A bear economy and drenching rainstorms raged on outside the Orange County Convention Center during EMC world this week. Inside, though, there were lively conversations in the hallways of the sprawling convention center, most looking forward to the future despite this year’s fiscal headwinds.
EMC to add cloud options for Networker, Avamar and RecoverPoint
One more EMC storage product roadmap nugget before we conclude our coverage of the show – senior vice president of storage software Mark Sorenson said Tuesday afternoon that EMC is planning cloud integration for at least three of its backup and replication software products: NetWorker, Avamar and RecoverPoint.
Sorenson said he expects enterprise customers will want a hybrid approach to storing data in the cloud, with some data left on-site. NetWorker will offer backup to EMC’s cloud data center as a media option. Customers without their own DR site will be able to replicate Avamar Data Stores or storage arrays using RecoverPoint to the cloud as a secondary data center. The NetWorker and Avamar integrations will come first, with RecoverPoint integration expected next year.
EMC eyeing Axxana?
Speaking of RecoverPoint, startup Axxana demonstrated its Phoenix DR appliance with RecoverPoint integration on the show floor. Axxana describes its product as a “black box” resistant to fire, earthquake, power failures and flood. It performs replication using cellular signals.
It intrigued me when Sorenson, unprompted, pointed to Axxana among all the others on the show floor. He also said EMC has already made a $1 million investment in the Israel-based company. He wouldn’t say anything about whether an acquisition is likely, of course, but it’ll be worth watching out for.
EMC product convergence, revisited
For a few years now, I’ve been harboring a sneaking suspicion about EMC’s hardware products. Ever since I saw an executive at a customer event talk about a unified backup and archiving appliance, I’ve been noticing more and more similarities among EMC’s other products as well. There are the common disk array enclosures (DAE) between Symmetrix, Clariion and Atmos; the disclosure here at the show that the fully automated storage tiering (FAST) feature already added to Celerra and Symm will be ported to Clariion by the end of this year; the use of the same Intel processors within Clariion and Symmetrix V-Max.
Because of these developments, it’s been easy to imagine future arrays that would work like the fabled unified backup appliance – standardized commodity hardware that’s given personality by software. I’m not the only one who’s gotten that impression, either.
But if that’s EMC’s ultimate strategy, they spent some time at this show trying to steer people off that trail. Joe Tucci said in a press Q&A Monday that while Clariion and Symmetrix will be able to “talk to each other” sometime next year, and despite the common processors, the two remain distinctly different in hardware as well as software. Even though they have the same kind of processor, they have different quantities of processors inside the system. In the midrange Clariion system, dual controllers mean 50% performance degradation if one fails; with more “engines” in the Symmetrix, it can take more of a licking and keep on ticking.
And what ever happened to that unified backup appliance? Back in Sept. 2007, the timeframe set for the release of the product was within 12 to 24 months. I asked an EMC spokesperson about it, and received this statement in return:
We don’t have plans for a combined backup and archive appliance.
Since [the] presentation [in 2007] we have delivered Avamar appliances and continue to deliver Disk Library appliances for backup. We also continue to provide Centera as our primary platform for archive.
Integrated management is central to EMC’s data protection strategy for its customers and we’ve already executed off that strategy with a number of our announcements including those announced today. Much has changed over the last two years around next-generation infrastructures and based on the feedback we’ve received from our customers, we feel we are making the right integrations to help our customers reduce complexity, increase storage efficiency and cut costs.
Now that I’ve seen V-Max and Atmos, I can understand how my guesses at the future of EMC hardware were close, but I don’t expect full convergence as described with the backup and archive appliance.
VMware, Cisco, EMC host press panel
EMC’s Chuck Hollis, Cisco’s Ed Bugnion and VMware’s Parag Patal held a panel discussion with press Tuesday morning to emphasize the coziness of what they’re calling the VCE alliance.
Given the disconnect between EMC’s rhapsodizing about an automated virtual future and the inherent conservatism of the storage audience, I asked the panelists when they thought this “new paradigm” they’re talking about would come to fruition.
