By Tom Foremski for SiliconValleyWatcher

I had an interesting briefing by Maxtor and its stealth software partner Fabrik on Tuesday. And I really appreciated them sending a car service to whisk me off 1 1/2 miles to the Hilton in downtown SF.

What was interesting is how Maxtor, one of the top hard drive companies (currently being acquired by Seagate Technology) is making its bid for the digital home. It is doing it through a strategy that leverages its brand and also moves it up the value stack.

I used to cover the hard drive industry when I was at the Financial Times. [It was a thrill to meet the legendary Al Shugart, a couple of years ago!]

In the late 1980s the hard drive industry used to consist of more than 40 companies and Silicon Valley was ground zero for this industry. This is also the region where IBM developed the first hard drive:

From Wikipedia:

The first hard disk drive was the IBM 350 Disk File, invented by Reynold Johnson and introduced in 1955 with the IBM 305 computer. This drive had fifty 24 inch platters, with a total capacity of five million characters. A single head was used for access to all the platters, making the average access time very slow.

The history of the hard drive industry followed the same pattern of consolidation that has characterized other tech industry sectors. Wall Street provided a lot of encouragement for the M&A, not just to fuel its investment banking business but also to promote the carrot that greater consolidation would lead to better profits.

The problem with the hard drive industry was that it continually got ahead of itself. The race to pile more bits per square measure was brutal. The technology breakthroughs were piling up and continually disrupting the industry. The hard drive industry, year-after-year produced faster, higher capacity hard drives for a lot less money. The performance gains were always greater than Moore's Law.

The hard drive companies couldn't make money in most years and were in this constant battle to undercut each other, either with technology or price cuts. But Wall Street urged even greater consolidation and the argument was plain: fewer players would mean more control over pricing. But it didn't happen, Wall Street analysts, perplexed, started to refer to the "profitless prosperity" of the hard drive industry.

[Please see SVW: Seagate and hard drive sector hit hard times again—is this the reward for sector consolidation?]

Silverlake Partners, the savvy Silicon Valley investment group acquired Seagate as part of a complex deal with Veritas and set to work on remaking the company--with some limited success.

However, it has been a tough, tough market, and it comes during a time when we have a data explosion of enormous magnitude. We save every bit of data multiple times and we generate a galaxy of data through our storage of photos, digital home movies and enterprise transactional data to...everything else.

So, back to Maxtor. It realized that it needed to move up the stack and add value to its drive. EMC, for example, was buying up low-priced hard drives, sticking them in a cabinet--wrapping some software around it--and getting 60 percent plus margins on the enterprise storage systems it was selling.

Maxtor has been following a similar strategy and has built up its brands such as its successful "one-touch" drive line. One-touch and it backs up your PC. Brilliantly simple and obvious.

Now, it wants to go further--it wants to be the media server in your home, it wants a piece of the digital home. And it might just get a decent sized chunk with its unique strategy.

A lot of the product introductions are under embargo--but you'll see them from April 10 onwards into the summer. What isn't under embargo is its business strategy which for me, is where the juice is. Maxtor has teamed up startup Fabrik, a software and data hosting company for its "Project Fusion" which is a way for people to manage, organize, store and share their media: photos, movies, music, etc.

Now, you might say, we've seen this, and heard this pitch before and there are a ton of companies that seem to say similar things, and want a similar slice of the future digital home entertainment system. And you are right.

But Maxtor and Fabrik are coming at it in a different way. They believe that the data is where the value lies and therefore they can provide a software application layer along with their hard drives, that can coexist, and support, the user interface applications for the digital home from Microsoft, Apple, Logitech, and many others.

It is a crafty strategy because the software interface is AJAX based so you can access and manage and organize your media from any computer with a web browser. Which also means that while you might be a "server hugger" and want your media files on a terabyte Maxtor data storage system sitting at home--you could also choose to store it in the cloud somewhere. The approach accommodates both types of users and Maxtor plays in both realms.

The software from Fabrik offers tagging to help organize, it produces multiple resolutions of photos automatically, and it has many other useful capabilities. But what it really is, is a desktop user interface for media file management that sits on the web. This means that Maxtor and Fabrik have the opportunity to establish a file management system that is web based rather than client-based as is Windows or Mac OSX, (which are also file management systems.)

It's a good strategy because you can still run whatever user interface/application you want to play on your clients. So in that way, Maxtor/Fabrik doesn't have to go toe-to-toe with the big players already in the home and on your desktop.

You'll only be able to get the drives bundled with Fabrik, or the Fabrik software by itself--through Maxtor. It's a variation of the Apple Computer/iTunes model...and you can bet there will be opportunities for added services.

Keep an eye on this Maxtor initiative led by ex-Apple exec Mike Williams, vice president and general manager, Maxtor Branded Products--I will certainly be watching. And take a look at Fabrik and its software here: http://www.fabrikinc.com/index.php.