One day after Rubrik pulled in more than a quarter of a million dollars in fresh funding, rival Veeam Software picked up nearly twice as much.
Veeam today said Insight Venture Partners has invested an additional $500 million in the data protection software vendor. That brings the total investment in data protection and data management technologies to $761 million this week. Throw in the $250 million funding that Cohesity received in June 2018 and $100 million for Actifio last August, and you have four nine-figure funding rounds worth more than $1 billion in the space in eight months.
Like Rubrik, Veeam is looking to use its haul in part on acquisitions to bring it new technologies. Ratmir Timashev, a Veeam founder and its executive vice president, identified cloud management, containers, and greater support for KVM hypervisors as areas that Veeam will seek to bolster.
“Our goal is to grow beyond backup to intelligent data management,” he said.
In 2018 Veeam acquired N2WS, a small vendor that provides backup for data on Amazon Web Services. Timashev hinted that bigger deals are coming.
“As we enter our second decade, we might need larger cash reserves for much larger acquisitions,” Timashev said.
Insight Venture Partners invests in other data protection vendors, and owns another Veeam rival, Unitrends. Timashev did not identify companies Veeam is considering buying, but he did say Unitrends is not one of them.
There are significant differences between the two data protection vendors who received funding this week. On the technology side, Veeam remains a software-only product while Rubrik sells software integrated with hardware appliances. Timashev said Veeam, which originally specialized in protection of virtual machines but has expanded into physical and cloud protection, will not follow backup software vendors such as Veritas and Commvault down the path of integrated appliances.
He said Veeam will continue to support a wide range of primary and secondary storage vendors instead of competing against them.
“We understand the hardware model, but Veeam is software-defined,” Timashev said.
On the business side, Rubrik is a traditional technology startup relying heavily on venture funding and aiming to eventually become a public company. Swiss-based Veeam was self-funded for years, until Insight Ventures came aboard as a minority investor in 2013. Timashev said the venture capitalist and private equity firm remains a minority investor, even with the fresh $500 million investment. Veeam has no other venture or private equity funding.
Timashev said Veeam, which launched in 2006, has been profitable for years. He said the vendor fell just short of its goal for $1 billion in bookings in 2018 but he expects to hit that milestone in 2019. He said Veeam’s goal is to go beyond $2 billion within five years. Timashev said Veeam made more than $100 million in profit in 2018, and had close to $800 million in cash before the new investment.
Unlike Rubrik and most startups, Veeam is not looking to get acquired or go public. Timashev and Veeam’s other founder, CEO Andrei Baronov, remain in control of the company.
“We don’t have to go public,” Timashev said. “We have the ability to stay flexible and nimble without additional pressure from public shareholders. We have the flexibility that a public company does not have.”
Timashev said Veeam has more than 3,500 employees and plans to add nearly 1,000 in 2019.
Rubrik, which helped change the role of backup in data management, is shopping for new technologies for its Cloud Data Management platform.
Rubrik today said it completed a whopping $261 million Series E funding round, bringing its total venture funding investment to $553 million. Overall funding is down for storage vendors, but Rubrik and its rival Cohesity have proven the exceptions. In mid-2018, Cohesity completed a $250 million round to bring its total to $410 million.
Rubrik and Cohesity popped up in 2014, attempting to bring the concepts of hyper-converged infrastructure to data protection. Legacy backup vendors have been scrambling since then to add scale-out products that can handle backup, archive, copy data management and data governance features to data stored on-premises and in clouds.
Bipul Sinha, Rubrik’s CEO and one of its founders, said Rubrik will use the funding to add technologies that it can deliver faster through acquisitions than internal development. Rubrik in February, 2018, acquired cloud database backup startup Datos IO in its only acquisition so far.
“We’ll be opportunistic when it comes to acquiring products and technologies to expand our platform,” Sinha said.
He identified artificial intelligence, machine learning and analytics tools that help organizations get more out of their data as areas where Rubrik will expand. Sinha said these technologies can help Rubrik’s Cloud Data Management software deal with regulations such as GDPR.
“In 2019 we’ll enter new markets,” Sinha said. “Backup and recovery is just our starting point. Now that we have the data, we’re looking at applying machine learning, artificial intelligence and other analytics tools that extracts more intelligence out of the data for compliance, governance and security.”
