The stock market was alive with rumors that Seagate might be bought by an unnamed Chinese company, as reported in the New York Times, among others. This comes after a week of insider whispers about a possible tieup between Seagate and memory-makers, Micron or SanDisk, itself a Seagate spin-off. It seems that the hot disk drive and flash memory markets are shaking as sales heat up and margins thin out. Note that this is far from a done-deal. Rather, Seagate CEO, William Watkins, was merely noting in an interview that there was such an inquiry.

To my eyes, a Seagate buy-out would be little different from the sale of IBM’s disk drive operations to Hitachi back in 2002 or their sale of the PC group to Lenovo two years later. Seagate is a component maker, and although it is a critical piece of the storage industry it is not really a strategic entity. Certainly, the company’s contributions to standards like SATA, SAS, and (yes) hybrid drives are worthwhile, but apart from evault, the company contributes little to the value-added services landscape.

Still, if a buy-out softened scrappy Seagate I would miss the healthy contribution between them, Western Digital, Hitachi, and the other disk vendors. And it would be an end of an era, with Alan Shugart’s old company going the way of MG Rover and the rest.

Yes, folks, China is rising in storage industry. A while back, my good friend Marc Staimer suggested that Huawei might become the next great storage vendor. Well, Huawei’s joint venture with 3Com has now become 3Com’s unit in China, H3C. That’s right, Bob Metcalfe’s old company bought Huawei out of the venture this year in an attempt to regain the number two market position in networking. And since H3C has long had a strong interest in the storage side of the network, we might see 3Com attack the low end of the storage industry next year!

H3C already has a long list of products, most based on in-house hardware and OEM software. On the storage side, the company makes an iSCSI storage array platform dubbed “Neocean”. This storage platform, selling strongly in China, is alleged to leverage technology licensed from FalconStor (on the low-end IX1000), Intransa (on the bigger IX5000), as well as iVivity and Xyratex. OEM storage developer Ciprico today announced that it will be working with H3C on the next generation. H3C also sells a WAFS accelerator leveraging Expand Networks software. All of these should be coming to the United States next year.

Huawei itself is also getting back into the storage market in the form of a joint venture with Symantec, creatively called Huawei-Symantec. This company is set to be coming out with a line of network devices with Veritas-based software built in. We’re hearing about virus scanning and content indexing appliances, as well as NAS and SAN arrays which will include storage foundation software from Symantec right out of the box.

Who knows what’s next from Huawei? I’d guess expanded services, more resellers in the West, and more OEM deals to create bigger systems. In a few years, they might give Hitachi and EMC trouble in the enterprise market, especially when big server vendors like Sun, SGI, Dell, and HP start rethinking their OEM strategies…