“I still talk to some people who see iSCSI as newfangled,” Hollis said. “We won’t see majority adoption for many, many years.”
Server virtualization, which lays the groundwork for the new virtual data center we heard so much about at the show, “has already passed its tipping point,” Patal pointed out.
Cisco talks FCoE adoption
Also on the adoption-trends front, I had a pretty interesting conversation over lunch Tuesday with Bill Marozas, senior manager of business development and partner management in the data center unit for Cisco. We were talking about how the economic downturn might affect adoption for FCoE, because financial services firms were seen as the most likely early adopters and that sector is struggling. Marozas said this would probably impact adoption, but that many companies are already “planning for the upturn.”
The problem, I said, is that any upturn in our economy will probably involve fundamental changes to who and what drives it – we might see overall economic revitalization, but in sectors like Web 2.0 rather than financial services. I don’t think financial services will return to where they were earlier this decade at all, after the consolidation or collapse of so many firms in the last year.
The most likely place for FCoE to find a home given the state of the financial services industry is probably in either the healthcare or energy sector, both of which are undergoing massive digitization efforts right now.
But after the economy, there are also plenty of questions to be answered about the technology. It needs to be more clearly explained, for example, exactly how Cisco’s MDS FC director switches — which Marozas said will remain available even as Cisco pushes its Nexus switches into the market — fit into the FCoE picture. And if you’re keeping your FC director while adding new top-of-rack switches for FCoE, where do the infrastructure savings and consolidation come from? Stay tuned for more follow-up here.
Attendance down, economy to blame
According to CEO Joe Tucci’s keynote, there were 9,000 total attendees – including EMC staff, partners, press and analysts as well as end users – at EMC World 2008. This year EMC claimed more than 7,000 attendees. A decline, to be sure, and I spoke with several users prior to the show who had attended in previous years but were sitting this one out because of travel budget restrictions. However, the show seemed livelier and much bigger than Storage Networking World, also held in Orlando last month. The fact that the show still went on was a victory in the current climate; competitors NetApp and Symantec both called off their user conferences earlier this year.
Complete EMC World 2009 coverage.
The CEO duo of EMC’s empire, Joe Tucci of EMC and Paul Maritz of VMware, did plenty of talking at EMC World today, with a keynote apiece and a press Q&A session this afternoon.
The two addressed hot topics including coopetition with Oracle, potential future acquisitions and the high-profile departure of former Storage Division head David Donatelli for Hewlett-Packard.
Both CEOs downplayed the impact of Oracle Corp.’s recent acquisitions of Sun Microsystems and server virtualization player Virtual Iron. The deals will bring Sun into greater competition with EMC and VMware. “There are several companies like Oracle developing rich software stacks right now, including us,” Tucci said, pointing out software such as Java and MySQL was most likely the main impetus for the Sun deal. “With that came a hardware business, but I don’t think that will really change the landscape [in the storage market] significantly.”
Maritz said Virtual Iron’s management tools for virtualization “were state of the art two to three years ago, but they’ve fallen behind. Oracle is trying to come from behind and pick up crumbs along the way to improve their position, but we believe vSphere is at least a generation ahead of them.”
With EMC sitting on a reported $9.8 billion in cash reserves, the question of acquisitions came up. Tucci mostly deflected the question, but said that if EMC does acquire more companies, it will be to strengthen offerings in areas where the company already plays, rather than getting into new markets.
Tucci was also asked if EMC might itself be a target for acquisition (Cisco/EMC merger rumors have popped up again in recent months). Tucci replied that EMC is “certainly not for sale. We’re obligated to do what’s in the best interests of shareholders, but [selling the company] is not our core strategy.”
As for Donatelli — whose move to HP is being held up in a legal battle — Tucci didn’t make too much of his departure. “It happens in this industry. People get poached,” he said. “He’s a good leader, but the technologists who designed our products are all still here today. We’ll be just fine.”
Clouds coming together?
