Judging by NetApp’s results, the spending slowdown storage vendors feared this year hit hard in January.
Because NetApp’s last quarter ended Jan. 23 instead of at the end of December, it became the first storage vendor to report earnings that included results from early 2009. And those results were ugly — NetApp Wednesday night said its revenues of $874 million were down year-over-year and sequentially, it lost $75 million last quarter, and executives refused to give guidance for coming quarters.
The loss was due mainly to $128 million payment to the General Services Administration (GSA) over NetApp discount policies to government agencies from 1995-2005. But revenue was down 1% from last year and 4% from the previous quarter, and NetApp executives say that’s because their largest customers stopped spending in January.
“We were tracking pretty good through November and December,” CEO Dan Warmenhoven said. “I think the focus was on the first three weeks in January. That is where things kind of really stalled out.”
For the most part, storage vendors reported decent results for last quarter but were wary of what 2009 might bring. Warmenhoven says despite the slip, he doesn’t think NetApp lost market share. Instead, customers just stopped buying any storage. When an analyst on NetApp’s earnings call suggested NetApp lost market share, Warmenhoven said, “My guess is when you see the other storage vendors report on their first calendar quarter which includes January, you may come to a different conclusion.”
NetApp president Tom Georgens said there were shifts in buying trends last quarter. NetApp’s 50 largest accounts were most impacted by the economy. Also, sales tended to turn more toward SAN than NAS than in the past. And while FAS2000 low end and midrange FAS3000 system revenue increased from last year, high-end FAS6000 sales declined.
“January is always tough for IT spending, and this year it’s awful,” said Enterprise Strategy Group analyst Brian Babineau, who suggests NetApp might have to diversify its product portfolio to help customers deal with data growth while trimming budgets. “Just selling storage and data management is tough,” he said. “They could get into archiving, for example. They need more quivers in the bow.”
NetApp cut loose a few products last quarter, discontinuing its StoreVault SMB storage system and SnapMirror for Open Systems replication software. Warmenhoven said StoreVault’s revenue never reached $5 million for a quarter and SnapMirror for Open systems failed to hit $1 million in a quarter.
Along with cutting those products, NetApp laid off around 540 employees – 6% of its workforce – this week. In a sign of the times, CFO Steve Gomo opened the earnings call by saying, “The financial highlight of our quarter was strong expense management.”
Although the Senate and House are still hammering out details of the economic stimulus package, the current plan includes provisions that would bring funding to the storage and IT industries.
Broadband networking investment is one big issue addressed by the stimulus. According to a whitepaper posted by the Information Technology and Innovation Foundation (ITIF), “ITIF estimates that spurring an additional investment of $30 billion in America’s IT network infrastructure in 2009 will create approximately 949,000 U.S. jobs …We also estimate that approximately 525,000 of these jobs will be in small businesses [fewer than 500 employees].” The $30 billion referred to includes “spurring or supporting” $10 billion investment in broadband networks over one year.
Storage industry experts who weighed in on Obama’s technology investment plans around the New Year also supported such investments, and respondents to a Web poll identified broadband investment and neutrality as the most important technological issue for the new President’s administration.
Next up on the list are new plans for “smart” sensors on public infrastructure like electrical grids. Every one of those sensors generates data, and IT vendors, most recently IBM, are eagerly anticipating the deluge of infrastructure requirements this will eventually bring about. According to an IBM press release announcing its new dynamic infrastructure and cloud computing initiatives yesterday, the world is now generating 15 PB of new data per day. That’s a lot of disk drives, and at least some job security for those tasked with keeping them spinning.
Perhaps the heftiest chunk of spending, though, is the $20 billion laid aside as part of the plan for digitizing healthcare records. States like Massachusetts have also already passed laws requiring electronic medical records. Something’s got to give there, too, according to industry experts, some of whom, like Compellent Technologies Inc.’s vice president of marketing Bruce Kornfeld, told me they’ve recently gotten a patient’s-eye view of the deficits in how some healthcare records are handled when two of his physicians faxed, in low-quality black and white, some images that had originally been taken in high-res technicolor.
