The New York Times and BusinessWeek are reporting today that Sun Microsystems co-founder Andy Bechtolsheim is leaving the company (for a second time) to serve as chairman and chief development officer for a startup he funded. That company, Arista, will compete with Cisco in the 10 Gigabit Ethernet (10 GbE) and cloud computing markets. Former Cisco exec Jayshree Ullal has been recruited as Arista’s CEO.
Reached for comment, a Sun spokesperson sent the following statement today:
There have been a few inaccurate articles published regarding the status of Sun co-founder, Andy Bechtolsheim. Sun can confirm that Andy will remain with Sun to continue his present involvement with the Sun Systems group in helping to drive new product architectures, including X64 servers and storage servers, and will continue to work on key strategic initiatives such as HPC. Andy will move to part-time work status and spend the remainder of his time involved in the start-up community where he worked prior to re-joining Sun in 2004.
The Times story does note that “he said he would retain a part-time advisory role at the company. ‘It’s my baby…I will always be associated with Sun’.”
Regardless of the semantics about Bechtolsheim’s work status, the move is another blow to Sun among many recently, from declining earnings to the impairment of goodwill for its StorageTek acquisition.
Although EMC executives said sales of midrange Clariion systems were strong last quarter — up 12 percent from last year – the Clariion discussion wasn’t all hearts, roses and strong margins on its earnings call. Dell accounted for less than 30 percent of Clariion sales, down from 33 percent in the prior quarter.
Wall Street analysts estimated Dell Clariion revenues for the quarter were down 26% year over year and 12% sequentially. Aaron Rakers of Wachovia pointed out that Dell now accounts for 10.4% of EMC overall revenue, down from 12.3% in the second quarter and 15.8% a year ago.
For the first time since Dell acquired iSCSI SAN vendor EqualLogic last January, EMC CEO Joe Tucci acknowledged his long-time partner’s acquistion of its own SAN platform affected Clariion sales. “We’ve probably gotten a little off track,” he said. “As Dell bought EqualLogic, we diverged more than we should’ve.” Tucci added “there’s a lot more we could and should be doing together…we’re quickly and actively working to put plans in place to make this relationship even better.”
In the meantime, Tucci noted that EMC had built up new sales channels for Clariion, which negated the impact of the decline in Dell Clariion revenues.
Rakers called the Dell revelation “disappointing as [EMC] did note that it was ‘back on track’ with Dell during its prior quarter earnings call.”
Early results are in, and they indicate no massive spending slowdown for storage last quarter but vendors are bracing for one this quarter.
EMC hit expectations for last quarter while indicating customers may be cutting back. That reflects the trend of the other vendors who reported earnings this week.
Systems vendor Compellent realized its first profitable quarter with income of $464,000 a year after going public and a quarter ahead of its goal. QLogic reported higher revenue than expected, although it would have been on the low end of its forecast if not for a one-time royalty revenue benefit. Still, its HBA sales held up reasonably well despite a poor quarter from its larger OEM partner Sun.
VMware also did better than expected, and it’s no secret that virtual server sales bode well for networked storage sales.
Although the fourth quarter is usually strong for storage sales, forecasts are conservative for this quarter. A lot of the conservatism comes from the gloomy reports from analysts and in the media almost daily as well as early signs that sales are slowing.
“We see a slight slowdown in October compared to the seasonality,” QLogic CEO H.K. Desai said during his company’s earnings conference call. “It’s supposed to be a strong month. We see some slowdown compared to what we have seen in the previous October or the first month of the quarter previously.”
VMware CFO Mark Peek said the percentage of enterprise licenses was down compared last quarter compared to the previous quarter as organizations buy only the licenses they need.
“Customers continue to proceed cautiously in their capital spending decision process,” he said. “In some instances, customers are deciding to forego larger discounts offered by enterprise license agreements and instead are choosing to buy for their immediate needs.”
Compellent CEO Phil Soran said he’s still hoping for an increase in spending among smaller shops, although Compellent’s fourth-quarter revenue guidance of $25 million called for only a modest uptick from the$24.6 million it reported from last quarter.
“I think the mid-size enterprise customer is a little more resilient,” he said. “It doesn’t mean they’re not being hit by the economic environment, but I’ve seen some numbers, forecast in storage growths and it’s been hit hard at the large accounts, the enterprise accounts and the mid-size enterprise.”
Sun is following Hewlett-Packard and IBM into the storage blade market with a disk module for the Sun Blade 6000. The disk module holds up to 1.2 TB of storage in the form of eight 73 GB or 146 GB SAS drives.