Both CEOs also emphasized their converging vision for the virtual data center and the cloud, which Tucci called “first cousins” – similar data centers at each end of the wire that VMware and EMC envision being managed as a federated whole. Both sides would use VMware as a middleware layer to let apps float between inside-the-firewall and outside-the-firewall infrastructures for enterprises.
This is somewhat similar to today’s news about EMC’s new Atmos onLine service, which would use applications linked through Atmos APIs to federate data between on-premise and cloud-based storage.
Things got a little confusing, though, between competing claims of perfect alignment with VMware between Atmos and the new Symmetrix V-Max system. Atmos has a file/object interface making it more suitable to unstructured data, and V-Max is geared more toward transaction-heavy workloads, Tucci clarified. He said he expects V-Max deployments going forward to use sold state as a rule. “The norm with V-Max should be that SSDs will be in the system – it will be unusual to see one without it,” he said. In his keynote, Tucci also said he expects Flash to dominate solid-state storage, with technologies like phase-change memory much further down the road.
Since the launch of VMware vSphere, EMC and VMware have pushed customers to virtualize tier 1 applications, which in the past have been left out of virtualization because of hypervisor performance penalties. Maritz today touted a new maximum performance benchmark for vSphere of 330,000 IOPS on a paravirtualized VM on a 64-core cluster of servers attached to an array of Flash drives (no details on how many Flash drives and what type they were). This is compared to VMware Virtual Infrastructure 3.5’s maximum performance benchmark, which attained about 100,000 IOPS on a 16-core single server attached to 500 FC disk drives on an EMC Clariion disk array.
Hifn (now part of Exar Corp.) is taking another crack at getting major OEMs to ship products integrated with its DR line of compression, encryption and deduplication hashing acceleration cards, which could potentially spur the development of primary storage data deduplication offerings.
Prior to its acquisition by Exar, Hifn began sampling Express DR 250 and 255 cards to OEMs, but they hadn’t made their way into any announced third-party products. At this spring’s SNW, Hifn launched its own product based on the DR 255.
It was unclear why the chip boards, which perform processor-intensive data reduction and encryption in silicon, hadn’t caught on with OEMs. Maybe Hifn’s announcement today of its new DR 1600 series may tacitly answer that question with new features such as high availability and boosted performance.
The DR 1600 line consists of six new models offering different levels of performance and combinations of compression, encryption, and dedupe. The Express DR 1600, 1610 and 1620 perform LZS compression and encryption only, at speeds of up to 300 MBps, 900 MBps, and 1800 MBps, respectively. The Express DR 1605, 1615, and 1625 run at the same three levels of throughput, but offer compression, encryption and hardware-based hashing for data deduplication (hash comparisons must still be performed by an OEM in software).
Hifn has also developed new software to go with the cards for this release, which includes a new API to standardize and ease integration of the cards into storage products to make it quicker for OEMs to take them to market. The 1600 series includes new high availability software for failover between cards, or to “pass through” traffic. That means if one card fails, the other can still perform compression, encryption, and dedupe in software.
According to Zack Mihalis, director of product marketing for Hifn, the new cards are sampling to OEMs and will become generally available at the end of July. Mihalis claimed that several large OEMs are considering the cards, potentially for primary storage dedupe. EMC, NetApp and Quantum are traditionally among Hifn’s OEMs, but Mihalis declined to disclose if any of them are sampling the DR 1600 cards.
Still, some industry analysts see this as the first step toward primary storage data reduction products becoming as ubiquitous as those for backup workloads. “Hifn has some very major OEMs as clients,” said IDC analyst Benjamin Woo. “This release is very timely – in this downturn we need to be more efficient with how we deal with data.”
However, Taneja Group analyst Jeff Boles pointed out that there’s still plenty of engineering work to be done to produce primary storage dedupe products, even with some of it already completed by Hifn. “Keep in mind that Hifn is hashing at 1,800 megabytes per second, but that’s not the speed of writing out to disk,” he said. “It’s still up to someone to make maximum use of this on disk, with caching, etc. Can you use this to service a random workload? That may be an engineering feat in itself.”
