Dell Technologies World 2018 has come and gone with hardly a mention of the corporate reorganization Michael Dell and his team is considering as the next step after Dell’s $60 billion-plus 2017 acquisition of storage giant EMC.
Dell has been weighing a return to public ownership as part of strategy to pay down a mountain of debt related to the merger with EMC . A potential reverse merger with its VMware subsidiary is one option Dell is considering, along with a possible spinoff of the Dell EMC storage division as a public company.
But Dell chairman and CEO Michael Dell stuck to technology during his Monday keynote address kicking off the conference. He also sidestepped questions about the issue during a media briefing following his keynote, suggesting any interested parties should read the SEC filing the company made listing its options.
“Have you read our Form 13D (securities filing)?” Dell responded to a question from one reporter. “If you haven’t read it, I suggest you read it in full. It contains everything we’ve said on the matter. We filed it because we publicly said we were thinking about some things. If I say anything else about it, we’ll have to make another filing.”
The coals of Dell’s post-merger considerations are being stoked by roughly $46 billion of debt related to the EMC transaction. Getting a handle on the debt service was an immediate concern when Dell and EMC storage fused into a single company. Analysts and industry observers have predicted from the outset that Dell would have to lop off business segments that no longer fit its long-range goals, including services and software.
In the Jan. 31 filing with the U.S. Securities and Exchange Commission, actually made by publicly traded VMware, Dell Technologies referred to several options under review. One option involves Dell EMC storage pursuing an initial public offering (IPO) of stock. That would mark a sharp departure from the origins of the EMC deal.
Taking Dell EMC storage public likely would net much larger proceeds than the $555 million from Dell subsidiary Pivotal Software’s recent IPO. At the time it acquired EMC, Dell touted the fact the deal would shield the storage business from the scrutiny of Wall Street.
Since the merger, Dell EMC storage revenue has sagged, with Dell Technologies claiming the lion’s share of revenue from sales of traditional servers and networking gear. Would investors get behind an EMC IPO, considering the industrywide decline in externally networked storage sales? That an open question and one undoubtedly getting batted around during Dell’s executive deliberations.
A reverse merger with VMware would shift the Dell EMC debt to the virtualization vendor’s books. That would entail Dell, which owns 81% of VMware, to be the acquired by its much smaller subsidiary. VMware could absorb the debt by selling additional shares to amortize the cost, but shareholders might balk if they perceive such a decision will dilute the value of VMware holdings.
“It’s not a guarantee that activist investors won’t jump in. But there is so much cash being generated by VMware (it could make sense) as a way of shuffling that paper debt around,” said Greg Schulz, senior advisory analyst at consulting firm Server and Storage IO, based in Stillwater, Minn.
Then again, it’s entirely possible that no changes lay ahead for VMware or Dell EMC storage. Listed among the various options on Dell’s securities filing is “maintaining the status quo.” Most industry observers, in fact, say they would be surprised if Dell made any substantive change to its corporate structure.
For now, though, Dell’s flight path toward a decision appears to be stuck in an indefinite holding pattern, searching for a runway and soft landing.
Pivot3, one of the last small independent hyper-converged infrastructure (HCI) vendors left, is on a growth path that its CEO said could lead it to going public within two years.
The vendor report its first quarter 2018 bookings increased more than 60% over last year, with two-thirds of its sales coming from Fortune 1000 companies.
Pivot3 CEO Ron Nash said the early HCI vendor is on pace to hit profitability and complete an initial public offering of stock within 18 to 24 months. He said the 250-employee company that has not raised venture funding in two years will probably not need any more funding until then. Since its 2003 launch, Pivot3 raised $253 million in funding with the last round of $55 million coming in early 2016.
“We substantially reduced our loss over the past three or four quarters,” Nash said. “We’re on our path to break even, and we’re planning to drive to profitability before we IPO. I want us to be ready to be a public company before we do our IPO.”
Nash attributed recent Pivot3 revenue growth to it selling to larger customers, customers running several applications instead of one app, buyers expanding their deployments.
He said Pivot3’s early video surveillance customers are now buying Acuity HCI appliances, and Acuity customers are adding Pivot3 video product. Nash said the larger and multi-app deployments are partly a result of Acuity’s early use of NVMe inside HCI appliances as well as its quality of service.
The claimed Pivot3 revnue growth is in line with —although slightly below — the rest of the HCI market. No industry-wide figures are available yet for the first quarter, but IDC put HCI worldwide revenue growth at 68% in the third quarter of 2017 and 69.4% in the fourth quarter. Pivot3 claimed its revenue increased 50% in the third quarter and 65% in the fourth.
