaving Intel saddled with a lot of devalued inventory.

To shore up its flash business and boost sales volumes, Otellini said Intel will push more aggressively into the SSD market in the second half of the year – and it's not hard to imagine what could result. If Intel starts pushing low-cost SSDs for laptops, rivals such as Samsung and SanDisk (SNDK) could easily respond with a price war, with all of them competing to get Hewlett-Packard (HPQ), Dell (DELL) and other major laptop makers to buy up their flash inventories.

So if a more intense SSD price war does flare up, will flash prices drop far enough to rattle Watkins? It might be unwise to bet against it. In a presentation for media and analysts earlier this month at Samsung's Silicon Valley office, executives at the flash memory leader strongly hinted that they're willing to see flash prices drop even more steeply this year, if it means wrestling more laptop business away from hard drive makers.

This much seems certain: Things will only get wilder in the storage world this year, especially for laptop buyers and patent lawyers.

New Home Server aims to bring big-business technology to the home — but it will be a tough sell

HP's MediaSmart Server runs Microsoft's new Windows Home Server operating system. Image from Microsoft.

Yes, it has come to this. Now that consumers have multi-PC homes, wireless networks, and thousands of digital files floating around, they need a computer whose sole purpose is to keep an eye on the other computers.

At least, that's Microsoft's (MSFT) pitch for a new class of machines built to run its new Windows Home Server operating system. Home Server products became available for pre-order this week from retailers including Best Buy (BBY), Circuit City (CC) and Amazon (AMZN), but it remains to be seen whether mainstream computer shoppers will buy the idea.

The concept is geeky, but the need for a home server is real, as anyone who has lost files to a hard drive meltdown will attest. The promise of the home server is that it will deftly perform many useful tasks that most computer users find too troublesome to do on our own.

For example, it will automatically back up every file on all the Windows computers in your home (so long as they're running Windows XP or higher). The home server will also allow you to use a web browser to access files that are on your home computers while you're on the road, and even remotely share them with friends and family. All the while it also watches out for the other PCs in its network, making sure they have the latest security software updates.

Microsoft’s Zune: The sequel (Photos 1-4)

Microsoft says Home Server will also share files with computers running Apple's (AAPL) Mac OS, but some features, like automatic backup, won't work. (Mac users might not be too interested anyway; the latest version of the Mac OS comes with automatic backup features that the company has promised will eventually work across all Macs on a network.)

The computer industry is tentatively embracing the home server concept. Hewlett-Packard (HPQ) will have one of the first systems, the HP MediaSmart Server, which uses a processor from Advanced Micro Devices (AMD) and up to a terabyte (1,000 gigabytes) of storage. Microsoft said a 500-gigabyte version will have a suggested retail price of $599, the terabyte version will be $749, and they will ship at the end of the month. There will be other systems too, including one from hard drive maker Seagate (STX) and systems with Intel (INTC) processors.

Practical though it may be, the concept of a "server" is still foreign to many everyday PC users — and that fact will make it difficult for Microsoft and its partners to market the thing. In the business world, servers are used to centrally manage important data and programs, but most office workers never need to come in contact with them. In fact, servers typically get mentioned only when there's a problem with them — as in, "The e-mail server is down," or, "Some important files just disappeared off of the server."

A financial edge from edgy PC design (Photos 1-7)

High-performance computer provider Velocity Micro plans to offer its NetMagix HomeServer for about $899 by year's end. Image: Microsoft

Despite any marketing challenges, some tech reviewers seem to love the early versions of Windows Home Server. Though he found some glitches, Michael Gartenberg, analyst with JupiterResearch, wrote on his blog this summer that the home server is "one of those things that you think you don't need until you start using and the more you use it, the more you wonder how you lived without it."

But I have my doubts that mainstream shoppers will feel the same. Even for people who know what they are, the corporate server can be an intimidating concept — so it's probably the wrong metaphor to use with consumers. At work, we need full-time IT workers to keep those mysterious servers working right – we come home to escape those sorts of complexities and hassles. That being the case, I doubt most people will feel good about going out and buying a $700 computer to bring home and put in a closet, no matter how fine a job it does as a digital minder for the other home PCs.

New design in HP’s business displays (Photos 1-5)

Even so, there are ways that Microsoft could tweak the home server concept that might make it easier for consumers to embrace.

For example, I could imagine mainstream consumers buying this kind of product if it were billed as a sort of TiVo (TIVO) on steroids – a supercharged version of the PCs that run Microsoft's Media Center software. As a high-end home theater component that also happens to manage the networked computers, it could be a fun addition to the household. I could also imagine Microsoft one day offering many of Home Server's features as an online service rather than as a physical product. Though an online service wouldn't be a practical way to back up software programs and videos, it could be a fine way to store documents, photos, and even audio files.

For now, though, geeks everywhere can rejoice that capable home servers seem to be arriving — even if the whole idea of PCs managing other PCs is a bit scary for most home people.