In addition to these items, Seagate’s official blog points out some more tech stimulus in the Obama plan, including “Direct IT investments – government modernization, like a $400 million computer for the Social Security Administration…[and] Direct storage purchases by stimulated consumers – home storage is becoming a mainstream consumer electronics category.”
Meanwhile, even as dismal jobs reports come rolling in from the wider economy, IT industry analysts have suggested that the picture in IT is looking less grim. According to a report released by Foote Partners last week, “IT jobs continue to show strong counter movement against national jobs trends.” Foote’s report found “growth in pay for skills in Architecture, Project Management, IT Security, Database, Networking, Communications, and Methodology and Process skills and certifications over the past three months.” Foote also cited numbers recently released by the Bureau of Labor Statistics (BLS) which show 9,000 jobs were added in October and November in the Management and Technical Consulting Services employment category, and another 11,000 were added in January.
Even though it’s early in the process, some members of the storage blogosphere are already starting to feel the effects of federal spending on IT. “This week the federal government bailed me and my little almost-a-real-company out,” wrote Jesse Gilleland in a post on his blog, SanGod.com, titled A bailout for little old me?
Several years ago I worked for a particular federal client. Data migration, switch migration, cable remediation, and a number of other projects. Apparently it went well because for years they’ve been trying to get me back in and it just came down the wire that I’ve just been awarded a 1-year contract to go in as their new storage admin. So the company is saved, or at least has been granted a one-year stay of execution.
NetApp Inc. was at the center of some buzz over the weekend among publications that cover corporate financials, after a column in Barron’s touched off speculation on Wall St. that NetApp might be about to report encouraging earnings. Amid that speculation was buzz that the company would also be laying off workers to maintain its profit margins as the economy continues to spiral downward.
NetApp PR director Jodi Bauman today confirmed the company plans to reduce its global workforce by 6% with the following statement: “”Today NetApp took a number of steps to better align our resources with the business outlook. This restructuring includes a reduction of about 6% of the global workforce, as well as the reallocation of other resources to initiatives designed to increase operating efficiency and build a foundation for additional market share gains.”
The company outlined a strategy at its Analyst Day last March that included adding to its sales force to better penetrate the enterprise market. It remains unclear how the planned cuts will affect that strategy. NetApp will hold its quarterly earnings call on Wednesday and may offer additional color then.
Startup Cleversafe Inc. is preparing to launch a new online storage service based on its dsNet product, with data centers on each of the three major power grids in the U.S.
Since coming out of stealth two years ago, Cleversafe’s goal has been to deliver dsNet as a service. So far, the company has sold a few systems to service providers in the company’s home area of Chicago, but it has yet to realize its original vision of a “Storage Internet” in which data is distributed geographically.
The new service is currently in beta testing and four data center locations have been built out, three in Chicago and one in Omaha, Nebraska. By the end of March, Cleversafe officials say they expect to double that number of data centers and extend the dsNet service across U.S. power grids in the West, East and Texas interconnect. Each power grid will have two data centers, and each data center would utilize multiple internet service providers for redundancy.
Cleversafe’s SliceStor storage nodes can break up a single file into up to 11 pieces for redundancy. The Cleversafe hash appended to each slice for reconstruction also provides built-in encryption. The company is selling dsNet systems into end user and service provider accounts with customizable fault tolerance, but the dsNet service would have 8-6 or 8-5 redundancy, meaning eight slices across each data center with either five or six nodes required to reconstruct files.
dsNet might eventually be able to act as a content delivery network (CDN) as well as a storage service, according to director of customer solutions Alan Holmes, so that files can be delivered without requiring a separate Accesser node or client, as is required today. “We have a technology differentiator already built in to dsNet,” Holmes said. “Because of the way we reconstruct files, we already query the network for the nearest server many times per second.”