A big question about Rubrik is whether it can appeal enough to large enterprises to win customers from large legacy backup vendors such as Veritas, Dell EMC and IBM. Sinha said Rubrik has enterprise needs covered after adding enhanced data protection for Oracle, SAP HANA and file storage last year.
Startups don’t usually go out on the prowl for companies to buy, but few startups have more than half a billion dollars in funding. Sinha said Rubrik went from 700 customers at the start of 2018 to more than 1,300 by the end of the year, and revenue also roughly doubled. And Rubrik may not be finished yet with VC money. Sinha said it will continue to raise money if it must to fuel growth.
“There is a transition happening in data management that is being expanded into the multi-cloud and hybrid cloud world,” he said. “How do we deliver more core services, capture more share of wallet and make Rubrik an iconic company for the next 30 to 40 years? We’re focusing on the opportunities in front of us.”
He did say Rubrik will become a public company, but there is no timeframe for its initial public offering. Rubrik is far from profitable.
“That is our ambition,” he said. “Going pubic is a milestone on our journey. We want any large business around the world to think of Rubrik for their data and application management challenges.”
Rubrik has made moves over the past year that indicates it is aiming for an IPO soon. In 2018 it hired a new CFO and chief legal officer, and coaxed Avon Puri from VMware to serve as CIO. Microsoft chairman and former Symantec CEO John Thompson and former Cisco CEO John Chambers joined Rubrik as investors last year, with Thompson also taking a board seat and Chambers serving as an adviser.
Rubrik and Cohesity have likened their architecture to hyper-convergence for secondary data, and both companies have executives who were involved early on with hyper-converged pioneer Nutanix. Nutanix became a public company in 2016 after raising $394 million in VC funding. It has continued to grow the company and chase revenue, even while losing hundreds of millions of dollars every year. Rubrik appears to be following that strategy of trying to grow in a rapidly expanding market.
But Sinha said Rubrik will not follow Nutanix down the past of building its own cloud service. Nutanix this year launched its Xi cloud services that will eventually challenge Amazon and other public clouds.
“No, we will not build our own cloud,” Sinha said when asked if Rubrik would go that route. “We have strong partnerships with Microsoft, AWS and others, and we will continue to accelerate those partnerships.”
New investor Bain Capital Ventures led the funding round, with previous venture capitalist investors Lightspeed Ventures, Greylock Partners, Khosla Ventures and Institutional Venture Partners participating.
Major storage and server vendors are angling for position in hyper-converged systems. But as has been the case for a while, the jockeying really is for who finishes in third place.
The battle for first and second is a tilt between Dell EMC subsidiary VMware and hyper-converged infrastructure (HCI) market pioneer Nutanix. Wells Fargo Securities, citing market estimates by analyst firm IDC, said in a research note those two vendors sold 70% of all HCI systems during the September quarter, or $1.5 billion.
The combined clout of Dell EMC and VMware give it control of nearly 60% of the market. Nutanix claimed a 35% share, with other vendors in scrimmage for the leavings.
Industrywide, IDC said overall HCI revenues surged 15% from the prior quarter, up 67% year over year to a record $1.7 billion.
The combination of VMware Virtual SAN (vSAN) software-defined storage and vSAN Ready Nodes led the way at $591 million, which equates to 35% share of the HCI market. The VMware HCI figures include software-only licenses for vSphere ($89 million). VMware reported for the October quarter that VSAN bookings grew 50% year over year.
Customer can get VSAN as a software-only license, or buy it packaged on x86 Ready Node servers from certified hardware partners.
Dell Inc. this month won approval from VMware shareholders to go public by buying up a tracking stock tied to the valuation of the virtualization giant. The financial maneuver is expected to enable Dell to start trading its common shares Dec. 28. and to keep VMware as a separate publicly traded company.
The Nutanix software-defined model, one year later
According to the IDC forecast, Dell EMC saw HCI revenue increase to $373 million, good for 22% market share. Coupled with VMware, that gives Dell Technologies control of nearly 60% of the market.