Founder and CEO Michael Dell. Image: Dell

Michael Dell’s old game plan was ruthless and effective: Crush competitors by building products at a lower cost, and using the Internet to pass the savings on to value-conscious customers. That strategy made his namesake company a darling of the first Internet boom and the largest computer maker in the world.

But times have changed. In recent years archrival Hewlett-Packard (HPQ) has stolen Dell’s (DELL) global PC crown by using HP’s larger size to cut costs and its retail relationships to grow sales. And while Dell has struggled, companies like Apple (AAPL) are using design savvy to simplify computing experience through devices like the iPod and iPhone.

To face these challenges, Dell is changing too – and there’s no clearer sign than the company’s announcement Monday that it intends to buy privately held data storage provider EqualLogic for $1.4 billion. The size of the deal is remarkable for a company that once dismissed big acquisitions as unworkable. EqualLogic not only marks the biggest acquisition in Dell’s history, but also the most any company has paid in cash for a venture-backed startup. The deal is expected to close in February, and Dell expects to keep most of the company's nearly 400 employees.

Microsoft’s Zune: The sequel (Photos 1-4)

The change is more than just talk. The move to buy EqualLogic shows Dell is willing to place billion-dollar bets on a different way of doing things. The old Dell didn’t do many big purchases; when IBM (IBM) sold its PC business to Lenovo, CNET quoted Michael Dell saying, “We're not big fans of the idea of taking companies and smashing them together. … When was the last time you saw a successful acquisition or merger in the computer industry?”

Explaining why Dell is making the move, executives say buying EqualLogic fits the company’s new emphasis on simplicity. Nashua, N.H.-based EqualLogic uses hardware and software to help organizations like Fidelity Bank and Yale University more deftly manage their sea of digital information by allowing them to access data faster and pinpoint problems. EqualLogic's technology for creating storage area networks is known for being easy to upgrade and having an easy-to-use interface. Dell will incorporate it into future versions of its PowerVault storage line.

The best-designed Bluetooth gear (Photos 1-8)

SVP of Business Product Group, Brad Anderson. Image: Dell

Such storage technology is a fast-growing area for Dell. The company says sales for the segment recently have grown 24 percent year-over-year. Better yet, EqualLogic’s area of specialization in storage, a method called iSCSI that uses Ethernet to move data instead of a more common method called fibre channel, is projected to be the fastest-growing segment of the market. Dell plans to continue to sell EMC’s (EMC) fibre-channel based storage solutions as well.

EqualLogic’s technology isn’t cheap for companies to buy; but that fits Dell’s new strategy, too. Rather than focus mainly low prices as its selling point for customers, Dell is seeking to position itself as an innovator that will streamline the maddening process of buying and maintaining business technology. This is a change in strategy for Dell, whose competitors have traditionally criticized the company for running a tight operation but not fostering innovation.

“It’s fair historically, if you go back a year or so, that you would have thought of Dell as more of a fast follower," said Brad Anderson, senior vice president of Dell’s business product group. "But we recognize that if we want to solve our customers’ problems and provide leadership, we’re going to need to jump in very early.”

It’s a message that comes straight from the top, now that Michael Dell has retaken the reins as CEO.

“With Michael coming back, things are a little bit different,” Anderson, said. “Company-wide, we are driving IT simplification very hard. It is our strategy; it is our mission. It’s also driving a cultural change within Dell.”

Servers like this one, which put information onto the Internet, let off a lot of heat – and it takes energy to cool them. Photo: HP

The Internet is hot. Not just hot as in popularity. Hot as in heat.

It’s so hot, in fact, that data centers – those expensive warehouses full of computers that serve up information – are racking up huge power bills. According to Hewlett-Packard's (HPQ) calculations, a large data center with 70,000 square feet of space might guzzle $10.4 million worth of power in a year. Data centers require so much energy that over a three-year period, the computers inside could easily cost a company as much to plug in and cool as they did to purchase in the first place.

To deal with the power problem, and make some money in the process, HP weeks ago began selling a homegrown technology called Dynamic Smart Cooling. Today, the company is releasing numbers it hopes will convince customers that the technology works.

When HP installed a Dynamic Smart Cooling system in a data center in Bangalore, it managed to cut cooling costs by 40 percent. If those results bear out in other settings, companies that operate multiple data centers could see millions of dollars in savings.

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John Sontag, director of virtualization and datacenter architecture for HP Labs, said HP had previously offered cooling numbers based on an installation in a tiny 3,000-square-foot U.S. data center. He expects that these numbers will be more convincing. “We’ve had a strong belief all along that our solution would scale,” he said.

Dynamic Smart Cooling works something like a high-tech home thermostat. In a typical big-company installation, thousands of tiny sensors measure how much heat computers in a data center give off. The sensors then pass the information to an intelligent air conditioning system that decides which areas of a vast server farm need to be cooled, and how much.

That method is different from the standard practice in data centers, which is to blast air conditioners all the time. Like a thermostat that cools a home only when it’s hottest and when people are home, the flexible approach of Dynamic Smart Cooling uses less energy.