The Museum of Broadcast Communications (MBC) is an early adopter of the service, thanks to a chance online connection between the museum’s website and Cleversafe founder Chris Gladwin. The museum, also a brick-and-mortar institution in Chicago since the late 1980’s, was struggling to host digital files for download on its website, and sent out a letter to members announcing the discontinuation of that service two years ago. Gladwin received that notification, according to MBC founder and president Bruce DuMont, and got in contact with the museum to offer the dsNet service.
Neither DuMont or Cleversafe would disclose the specific financial details of Cleversafe’s relationship with MBC, but DuMont said MBC had agreed to partner with Cleversafe for its online content distribution for 10 years. “Right now, we’re in year two,” he said.
Here are some stories you may have missed this week:
As always, you can find the latest storage news, trends and analysis at http://searchstorage.com/news
EMC Corp. rolled out a 4 TB home NAS box for the Iomega StorCenter line today, and an EMC official told Storage Soup about other software and hardware updates to come for EMC’s SMB, SOHO and consumer products later this year.
The Iomega StorCenter Pro ix4-100 is an upmarket successor to the two-drive ix2 consumer product. It also has a predecessor within Iomega’s product lines, the Iomega 150d NAS, launched prior to EMC’s acquisition of Iomega last year. The ix4 adds more enterprise-level software features such as security and built-in data backup with the addition of EMC’s LifeLine consumer storage software to the 150d’s hardware. EMC’s Mozy online backup service and Retrospect local backup software are also included, along with automatically updated backup folders within the device.
Marc Tanguay, GM of the StorCenter product line, said the four-bay ix4 is aimed at small businesses of around 25 employees rather than the home NAS market. It will come in 2 TB and 4 TB capacities, the latter double the capacity for the ix2. As with the ix2, the LifeLine software will offer features like Windows Active Directory support, email and SNMP system status notifications, print server capabilities and Bluetooth compatibility. The ix4 will support four printers (the ix2 supports two), and the ability to plug in an Axis security camera and stream directly to the box without a PC as an operator.
Tanguay said customers who purchase the ix4 now will get a free upgrade at the end of the first quarter to the next version of LifeLine. That version will include remote administrative access, which will be free for the first year and then cost around $9.95 per year, according to Tanguay. Remote access will let customers upload and download files to the box from a remote location, and an admin can manage it from a Web browser. Also coming in the next version of Lifeline is native Apple File Protocol support. StorCenter currently supports Mac and Apple computers, but “it’s easier to share files and networks with native AFP support,” Tanguay said.
The next version will also offer folder quotas and automated torrent support. Consumers are the most frequent users of torrents to share media files, but Tanguay said small businesses are increasingly using them to exchange data as well. The new version of LifeLine will offer the ability to run the torrent downloader on the shared storage box without requiring a separate computer or process. “Today if a worker is moving from office to home, they lose the continuity of the download, and they have to use their PC’s CPU power for large files,” Tanguay said. Finally, the next version of LifeLine will also make the StorCenter a full media server, including native support for iTunes.
The StorCenter hardware will also be upgraded in the second quarter when EMC will support 2 TB SATA drives from Seagate and Western Digital, and release a new 8 TB StorCenter model.
The 2TB StorCenter Pro ix4-100 NAS Server is now available for $799.95. The 4TB StorCenter Pro ix4-100 NAS Server will be available later this month for $1,299.95.
SSD maker Fusion-io announced today that Apple founder Steve Wozniak has joined it as Chief Scientist. According to a Fusion-io press release, “Wozniak will act as a key technical advisor to the Fusion-io research and development group. He will also work closely with the executive team of Fusion-io in formulating a company strategy that will accelerate the expansion of major global accounts.”
Wozniak is a big name for an emerging company like Fusion-io to land. Sometimes known as Apple’s “other Steve,” Wozniak is credited with significant engineering contributions to the personal computer revolution of the 1970’s.
Interestingly, Wozniak is not the only former Apple exec who has found his way to the storage–and specifically, solid-state storage–industry. Michael Cornwell, now heading up NAND business development for Sun Microsystems, was previously the manager of storage engineering for the iPod division of Apple.