The latest product rolled out by Sun under its Open Storage brand comes three weeks after IBM rolled out a storage enclosure for its BladeCenter S and a month after HP bundled storage blades with its “Shorty” BladeSystem c3000.
Francis Lam, product manager for the Sun Blade 6000, says a storage module was planned for the 6000 from the start, and the time is right because SAS controller chips have been built into the server modules. “The plumbing has been in place,” he said.
Pricing begins at $1,595.
The storage blade release comes one day after Sun disclosed it struggled again financially last quarter, and expects to lose between $0.25 and $0.35 a share on revenues in the range of $2.950 to $3.050 billion, down from $3.219 billion in the same quarter last year. No mention of storage sales was made in Sun’s press release detailing its latest earnings miss.
Over the last few weeks, I’ve written a couple of stories about how the current global economic crisis is being projected to impact the storage market. While users say they don’t anticipate much of a change in their daily life–storage budgets are lean and adoption of products in the storage market is conservative as it is–financial analysts and storage experts see a much bigger impact for storage vendors from the collective effects of declining storage spending growth.
However, there’s one area where, if you’ll pardon the phrase, a potential silver lining has been spotted: cloud computing. One theory is that less available capital or credit for capital outlay makes the economies of scale and zero-hardware options offered by cloud vendors more attractive. But another theory is that in the current economic climate, users become more risk averse than ever, and the cloud remains a new, relatively bleeding-edge phenomenon.
Today there have been some more analyses released about the possibilities for the cloud market, one a cloud computing spending forecast from IDC and the other is an analysis of the barriers to cloud entry by Gregory Ness for Seeking Alpha.
With or without economic downturns, according to Ness, the nature of today’s network infrastructure is a hurdle to widespread cloud deployment (not to mention the bandwidth of the average data center’s connection to the wider Internet):
Certainly there will always be a business case for elements of cloud, from Google’s pre-enterprise applications to Amazon’s popular services and the powerhouse of CRM, HR and other popular cloud services. Yet there are substantial economic barriers to entry based on the nature of today’s static infrastructure.[...]Until the current network evolves into a more dynamic infrastructure, all bets are off on the payoffs of pretty much every major IT initiative on the horizon today, including cost-cutting measures that would be employed in order to shrink operating costs without shrinking the network.
Automation and control has been both a key driver and a barrier for the adoption of new technology as well as an enterprise’s ability to monetize past investments. Increasingly complex networks are requiring escalating rates of manual intervention. This dynamic will have more impact on IT spending over the next five years than the global recession, because automation is often the best answer to the productivity and expense challenge.
IDC acknowledges that the growth opportunity is “in its infancy” but says the marginal growth will be irresistible to vendors:
Of the $383 billion customers will spend this year within the five major IT segments noted above, $16.2 billion – or a mere 4% – will be consumed as cloud services. By 2012, customer spending on IT cloud services will grow almost threefold, to $42 billion.By 2012 – based on a conservative forecasting approach…customer spending on IT cloud services will grow almost threefold, to $42 billion, accounting for 9% of customer spending.
On one level, one could argue that – in spite of the all the buzz about Cloud Computing and Cloud Services – this model will not even crack 10% of IT spending four years from now. And therefore, one could reasonably ask: why all the fuss?On one level, one could argue that – in spite of the all the buzz about Cloud Computing and Cloud Services – this model will not even crack 10% of IT spending four years from now. And therefore, one could reasonably ask: why all the fuss?
One reason IT suppliers are sharpening their focus on the “cloud” model is its growth trajectory, which – at 27% CAGR – is over five times the growth rate of the traditional, on-premise IT delivery/consumption model. Spending on IT cloud services is growing at over five times the rate of traditional, on-premise IT.As noted in our recent user survey, this rapid growth is being driven by the ease and speed with which users can adopt these offerings, as well as the cloud model’s economic benefits (for users and suppliers alike) – which will have even greater resonance in the current economic crisis.
Even more striking than this high growth rate, is the contribution cloud offerings’ growth will soon make to the IT market’s overall growth. By 2012 – even at only 9% of user spending – cloud services growth will account for fully 25% of the industry’s year-over-year growth in these five major segments. In 2013, if the same growth trajectories continue, IT cloud services growth will generate about one-third of the industry’s net new growth in these segments.
It will be interesting to see how things actually play out.
FalconStor Software today issued a press release saying it will miss its previous revenue estimates for the year, due to a bad third quarter. FalconStor’s new estimate for the quarter that ended Sept. 30 is a range of between $19 million and $19.5 million, in contrast with Wall Street’s $22.78 million consensus.