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HP estimates that it will typically take five months from when it initially briefs a customer on Dynamic Smart Cooling to when a customer flips the switch and begins using the technology.

HP is one of several companies, including Intel (INTC), Advanced Micro Devices (AMD), and Sun Microsystems (JAVA), looking for ways to make data centers more efficient. And the market for efficient technology will probably be around for a while: According to the Department of Energy, U.S. data centers accounted for 1.5 percent of country’s electricity use last year, more than all the color televisions combined.

As long as companies like Apple (AAPL) Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT) keep investing in audio, video and social networking services, there will be demand for more data centers.

Flash-based models such as the new iPod touch are increasingly upstaging Apple's hard drive-based players. Photo: Jon Fortt

In the iPod’s world, storage isn’t the selling point it used to be.

That’s one clear lesson from the sales rankings at the Apple Store, which posts a regularly updated list of the most popular iPod models. Though the iPod classic, which uses a hard drive to store music and video, offers a whopping 80 gigabytes of storage for $249, it is being outsold by the iPod touch. This, despite the fact that the touch has a tenth of the storage space and costs $50 more.

Why is the touch beating the classic? For one, the iPod touch has the benefit of good looks – it’s almost identical to the iPhone, this year’s must-have gadget. The touch also has a large display, built-in WiFi and web browsing. (The iPod touch is isn't Apple's best-selling model; number-one is the slim iPod nano, which starts at $149. It doesn't use a hard drive either.)

The iPod sales trend is important as Apple (AAPL) today reports earnings for fiscal 2007. Apple’s iPod has been the product that most visibly fueled the company’s turnaround over the past few years, and it has allowed Apple to dominate the burgeoning digital music business. The iPod commands about 70 percent of the digital media player market, and Apple’s iTunes Music Store is the go-to place for media downloads.

But recently Apple is seeing increased competition. Rivals such as SanDisk (SNDK), Microsoft (MSFT) and Sony (SNE), which were slow to catch on to the iPod’s popularity, are introducing sleeker models. Apple also faces more credible rivals to its iTunes store. Amazon (AMZN) recently began selling MP3 downloads without copy protection that will play on any music player, including an iPod; Microsoft plans to launch a similar store next month.

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The iPod classic. Photo: Apple

So it’s especially noteworthy that mere storage capacity doesn’t seem to be the main factor driving iPod sales. This detail actually bodes well for Apple; the more it can position its device design and software interface as unique selling points, the harder it will be for competitors to dethrone the iPod.

Storage wasn’t always so passé. When the iPod first came out, Apple priced the models based on how much music they could hold. The entry-level iPod had a 5-gigabyte hard drive, and higher-capacity models were more expensive. It was generally understood in the marketplace that the higher-capacity iPods were more desirable.

That mindset began to change when Apple introduced the iPod nano. Rather than rely on a bulkier, higher-capacity hard drive, the nano used flash memory, a type of semiconductor that stores digital information. (Corrected from an earlier version. Readers remind me that the iPod mini was hard drive-based. Thanks, readers, as always.) Flash memory is smaller than a hard drive, and requires less power to run – but it also stores less data.

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For a long time, Apple didn’t seem to expect consumers to embrace flash-based players. On several occasions in the iPod’s early days, I pressed Apple worldwide product marketing chief about when the company might begin using flash storage for devices, as many of its competitors were. He typically responded that hard drives held far more music, and would do so for the foreseeable future, so there wasn’t much reason for Apple to embrace flash.

But when Apple offered the iPod nano, that mindset changed. The nano, became the bestselling iPod model, thanks to its slim, pocketable size and low price. Now the flash-based iPod touch is taking that trend to another level. Remarkably, even though the iPod touch costs more than iPods that hold more content, consumers appear to find it more desirable.

At least for now. Steve Baker, analyst for NPD Group, notes that the iPod touch has only been on sale for about a month, so it’s early to draw too many conclusions. Some of the iPod touch’s popularity might be due to its similarity to the popular iPhone. But still, demand for the touch makes sense, he said.

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“The base of users who need to upgrade their 30GB player to 160 GB drives is pretty small,” Baker said, referring to the highest-capacity hard drive-based iPod. Demand, he says, “has more to do with the touch being a different kind of product.”

Might it also have to do with the fact that downloadable video still isn’t easy to come by? While Apple has millions of songs available for purchase on iTunes, Hollywood studios have been less eager to offer their video libraries to Apple. Studio chiefs feel Apple demands too much control over how downloadable movies and TV shows are priced, and have complained that Apple’s main objective is to provide cheap content to drive iPod sales, not to create a healthy marketplace for content.

If Apple and the studios work out an agreement sometime soon, or if some other retailer begins selling iPod-friendly downloads, perhaps consumer tastes will shift back toward higher-capacity hard drive-based players.

But until then, big screens, Internet connectivity and advanced software seem to be more important selling points than raw storage capacity. And for Apple, that’s a good thing.