Fusion-io came out of stealth last March with a PCIe flash card designed to give off-the-shelf servers SAN-like performance. Fusion-io calls its product the ioDrive, and it’s NAND-based storage that comes in 80 Gbyte, 160 Gbyte and 320 Gbyte configurations. The ioDrive fits in a standard PCI express slot, shows up to an operating system as traditional storage and can be enabled as virtual swap space. IBM announced last fall that it will be partnering with Fusion-io to add ioDrives to its servers, which may include the servers that run its SAN Volume Controller (SVC) network-based storage virtualization product.
The economy took a bite out of CommVault last quarter, as the backup software vendor recorded lower sales than expected.
CommVault’s $60.1 million in revenue was below its guidance of $63 million to $65 million, and actually dropped 5% from the previous quarter — unusual because the fourth quarter of the year is when the most money is spent on storage. CommVault also reduced its forecast for this quarter to approximately $63 million to $67 million, down from previous guidance of $69 million to $72 million.
“We are certainly not happy with these results,” CommVault CEO Bob Hammer said on his company’s earnings call Wednesday night.
Hammer said CommVault’s win rate against its competitors hasn’t dropped, but larger deals are taking longer to get approved because of budget constraints. The company has increased its sales force to try and get things moving, and is counting on a boost from Simpana 8 released last week. Simpana 8 adds block-level data deduplication for data on disk and tape, and Hammer said CommVault released it ahead of schedule.
Still, CommVault’s forecast shows it might take awhile for Simpana sales to take off.
“We’re realistic about the state of the global economy,” Hammer said. “This uncertainty is why we have revised our guidance down. We’re dealing with an environment none of us has seen before.”
Riverbed Technology won’t be deduplicating primary data this year as planned.
The scheduled launch of its Atlas device has been delayed from this year into 2010, Riverbed CEO Jerry Kennelly disclosed today on the WAN optimization vendors’ earnings report conference call.
Riverbed did a round of pre-briefings for Atlas last September when it began alpha testing, forecasting its release this year. But Kennelly said today that Atlas will require adjustments before it is ready to bring to market. “We’ve had three months of alpha testing,” he said. “We’ve seen that our original approach can be better addressed to meet customer needs, so we will be delaying shipments.”
Riverbed’s SVP of marketing Eric Wolford said the changes will make Atlas easier to deploy and manage. “We’re disappointed in the delay to market, but we learned a lot from customers and found changes would be necessary,” he said. Wolford says the adjustments may mean Atlas can be used without Riverbed’s flagship Steelhead WAN appliances.
Kennelly said the original plans was to launch what he today called a “bare-bones release” this year followed by a more robust product in late 2010. Now he said there will be one rollout instead of two, although he would not say when in 2010 that would happen.
“Although we hate to announce a delay, we think it’s smarter for us and we’ll get more money earlier,” he said. We won’t be trying to shoot bullets in the economic market in 2009.”
The rest of the news was good on Riverbed’s call. Its fourth-quarter revenue of $92.2 million increased 21% over last year despite the down economy, and executives forecast a 14% to 18% year-over-year increase in revenue ($83 million to $86 million) this quarter. Riverbed also said today EMC qualified Steelhead appliances to work with EMC’s SRDF/Asynchronous replication software for its Symmetrix enterprise storage systems.
Wolford said the qualification was “a prerequisite” to getting Steelhead boxes installed by shops replicating data between Symmetrix systems in multiple sites. He said there were about 30 to 40 potential customers holding up deals pending qualification.
NetApp founder and current “Chief Philosophy Officer” has been on a media tour this month following the publication of his book about NetApp’s rise from startup to billion-dollar company, How to Castrate a Bull.
And yes, your first question–about that title and what it has to do with storage technology–was my first question as welll. Along the way, we also discuss NetApp’s rebranding last year, its positioning for the low end market, the time-honored SAN/NAS debate, and storage trends for the future.