Ten days after picking up Exchange CDP vendor Asempra, BakBone Software Thursday grabbed an entire message management division.
BakBone acquired ColdSpark for $15.9 million in cash and stock, and ColdSpark’s products will make up BakBone’s new division. ColdSpark founder and CTO Scott Brown becomes general manager of the message management group.
With Asempra, ColdSpark and BakBone’s NetVault platform, BakBone can protect data in a structured repository or file system or in motion as it moves across messaging systems. This also brings it beyond pure backup, where it probably can be no more than a niche player in a market where it competes with Symantec, EMC, IBM, Hewlett-Packard, CA, and CommVault. Now BakBone is a player in email management as well. That’s another crowded market, but there is still opportunity for a small player.
BakBone’s shopping spree comes within months of its taking a big step to remove a cloud that has hovered over the company for years. BakBone was knocked off the Toronto Stock Exchange in 2004 after accounting irregularities forced it to restate earnings for 2003 and 2004. It has been working on getting its books in compliance and current since then, and finally did that in February by filing annual reports for 2007, 2008 and the first three quarters of its 2009 fiscal year. BakBone is working on getting re-listed now that is financials are caught up.
My guess is BakBone will continue to move aggressively in the coming months, whether it’s making more acquisitions or pushing out its message about messaging.
Emulex rebuffed Broadcom again today, advising its shareholders to reject the cash tender offer Broadcom made May 5 in its latest attempt to acquire Emulex.
If you’ve been following this story, today’s news is no surprise. Since Broadcom first went public with its offer of $9.25 per share April 21, Emulex executives have claimed the offer undervalued the stock and that Emulex could do better on its own. The Emulex board rejected Broadcom’s original offer in December, then on May 4 it publicly declined the Broadcom offer. Broadcom then decided to make its offer directly to the Emulex shareholders.
The reasons cited by Emulex today:
- Significantly undervalues Emulex’s long-term prospects and does not adequately compensate stockholders for their shares;
- Is opportunistic, given that Broadcom was aware of significant new non-public design wins by Emulex in converged networking prior to making its proposal on April 21, 2009;
- Does not compensate Emulex’s stockholders for a range of other initiatives being undertaken by Emulex that will start to meaningfully impact earnings within the next year and beyond;
- Is clearly timed to take advantage of Emulex’s depressed stock price, which has been impacted by the current unprecedented negative macroeconomic conditions;
- Is funded in significant part by Emulex’s own cash resulting in Broadcom offering only $5.59 per share for the operations of
- Is highly conditional, creating substantial uncertainty as to whether Broadcom would be required to consummate the Offer.
Broadcom’s offer to Emulex shareholders expires June 3. The Ethernet chipmaker is looking to acquire Emulex’s Fibre Channel technology to position itself for the consolidation of storage and server networks expected to take place over the next few years.
Emulex’s stock opened today at $10.52.
Another bumper crop o’ news this week.
If you’ve been paying attention to recent storage product news, you may detect a distinctly consumer-ish flavor. Several vendors have recently redoubled efforts to reach the ever-elusive small business, home office and tech-savvy consumer. So far this year, the wave of new products has included EMC’s Iomega StorCenter ix4 product, Fabrik Inc. systems that were acquired by Hitachi GST, Seagate Technology’s BlackArmor NAS, and various ReadyNAS systems from NetGear.
One analyst who follows the consumer space closely says these products may be hitting the market at just the right time, but vendors still may need to tweak their approach to get the attention of shoppers at Best Buy.
“Digitization is reaching critical mass” in the home and small-office market, said ABI Research digital home group senior analyst Jason Blackwell in an interview with Storage Soup this week. Blackwell recently authored a market research report declaring that consumers are growing comfortable with home networks and network-attached devices. Products have been refined to offer easier installation and more features, and digital multimedia has become mainstream for users who want to keep music and photos on home networked storage products.