Dell EMC’s growth is tied to rising arc its VxRail flagship, which fueled a 109% increase in revenue to $184 million. Rack-scale VxRack HCI accounted for $80 million, representing year-over-year growth of 129%.
Dell also gained $124 million from sales of its XC Series, which bundles the Nutanix software stack on 14th generation PowerEdge servers. The Dell OEM deal provide 9% of Nutanix revenues during its recent quarter.
Nutanix created the HCI market by integrating compute, networking, storage and hypervisor software on a single hardware appliance. Nutanix rode the business model to an initial public offering in 2016, but last year ditched hardware to phase in a software-only licensing model, similar to the approach of VMware.
Aside from Dell, Nutanix has server deals with Cisco, Fujitsu, IBM, HPE and Lenovo. During the vendor’s last earnings report, Nutanix executives said subscriptions accounted for 51% of revenue
IDC said customers bought an estimated $585 million worth of Nutanix HCI gear, jumping 65% year over year. Direct sales of Nutanix NX Series accounted for $281 million in revenue. If you remove sales through third parties and OEMs, Nutanix’s share remained flat at around 35%.
Hewlett Packard Enterprise came in a distant third at $112 million, an improvement from $54 million from a year ago. The lion’s share of HPE’s HCI revenue stem from the SimpliVity product it acquired being in the market a full year.
Cisco HyperFlex sales of $78 million give the network and server vendor implied market share of 4.7%, down roughly half a point. Wells Fargo analysts characterized Cisco’s traction in HCI as “underwhelming.”
Netapp and Cisco have partnered on FlexPod CI for years, which uses Cisco servers and networking attached to NetApp FAS storage. NetApp is a latecomer to hyper-convergence. The NetApp HCI has been shipping about a year, based on SolidFire all-flash arrays it acquired in 2015. NetApp HCI revenue went from zero to $21 million last quarter.
Not mentioned are IBM and Hitachi Vantara. IBM uses its VersaStack converged infrastructure reference design to compete in the HCI market. Hitachi in September refreshed its Hitachi Unified Compute HC system, featuring an upgrade to NVMe flash.
The remaining $509 million in market revenue is credited to an assortment of unidentified vendors. The list likely includes niche vendors such as Datrium, Pivot3 and Scale Computing.
The CEO of object storage startup Minio wants to change the way people talk about his company in 2019, beginning with the way they say its name.
Most people pronounce it “MIN-EO” but CEO and founder Anand Babu Pariasamy said he wants the company known as Min-IO, as in “minimal IO.” The effort to reduce latency is reflected in a new hardware product that Minio plans to launch in 2019 to optimize its object storage software performance.
Minio is an object storage server released under Apache License 2.0 and compatible with Amazon S3 cloud storage. Periasamy bills Minio as object storage for AI.
Like most object storage vendors, Minio started out selling private cloud storage. But now it is aiming for data centers and private clouds by targeting specific applications.
“We want to see more applications built on object storage,” Pariasamy said during a recent press event at its Palo Alto, California, headquarters. “If you tell customers object is better than file and block, it’s not going to work. They need applications.”
Periasamy also wants people to change the way people talk about object storage and its relationship to AI. “AI is big data,” he said. “Object storage uses cases are machine learning, big data analytics, and application data. The primary use case for Minio has been replacing Hadoop.”
“In the end, the enterprise IT will look like AWS,” he said.
Minio is working on its own flash performance system that Periasamy said will ship in 2019. He said Minio has worked with hardware partner Samsung for six months on the storage system.
The hardware is an all-flash box that uses high-capacity quad-level cell (QLC) NVMe drives, up to eight servers with Intel Skylake chips, and Mellanox CX5 1000 Gigabit per second Ethernet switches. The system will perform erasure coding and bit-rot detection for data protection.
Periasamy said the server-based architecture is different from a typical storage array.
“We don’t come from the storage world, and that’s our strength,” he said. “We don’t look at this from a storage point of view. The problem with storage is, they’re all like chefs. They teach other chefs and if anyone tries to make changes to their recipes, they hate it.”
So 2019 may be the year that Minio either cooks up something different and tasty, or becomes one more chef that spoils the soup.
HYCU, which sells data protection specifically designed for Nutanix hyper-converged systems, today enhanced features for backing up the platform it has hitched its wagon to.
