They're not dealing with such large directories, but here are a couple threads that might be relevant: I wonder if the best first step might be something like this on the command line: 
for i in {a..z}
    do mkdir $i
    mv $i* $i/
done

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In reply to Re: Finding and sorting files in massive file directory by frozenwithjoy
in thread Finding and sorting files in massive file directory by CColin

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