Still, storage vendors and customer may need help finding each other. Retailers don’t always provide that yet.
“There needs to be continued education in this market, of retailers as well as consumers,” Blackwell said. “Usually [home storage systems] end up at Best Buy in the networking section. They really need to be located closer to the TVs” so consumers associate the storage boxes with what they’re good for – streaming multimedia. In the networking section, they’ll be mixed in with routers and other devices.
“Typically stores have really good salespeople for televisions, but the same cannot always be said about the networking section,” he said. “Customers are kind of left on their own.”
The products themselves can get closer to other devices as well, Blackwell said, in more ways than one – through integration and automation of media adapter cards to more easily network with those devices, and through attention to industrial design to look more like them. “Products need to look good, and provide a good overall experience for consumers,” Blackwell said.
Even with the sales expectation bar lowered due to the economy, CommVault still failed to clear it by a long way last quarter. Now CommVault CEO Bob Hammer is looking for data deduplication and management of storage clouds to pull his company out of its slump.
CommVault’s revenue of $56.1 million last quarter was down 1% from last year and down 7% from the disappointing previous quarter, and well below its previous forecast of $63 million to $67 million. CommVault’s net income of $200,000 for the quarter was down from $6.2 million in the same quarter last year.
Hammer blamed the poor results mainly on the economy, compounded by pricing discounts from his larger competitors Symantec and – to a lesser extent — EMC with its Avamar products.
“The numbers weren’t good,” Hammer told StorageSoup. “We got hit pretty hard clearly, but most of it was the economy. We found customers freezing budgets, reducing budgets, reducing capex. We also saw more competitive pricing pressures, but the big issue was the market locked up.”
The good news, Hammer says, is CommVault has already seen a thaw in spending budgets and strong interest in sales of Simpana 8 driven by deduplication. CommVault released Simpana 8 in late January, and its large OEM partners Dell and Hitachi Data Systems will begin selling it this quarter.
CommVault’s internal goals call for revenues to increase in double-digit percentages this quarter, but the company lacked the confidence to give any forecast. Hammer did say many customers’ budget restrictions have lifted.
“It’s too early to call this a big thaw, but it looks like the fundamentals are in place,” Hammer said. “The whole psychology is lot more positive. Budgets are there and customers are initiating projects. There’s still budget scrutiny, but it seems to be a lot easier to work with customers to close the deal.”
Hammer said CommVault shuffled its workforce to try to increase revenue by placing more people in sales and reducing other areas. The vendor will also offer “more flexible” pricing and payment models to counter what Hammer calls Symantec’s “kill CommVault in the cradle” discount programs. CommVault’s average selling price dropped to around $200,000 last quarter from $250,000 the previous quarter.
Hammer said Simpana 8 gained several hundred customers in the quarter, including more than 100 for its block-level dedupe. He says the software dedupe product had a high win rate against dedupe appliances from Data Domain, Quantum and others.
“The release was extremely successful, which sounds interesting given that we missed our number,” Hammer said.
CommVault is already looking to Simpana 9, which will likely be in beta late this year and in general release in mid-2010. The concentration will be on helping service providers managing storage in the cloud. Hammer says managed service providers are already a fast-growing segment of CommVault’s customer base.
“Storage clouds represent a natural target for Simpana,” he said. “There is no universal automated platform to manager internal and external clouds in a large global enterprise. We’ve been working on several innovative concepts to enable Simpana to be the first fully automated platform to deal with key aspects of cloud computing.”
In the wake of lawsuits filed by shareholders over its acquisition by Oracle, Sun Microsystems called for a meeting of shareholders to vote on the proposed merger and released background information about the negotiation process in an SEC filing today. And it’s a fascinating read.
The industry was almost immediately abuzz after the filing hit Sun’s website – Sun revealed in the document that there had been a third suitor in negotiations along with Oracle and, as widely reported, IBM. Aside from Oracle, no companies are actually named in the document. The others are referred to instead as Party A and Party B.