Comtrade Software launched HYCU (pronounced Haiku) software in June 2017 to concentrate on protection for data on Nutanix appliances. In March 2018, Comtrade Software rebranded as HYCU, part of the Comtrade Group. HYCU has more than 300 employees, mostly dedicated to a single application.
HYCU 3.5 allows snapshots of Nutanix Volume Groups, snapshots of SAP HANA, restores of individual disks instead of files, folders or virtual machines, and agentless backup of Microsoft SQL Failover Cluster.
HYCU’s support of SAP HANA follows Nutanix’s recent emphasis on protecting the application as it tries to move into more enterprise accounts. HYCU uses Nutanix SAP HANA snapshots for rapid recovery.
HYCU CEO Simon Taylor said his company develops all code individually from Nutanix, despite its focus on protecting data on Nutanix hyper-converged infrastructure. “It’s not co-engineered by any stretch,” he said.
Taylor said HYCU has more than 700 customers using its backup and recovery software, 18 months after launching its software for Nutanix.
“We’re thrilled to have made it this far,” Taylor said.
There are three versions of HYCU software. HYCU Data Protection Suite for Nutanix covers all virtual machines, applications and Nutanix Files. HYCU Data Protection for Nutanix Apps protects VMs and applications running on Nutanix, and HYCU Data Protection for Nutanix Files protects only data on Nutanix Files storage.
HYCU pricing starts at $1,500 per socket, or customers can choose monthly subscription pricing of $75 per socket and $10 per VM for enterprises.
External storage systems are all-but-obsolete in the software-defined era. At least that’s the fable shared repeatedly across the industry. But cloud and enterprise customers are collaborating to write a different tale, featuring legacy storage as a central character.
Similar to the “tape is dead” mantra and the predicted demise of Fibre Channel, legacy storage array vendors continue to hold their own, combining with original design manufacturers (ODMs) to ship nearly 114 exabytes of capacity last quarter, according to the latest tracking numbers by analyst firm IDC. That represents a 57% jump in total shipments year over year.
Factory revenue from external storage systems grew 19% worldwide to top $14 billion. Enterprise customers contributed $6.3 billion to the market, up nearly 13% from a year ago.
The IDC definition of networked storage entails any system with a minimum of three disks, accompanied by controllers, cabling and host bus adapters. The disks can be contained inside a traditional storage array or installed in an x86 server chassis.
And as data center administrators will tell you, the trend line is gradually moving away from the purchase of big iron legacy storage that entails high costs and vendor lock-in. IDC said cloud data centers selling consumption-based storage services fueled the biggest jump, buying $3.9 billion worth of storage gear from ODMs, or 46%. Overall, ODM sales to hyperscalers accounted for 27% of all enterprise storage investments – a percentage matched by server-side flash deployments, which climbed 10% to $3.8 billion.
No change atop the legacy storage leaderboard
Dell EMC maintained the No. 1 spot among the array vendors. Dell captured 19% of the enterprise storage market, edging Hewlett Packard Enterprise (HPE) at 16%. For the quarter, the combined storage brands of Dell and EMC generated $2.6 billion, marking year-over-year growth of nearly 22%.
This year has been one of contrasts for Dell EMC. The vendor struggled early to shake off a string of successive down earnings in storage, before finally posting gains in June. Last week, Dell EMC said it notched $3.9 billion en route to its third straight positive quarter, fueled in part by increased adoption of its VxRail hyper-converged infrastructure.
This week, parent company Dell unveiled a plan to go public in December with a complex buyback from shareholders of a tracking stock in its VMware subsidiary. A return to public trading is not expected to have an impact on Dell EMC storage customers.
HPE held on to second-place, despite seeing revenues decline more than 3%. HPE’s $2.3 billion equates to 16.4% of global enterprise storage sales, yet that is down nearly 4 full percentage points from HPE’s 2017 results. For the full year, HPE reported 13% growth in its legacy storage business, specifically calling out the integration of InfoSight analytics across its flagship 3PAR all-flash arrays as a key growth driver. HPE picked up InfoSight when it acquired Nimble Storage in 2017.
