While EMC exceeded its overall revenue forecast for last quarter, its storage revenue was a bit disappointing. EMC’s storage revenue made up $3.68 billion of the company’s $5.5 billion (counting VMware, RSA, Pivotal and other sources). On the storage side, that was a three percent decline from last year mainly because of a tough quarter for EMC’s VMAX enterprise storage array.
VMAX sales dropped 22 percent last quarter from the previous year. Revenue from the rest of EMC’s storage portfolio actually increased six percent, but VMAX is its largest and most expensive platform. The pattern was similar to what IBM reported last week, when its enterprise DS8000 dragged the entire storage hardware group to a 23 percent drop from last year.
As he did in January after EMC missed its forecast for 2013, EMC CEO Joe Tucci spoke of changes in spending patterns in the IT world today. Tucci said those changes bring challenges in the short term while raising long-term opportunities for vendors who get it right.
“The Information Technology industry is going through a major transformation, a secular shift from the client/server PC era of computing to a mobile, cloud, big data, social networking era,” Tucci said on EMC’s earnings call. “As we navigate through this transition, we and the rest of the industry are facing a global market which is exhibiting an air of caution in spending, resulting from an array of economic and political uncertainties around the world. Collectively, these two factors are creating an environment that is not for the faint of heart.”
David Goulden, CEO of EMC’s Information Infrastructure, blamed the VMAX decline on “math factors” (last year was strong for VMAX, so there was a tough comparison and changes in EMC’s order fulfillment process resulted in a larger product backlog) and product cycle. The VMAX, like IBM’s DS8000, is due for an upgrade and customers could be waiting for that before they buy their next one. Hitachi Data Systems and Hewlett-Packard upgraded their high-end arrays this week, putting pressure on their rivals. “We do have a refresh plan during the year,” Goulden said. “I won’t tell you exactly when. We don’t want to impact our own business more than we have to, but that certainly is a factor.”
EMC reported better results for its “emerging storage” category. Revenues for that group increased 81 percent year-over-year, although that growth is less impressive when you consider emerging products such as the XtremIO all-flash array and ViPR software-defined storage were not even selling yet a year ago. The emerging storage group also includes Isilon clustered NAS and Atmos object-based cloud storage. Taken together, the technologies in that group could determine the future of EMC storage.
Other news from the earnings call:
• The all-flash XtremIO array picked up “dozens” of new customers and more than 70 percent of VMAX and VNX2 midrange systems shipped with some flash capacity. EMC said it sold more than 17 PB of flash in the quarter, up 70 percent year-over-year. Goulden said EMC added 20 TB XtremIO systems in the quarter and has a “very aggressive roadmap this year” to expand the flash platform and integrate it with other EMC products.
• VCE Vblock converged appliances that EMC sells in partnership with Cisco and VMware grew 50 percent year-over-year with most of the units bought by new customers.
• Goulden said Data Domain backup appliances “had another excellent quarter” but did not provide specific numbers. EMC’s total backup and recovery revenue grew four percent year-over-year.
• Syncplicity file sharing software revenue more than doubled year over year.
• EMC estimated that more than $2 billion in revenue in 2013 came from cloud providers.