FalconStor also lowered its guidance for the full-year revenue to between $85 and $87 million, as opposed to its earlier projections of $100 to $104 million. In a statement, CEO ReiJane Huai blamed the wider economy for the shortfall:
“The difficult economic conditions at the end of the third quarter resulted in many companies freezing or lowering their information technology spending, which caused our revenues for the quarter to fall short of our projections. We remain confident in the capabilities of our products. But given the continuing difficult global economic conditions, we are projecting that revenues for the fourth quarter will also be below our previous expectations.”
“They have a much smaller margin of error,” Enterprise Strategy Group analyst Brian Babineau said of FalconStor. “A couple of deals don’t get done and they miss because we are only talking about $20 million a quarter in revenue.” FalconStor declined comment on whether any particular product line or individual product had been most affected by this miss. The company will report its earnings Oct. 28.
Analysts, investors and perhaps customers will watch closely over the next few weeks when storage companies report earnings, with guidance for this quarter and next year of particular interest. In a recent BusinessWeek interview, NetApp CEO Dan Warmenhoven said his company will also miss its revenue growth projection for the year. Worries in the market about IBM due to its financing business were assuaged somewhat by the pre-announcement of a 20% earnings increase for the company and a reaffirmation of its revenue targets for the year last week.
“I think most companies would have preannounced [shortfalls] already,” Babineau said. “I do not expect any [more] third quarter pre-announcements, however, I do expect some very conservative gudiance and commentary for all IT in regards to the calendar-year fourth quarter.”
IBM spent some time last summer revamping its storage systems, with a new midrange DS5000 system and the first version of the XIV under its brand. Big Blue hasn’t been neglecting software, though. Today IBM launched an entry level version of its SAN Volume Controller (SVC) that uses its same storage virtualization software on a less expensive server. And coming soon: data deduplication with Tivoli Storage Manager (TSM).
IBM System Storage SVC Entry Edition is limited in scale (up to 60 disk drives) and runs on a System x3250 single-socket server instead of the dual-core System x3550 that the standard SVC runs on. The idea is to make it more affordable for smaller companies – the entry edition is priced per disk drive with a starting configuration costing around $35,000 for five drives. The regular SVC is priced per usable capacity, starting at $50,000 for 1 TB. Customers who buy the entry edition can convert to the standard SVC later.
“This is not an SVC Light,” said Chris Saul, marketing manager for SVC. “It does everything our existing SVC does.” That includes the thin provisioning IBM recently added. Saul said he expects thin provisioning to be attractive to SMBs. IBM also added SVC support for IBM’s XIV and DS5000, IBM’s Diligent VTL deduplication gateway, HDS Universal Storage Platform and HP XP20000/XP24000 arrays and works with Microsoft Hyper-V. The entry level SVC will be available Nov. 21.
IBM is also planning dedupe in it’s the next version of its TSM backup software, due out around December or January. “TSM will have dedupe with TSM server in the next release,” said Kelly Beavers, IBM’s director of storage software. Bearvers said dedupe will be at the TSM server layer. “The next step is data dedupe on the client side, then with Files X software for remote office,” she said.
There are some potential inferences that can be made from two moves Symantec Corp. made last week: the acquisition of MessageLabs and the launch of Veritas Cluster Server One. However, for now clear answers as to whether or not those inferences are correct are not forthcoming.
MessageLabs is partnered with Fortiva to offer email archiving SaaS, so I wondered if the acquisition might mean that Symantec will get into that kind of offering as well. SearchSecurity.com reported that MessageLabs CEO Adrian Chamberlain will be heading up a new SaaS group at Symantec, though Symantec officials also told SearchSecurity they won’t be SaaS-enabling all products. This remains an open question for now, as a Symantec spokesperson told me that product roadmaps will be decided after the acquisition closes, which might not happen until year end.
Symantec also launched VCS One, with the goal of allowing organizations to keep active farms of virtual servers running at a disaster recovery site, as well as recover tiered applications with dependencies intact. “Right now, this process is dependent on a lot of tribal knowledge in the heads of individuals who know the right order and design scripts to run this kind of recovery,” said Mark Lohmeyer, vice president and general manager of the VCS product group at Symantec.
If any of that sounds familiar, it might be beacause this past May, VMware and its storage partners launched VMware Site Recovery Manager, allowing VMware’s VirtualCenter to execute commands against storage arrays at primary and secondary sites during recoveries and enable VirtualCenter-generated metadata about virtual machines to be replicated, along with system and application data. In part, SRM is designed to help server virtualization customers automate their disaster recovery checklists, which many of them keep on paper and check off manually.