NetApp closed the quarter with revenue growth of 15% ($808.2 million), but its overall share of the legacy storage market remained flat at around 6%. After a period of transition for NetApp, during which it needed to quickly catch up to all-flash competitors, five consecutive quarter of 7% revenue growth have followed, including four quarters of profit.
Hitachi Vantara and IBM closed out the top five, each with roughly 3% of the enterprise storage systems market, although both vendors saw storage revenue drop by double digits. Hitachi Vantara, formerly known as Hitachi Data Systems, posted $428 million, down 10%. IBM storage revenues fell 21% to $403 million.
It’s official: Dell Technologies once again will become a public company, after gaining hard-won approval to buy back VMware tracking stock from shareholders in a transaction approaching $24 billion.
Dell said 61% of VMware shareholders approved of the deal, capping months of sometimes-contentious negotiations between Dell and stockholders in its VMware virtualization subsidiary. The VMware tracking stock mirrors the performance of VMware, which closed the last quarter with $2.2 billion in revenue, up 15%.
The deal paves the way for Dell to start trading on the New York Stock Exchange by Dec. 28, without hiring an investment bank to underwrite the offer. The financial maneuvering is not expected to have material impact on Dell EMC storage customers, although it simplifies the Dell-EMC-VMware corporate structure and provides liquidity for investments and paying down roughly $53 billion in merger-related debt.
In going public, Dell said it will convert 199 million shares of the VMware tracking stock to newly created Dell Class C common shares. Shareholders will have the option to convert the shares or receive $120 in cash per share, without interest and subject to an aggregate cap of $9 billion. Dell boosted the VMware buyback price from its initial $109 per share after activist investor Carl Icahn sued the company. Icahn subsequently dropped his lawsuit last month following after Dell upped the offer.
Dell authorized 343 million shares of VMware tracking stock as a blandishment to win over EMC shareholders during merger negotiations.
Dell has been selling off assets since the merger, including services and software it claims no longer mesh with its long-term growth strategy. The vendor has entertained various scenarios since the start of the year, which included a potential reverse merger with VMware and an IPO to spin out Dell EMC as a separate company.
Dell went private in 2013 to escape the scrutiny of Wall Street, completing a $24.5 billion leveraged buyout by equity firm Silver Lake Partners, which subsequently helped Dell buy EMC and retains about 18% of the computer company.
Veeam updates to its flagship product and AWS data protection include the ability to migrate old data to cheaper cloud or object storage.
Update 4 of Veeam Availability Suite 9.5 is scheduled to be released this month to partners. General availability will follow at a date to be determined. Veeam’s flagship Availability Suite consists of Veeam Backup & Replication and the Veeam ONE monitoring and reporting tool.
The new Cloud Tier feature of Scale-out Backup Repository within Backup & Replication facilitates moving older backup files to cheaper storage, such as cloud or on-premises object storage, according to a presentation at the VeeamON Virtual conference this week. Targets include Amazon Simple Storage Service (S3), Microsoft Azure Blob Storage and S3-compatible object storage. Files remain on premises, but as only a shell.
The Veeam updates also feature Direct Restore to AWS. The process, which takes backup files and restores them into the public cloud, works in the same way as Veeam’s Direct Restore to Azure, said Michael Cade, technologist of product strategy.
A Staged Restore in the Veeam DataLabs copy data management tool helps with General Data Protection Regulation compliance, specifically the user’s “right to be forgotten,” Cade said. The DataLab can run a script removing personal data from a virtual machine backup, then migrate the VM to a production environment.
The Veeam updates also include ransomware protection. Also within Veeam DataLabs, the Secure Restore feature enables an optional antivirus scan to ensure the given restore point is uninfected before restoring. Veeam is not going to prevent attacks, but it can help with remediations, Cade said.
In addition, intelligent diagnostics in Veeam ONE analyze Backup & Replication debug logs, looking for known problems, and proactively report or remediate common configuration issues before impact to operations.
N2WS data protection tiers up
The Veeam updates include N2WS, a company it acquired at the end of last year. N2WS, which provides data protection for AWS workloads, released Backup & Recovery 2.4 last week, enabling users to choose from different storage tiers and reduce the cost of data requiring long-term retention.