From widely reported details about Sun’s negotiations with IBM, it seems clear the Blue Blue is Party A. Party B is much more mysterious, but a source told Bloomberg news that “Party ” was Hewlett-Packard Co. According to the filing, Party B did due diligence but never made a formal offer.
The details of how negotiations fell apart with Party A are interesting, with offers ranging from $8.40 to $10 per share.
On April 3, 2009, Party A indicated that it wished to bring the process to a close. On April 4, 2009, legal counsel for Party A delivered to us and our counsel two versions of a merger agreement, indicating that these agreements represented Party A’s final offer to acquire us and that such offer would expire at 6 p.m. that day if one of the two agreements were not executed by us prior to that time. One of the draft agreements proposed a price per share for our common stock of $9.40 in cash and the other proposed a price of $9.10 per share in cash. Each of the agreements contained certain material terms related to transaction certainty to which we and our advisors had previously objected. The $9.40 agreement also required us to take certain actions as a condition to Party A’s obligation to take certain steps to obtain antitrust clearance, which we had previously communicated to Party A that our management considered impossible for us to satisfy. The $9.10 agreement did not contain this condition.
Oracle paid $9.50 per share, for a total of $7.4 billion including Sun’s debts.
There has been speculation since the Oracle deal was announced about whether or not Oracle intends to maintain Sun’s hardware business going forward, or spin it off to another vendor. However, the Sun SEC filing today also disclosed that Sun will be bought whole by Oracle and operated as a wholly owned subsidiary. Another section of the document indicates Oracle had approached Sun with offers to buy just the software business, which went nowhere.
The document also goes into fine-grained detail about estimated severance for practically all of Sun’s upper management, including CEO Jonathan Schwartz ($9 million) and EVP of Systems John Fowler ($2,7 million). Whether or not they get those payoffs soon after the expected acquisition close (August 2009) is still anybody’s guess.
Because of how NetApp Inc.’s fiscal quarters fall, it was the first storage vendor to report results that included the month of January this year. As its second fiscal-quarter earnings call approaches May 20, Wall Street analysts are paying close attention to see what NetApp’s earnings will say about March and April.
So far much of the speculation is derived from other vendors’ reports on their January quarters, which in EMC‘s case included a prediction that storage spending will remain flat in the second calendar quarter of this year, and probably in the third quarter, too.
This week, however, financial analysts revised estimates in notes to clients, predicting that NetApp’s revenues will be down, not flat, well below the Street consensus of $863-$865 million for the quarter (which would be down from $873 million for the previous quarter). Stifel Nicolaus analyst Aaron Rakers predicted the number will be closer to $830 million, while RBC Capital Markets analyst Jared Rinderer pegged his estimate at $840 million.
According to Rakers, “Derivative data points and our channel checks leave us to believe that NetApp will miss Street revenue estimates by a far margin, albeit likely offset by another quarter of better-than-anticipated [operational expense] management.”
(1) EMC reported CLARiiON revenue declined by 18% [year over year (yr/yr)] and we estimate 33% sequentially. EMC did report that its Celerra revenue grew double-digits yr/yr during 1Q09 (vs. +42% yr/yr in 2008). (2) IBM, which accounted for 6% of NetApp’s Jan 09 revenue (seasonal strength relating to IBM’s 4Q08), reported that its storage revenue declined by 20% yr/yr, or we estimate as much as 40% sequentially. (3) Arrow and Avnet, which account for 20% of NetApp’s total revenue (~30% of indirect revenue) both highlighted continued weak enterprise spending trends over the past few weeks, (4) Europe has been consistently highlighted as the weakest geography in terms of IT spending trends. NetApp generated 36% of its revenue from EMEA last quarter.
Rinderer said the channel had executed well, and focused more on regional weakness in EMEA. Rakers placed emphasis on NetApp’s continued efforts to cut costs; if that’s truly the only bright spot for NetApp this quarter, that’ll make it the second quarter in a row. CFO Steve Gomo opened NetApp’s previous earnings call by saying, “The financial highlight of our quarter was strong expense management.”