Storage vendors look forward to the fourth quarter of every year because customers need to spend the rest of their annual budget, so they buy a lot of storage products. At this time of year you hear storage CEOs gleefully refer to “budget flush,” and the fourth quarter is almost always their top revenue period.
But this year that flush you hear may be their business going down the toilet. There has been a trend of CEOs from large tech companies warning that large enterprises and particularly financial services firms are spending less, and this could spill over to the rest of the business world.
Cisco, Symantec and IBM expressed those sentiments during their earnings reports over the past month or so. But while those companies sell storage, it’s not their main business. Storage is Network Appliance’s sole business, however, and CEO Dan Warmenhoven was no more optimistic during NetApp’s conference call Wednesday night.
Although NetApp had good results last quarter and gave a sunny forecast for this quarter, Warmenhoven pointed to a few ominous signs: business in North America was slow, outside of federal government. Revenues from NetApp’s 22 largest customers fell 4% over the last year. And he is worried that the problems with U.S. financial services firms could spread to the U.K., and other U.S. industries.
“I don’t see any pattern other than the financial services meltdown, and I would encourage all of you who are part of the financial services – especially broker-dealer organizations-to please keep that among yourself,” he told financial analysts on the call. “Once you start exporting that set of problems to the rest of the economy, everybody is going to go in the tank.”
Warmenhoven’s take on the economy was gloomier than EMC’s Joe Tucci’s comments last month when he said sales to financial services were “all right” but “nothing to write home about.”
But storage vendors’ gloom can be good news for customers looking to buy. NetApp execs spoke of “selective pricing” and pricing bundles on their conference call. They refused to get specific when analysts tried to pin them down, but it sounds like this could be a good time for a discount.