The vendor launched Amazon Elastic Block Store snapshot decoupling and the N2WS-enabled Amazon S3 repository. Customers can move snapshots to the repository.
That repository saves up to 40% on costs, said Ezra Charm, vice president of marketing at N2WS.
“Data storage in AWS can get expensive,” especially if an organization is looking at long-term retention, for example at least two years, Charm said during the virtual conference.
Possible uses include archiving data for compliance in S3, a cheaper storage tier. Managed service providers can also use it to lower storage costs for clients.
In addition, the N2WS update features VPC Capture and Clone. That capability captures VPC settings and clones them to other regions, which eliminates the need for manual configuration during disaster recovery, according to N2WS. An enhanced RESTful API automates backup and recovery for business-critical data.
“Any of the data you store [in AWS] is clearly your responsibility,” Charm said.
AWS data protection is an emerging market. In June 2018, Druva acquired CloudRanger, another company that provides backup and recovery of AWS data.
While human error is the most likely scenario why AWS data protection is needed, Charm said, there are many other possible issues.
“Ransomware in AWS has been documented,” he said.
N2WS Backup & Recovery 2.4 is available now in the AWS Marketplace.
HubStor added continuous data protection and version control to its cloud storage platform.
The continuous data protection (CDP) provides agentless monitoring of specific file system directories to detect new files and capture them, according to Canadian-based HubStor. Uses include backup with a short recovery point objective (RPO) or as a write-once read-many archive for compliance.
Enabling the CDP is a checkbox option with no additional charge or software to deploy it. The default timeframe is 30 seconds.
HubStor, which provides cloud-based data management software, had customers who wanted a “very short” RPO, said co-founder and CEO Geoff Bourgeois. The product previously could run scheduled scans every 30 minutes.
Version control, also a checkbox, goes hand-in-hand with continuous data protection. HubStor introduced version control now because CDP can produce many versions, Bourgeois said.
As HubStor captures incremental changes, the product builds out a version history for each file. Point-in-time awareness in the cloud enables an organization to restore data at a known healthy time, for example the moment before a ransomware attack hit.
Over time, an organization can prune its versions and phase them out — for example through a setting of one version per month — which can help “control the storage growth in the cloud,” Bourgeois said.
HubStor at ‘a neat stage’
HubStor, founded in 2015, claims nearly 100 customers and expects to hit the century mark by the end of the year.
“We’re at a neat stage in the company’s history,” Bourgeois said, noting HubStor does not have any venture capital funding and does not carry debt, making money through a consumption-based business model.
Typical customers are medium to large enterprises, with hundreds of terabytes under management. Customers are starting to get into the multi-petabyte range, as a new one is moving 5 PB into HubStor, Bourgeois said.
HubStor is closely tied to Microsoft and uses Azure for its back end. Its software-as-a-service approach provides a fully managed product for customers, Bourgeois said.
In addition to backup and recovery, HubStor offers tiering and retention capabilities.
KUKA, a global robotics manufacturing and implementation company, had a lifecycle problem with its file retention. It had nearly 75 TB of archived data with retention requirements.
After looking at a few vendors, including Nasuni and NetApp, KUKA found that HubStor handled archive tiering the best, said systems administrator Troy Dieter.
Since implementing HubStor six months ago, KUKA has recouped about 60 TB of SAN storage. That data is tiered and stored in HubStor’s tenant, Dieter said. Both HubStor and Veeam helped KUKA shift off of tape for archiving.
KUKA uses the search feature often. The company has about 75 million files just in archives, so being able to search quickly is valuable.
Dieter said he would demo the new CDP and version control features, but noted that he is satisfied with his company’s use of Veeam for backup.
“I’m eager to see what they’ve built in for their backup and retention,” he said of HubStor.
Dieter said a user experience refresh in the HubStor Connector Service — the storage transit agent — would be helpful, as it can get a little confusing.
HubStor aims to add continuous data protection support for Office 365 in early 2019, as customers require short RPOs for that data, Bourgeois said. Version control settings are available for Office 365.
Bourgeois said Veeam and SkyKick offer similar technologies and HubStor also sees startups Cohesity and Rubrik competing for some similar deals. HubStor has a leg up because of its consumption pricing model, with nothing owed upfront, Bourgeois said.