Meanwhile, Symantec has been among the most outspoken of storage vendors about friction with the server virtualization giant, and at Vision this year took VMware rival Citrix XenServer under its wing and into its product line, claiming the resultant Veritas Virtual Infrastructure product will be a better approach than VMware’s Virtual Machine File System (VMFS) for server virtualization in large environments.
However, Symantec positions VCS One as complementary to SRM, rather than competitive with it. A Symantec spokesperson emailed me the following statement when I asked about it late last week:
VCS One is a complementary solution for VMware environments that can help improve overall availability of the environment in production, for mission-critical apps, by taking an application-centric approach to HA/DR. And, we work closely with VMware to integrate with, and leverage VMware technologies such as Vmotion (for reducing planned downtime) and DRS today, and we’re looking at how we can also integrate with SRM in the future. Finally, our solution is ideal for heterogeneous physical and virtual environments, that includes VMware as well as other platforms (which is the case in virtually every data center).
It’s important to note, though, that VCS One only supports VMware virtual machines at present, which might make the kind of competitive statements made earlier this year a bit awkward at this stage. Lohmeyer says VCS One was under development before Xen came on the scene. “[Support for Xen] will be in our very next release,” he said. Once that happens, I wonder if Symantec’s messaging might change somewhat.
Google’s Message Discovery, based on its 2007 acquisition of email archiving services vendor Postini, has a new option for archiving messages for up to 10 years for a flat fee of $45 per user per year. According to the Official Google Enterprise Blog, “currently there is a lot of confusion in the marketplace about what kind of archiving solutions organizations should pursue, and that confusion is discouraging companies from taking this necessary step to protect their business.” Hence the new deal.
I wondered what “confusion” meant there, exactly, and how lowering the price of a technology would alleviate confusion about it. Google spokesperson Bill Kee elaborated in an email:
“There is often confusion among about how much data to keep and how much data to delete. Sometimes, these decisions are made on the basis of legal and business priorities. Often, however, the decision to keep or dispose of email is governed by storage limitations, server performance issues, or cost considerations. By offering a flat $45 model, regardless of how much you store or for how long, our goal is to help customers make retention decisions that align with legal and business priorities, rather than having constraints imposed by technology and cost limitations.”
According to the blog, the company will continue to offer a one-year retention period for the existing fee of $25 per user per year. Both packages also include spam and virus filtering, policy management tools and, of course, search.
Google’s not the first email archiving SaaS vendor to drop prices. Just before Dell bought it last year, MessageOne launched a new rapid-archiving service that can be deployed quickly and costs $1 per user per month — about half the price of Google’s original offering.
Both companies have made their own statements about where those pricing changes come from, but I wonder if there wasn’t also resistance to the companies’ initial pricing from users. A recent Forrester Research report also attributed relatively slow adoption of email archiving SaaS to network latency in accessing off-site archived messages and searching them for e-Discovery.
Brocade apparently became the first storage company to see positive effects of last week’s financial bailout when it received $1.1 billion loan to help finance its $3 billion acquisition of Foundry Networks.
Brocade executives spent hours extolling the virtues of Foundry and detailing how its expansion into Ethernet networking would help the FC switch vendor at its analyst day last month, yet were grilled during the Q&A session about how they would fund the deal. Analysts worried that funding would be hard to come by with banks faltering.
Investors worried, too. Foundry shares closed at $16.26 Tuesday, below the $18.50 in cash per share that Brocade would pay in the acquisition. That means investors doubted the deal would go down.
Brocade intends to raise another $400,000 in financing, probably from a high-yield bond or convertible debt offering. Besides securing $400,000, the other remaining obstacle to a deal is the Foundry shareholder vote scheduled for Oct. 24.
The loan from Banc of America Securities, HSBC Bank, and Morgan Stanley Senior Funding seems to have increased the confidence of investors and analysts. Foundry shares opened and closed at $16.70 today, finishing up on a day when the market was down while falling short of Brocade’s purchase price.
“We believe Brocade should be able to close the deal shortly after Oct. 24th,” analyst Kaushik Roy of wrote today in a note to clients, after acknowledging “some investors were worried if Brocade could secure the $1.5B financing for the acquisition.”
Acquiring Foundry would enable Brocade to compete on a second front against FC switch rival Cisco at a time when 10-Gig Ethernet, data center Ethernet, and Fibre Channel over Ethernet (FCoE) make Ethernet more valuable in storage and in the data center.