Dell EMC on Thursday reported nearly $4 billion in storage revenue in its most recent quarter, marking its third consecutive positive earnings in storage. But executives refrained from sharing high-fives, noting “we have work to do” to boost Dell EMC midrange storage and recapture lost market share.
Storage market leader Dell EMC is part of Dell Technologies Infrastructure Solutions Group (ISG), which also includes Dell networking and server hardware. ISG generated nearly $9 billion in revenue, up 19%, mostly driven by a 30 percent growth in sales of 14G Dell PowerEdge storage servers and networking gear to $5.1 billion.
Last quarter, Dell EMC storage revenue increased 6%, less than half the 13% in the prior quarter. For the first quarter, Dell EMC storage grew 10%.
“Quite frankly, we would have liked to have seen higher growth in storage this quarter, but we do believe we have taken the right actions to drive meaningful long-term improvements in the storage business,” Dell CFO Tom Sweet said.
Dell EMC outpaced IBM, which reported a decline in storage revenue in its last earnings period, but lagged behind Pure Storage (34% year-over-year growth) and slightly behind NetApp (7% year-over-year increase).
Sweet said Dell EMC has set a target operating margin for ISG of 14% as part of a playbook to drive “a consistent, creaming-the-market trajectory that will allow us to recapture a fair amount of the share loss we experienced over the last number of years.”
Parent company Dell Technologies reported overall revenue of $22.5 billion for the quarter, up 15%, with a GAAP operating loss of $356 million. The Client Solutions Group, which includes client and consumer PCs, monitors and integrated software, contributed $10.9 billion, up 11%. The VMware segment chugged along at 15% growth, generating $2.2 billion, driven by a 17% jump in license revenue.
In a related matter, Dell said stockholders are expected to vote Dec. 11 on a complex buyback of its 81% stake in VMware. Dell picked up VMware when it acquired EMC.
The measure would return Dell to publicly traded status, without having to underwrite an initial public offering. Dell has proposed to convert its Class V tracking stock in VMware to Class C common stock, which would be publicly traded on the New York Stock Exchange under the ticker symbol “DELL.” If approved, trading is projected to start Dec. 28.
PowerMax, VxRail carry Dell EMC midrange storage
Growing the storage business has been a problem – particularly Dell EMC midrange storage – since the 2015 merger with EMC. Prior to this year’s first quarter, Dell EMC storage market share declined in 15 of the previous 16 quarters. The vendor is taking a two-pronged approach to “stabilize” storage and recapture lost market share, said Jeff Clarke, a Dell vice chairman of products and operations at ISG.
One part of the strategy involves getting newly hired salespeople up to speed, Clarke said. “We need more storage buyers and we are putting in the capacity in both our enterprise and commercial sales organizations to do so.
“The second linchpin (is) to improve the overall competitiveness of the product. We have done that over the last 14 months,” refreshing high-end PowerMax (formerly VMAX) all-flash arrays with NVMe and adding other performance enhancements.
Clarke said high-end, file-based and all-flash Dell EMC storage each grew by double digits, while VxRail hyper-converged infrastructure posted triple-digit growth and is poised to top $1 billion in 2018. Dell does not provide a breakdown of revenue by individual products.
The laggard was Dell EMC midrange storage, which Clarke said did not “grow to the degree we would have liked.” The midrange gear includes flagship all-flash Dell EMC Unity and SC Series (legacy Dell Compellent) arrays.
Overlapping midrange storage has been weighing on Dell EMC. After insisting repeatedly it had no intention to winnow down redundant systems, the company reversed field in September, forecasting a plan to combine engineering and launch new Dell EMC midrange storage in 2019.
Dell executives also dismissed concerns over Amazon Web Services’ announced plans to challenge legacy storage vendors by delivering racks of data center hardware for deployment on premises. Although Amazon’s announcement caught many in the industry off guard, Clarke said Dell EMC was not surprised by it.
“Not everything is going to (be stored in) a handful of public clouds. We’re seeing workloads repatriate to on-prem for cost reasons, security reasons, and performance reasons. And we think Dell Technologies is positioned quite nicely” to compete in this world.”