Like many emerging technologies, HCI began with startups before large vendors jumped in. The early players were Nutanix, SimpliVity, Pivot3, Scale Computing, Maxta and a few others. Now Nutanix is a public company, SimpliVity is part of Hewlett Packard Enterprise and the HCI market is dominated by large vendors.
The recent Gartner Magic Quadrant for HCI listed Nutanix, Dell EMC, VMware and HPE as leaders. Pivot3 made the challenger quadrant along with Cisco and Huawei. That puts Pivot3 up against large established vendors in most of its deals.
One of Pivot3’s biggest challenges is what Nash calls “big legacy companies playing big-boy bad behavior.” By that, he means the large vendors who were slow to embrace hyper-convergence will try to raise concerns about smaller companies when they talk to potential customers. If that fails, they will deeply discount their products.
“First, the big boys deny the new technology is better,” Nash said. “Then when the new technology companies start to make breakthroughs, the big boys give a discount. But over the long term, no one has ever protected a market long term by doing that. It only slows the erosion.”
The Unitrends VMware backup product that launched today is going directly after one of the data protection vendor’s major competitors.
VM Backup Essentials (vBE) converges many features the vendor previously offered — including virtual backup software and ransomware detection — into a product specifically targeted at VMware administrators in SMBs, a customer base that Unitrends says Veeam Software is overlooking. Unitrends calls vBE a “Veeam killer.”
Unitrends CTO Mark Jordan said Veeam is leaving behind VMware administrators as it shifts its focus to enterprise customers.
“We are using this to fill a niche,” Jordan said.
Unitrends CEO Paul Brady said he’s heard complaints about Veeam’s increasing prices and lack of attention. The number of customers expressing frustration gained steam in the second half of last year, he said.
George Crump, founder and president of analysis firm Storage Switzerland, said Unitrends is banking on the fact that Veeam has left its core market exposed.
“I don’t know if that’s really happening,” Crump said. “If the market is exposed, I think [Unitrends] could be pretty successful there.”
For 2017, Veeam hit 62% year-over-year growth in enterprise deals and 500% annual growth for deals exceeding $1 million. Veeam’s push for more enterprise business has also been clear in its product updates. The latest version of its flagship data protection product, Veeam Availability Suite, improved management of virtual, physical and cloud data. In addition, through an OEM deal with Cristie Software, the Veeam Availability Platform added physical protection.
Danny Allan, vice president of product strategy at Veeam, said the vendor has nearly 300,000 customers and continues to add 4,000 new ones each month. Veeam claims its first-quarter bookings increased 21% year over year, and expects to reach $1 billion for 2018.
“For smaller companies, we have Veeam Backup Essentials 9.5, an affordably priced solution that meets the needs of SMBs,” Allan wrote in an email. “For large enterprises, we have the enterprise-plus edition of Veeam Availability Suite, which is designed for large, distributed, multi-cloud architectures that scale to multiple petabytes. What’s more, we help power over 3,200 partners’ backup-as-a-service and DR-as-a-service offerings to tens of thousands of Veeam customers.
“That said, if anyone has concerns about our commitment to VMware administrators, we encourage them to ask someone from Veeam about it when they attend their next [VMware User Group]. Because Veeam will be there.”
How will Unitrends vBE measure up?
The Unitrends VMware backup product is a virtual appliance for a hypervisor-level environment only. It manages protection for VMware workloads in public clouds such as Google Cloud Platform and Amazon Web Services, and also integrates with the Unitrends Cloud purpose-built for DR as a service. The product manages VMware data backup, off-site replication and recovery, according to Unitrends.
The ransomware detection was previously included in Unitrends Recovery Series physical appliances and Unitrends Backup virtual appliances. The technology uses predictive analytics to determine the probability that ransomware is operating on a server, workstation or desktop computer. Unitrends alerts customers when it detects ransomware, so they can immediately restore from the last legitimate recovery point.
“It’s a feature set that wins us business every single day,” Jordan said.
The Unitrends VMware backup also includes enterprise-grade global and inline deduplication.
Though there’s nothing that stands out in terms of new technology, Crump said, Unitrends has simplified the interface and removed options that no longer apply because the product is focused on VMware.
Crump said he feels Veeam’s sweet spot is still VMware protection. The product is solid technology-wise, he said, and though it’s become more expensive, he doesn’t see Veeam losing a significant market share.
For Crump, Unitrends’ success comes down to two questions: How well does it execute? And how accurate is its description of the discomfort in the Veeam community?
From a technology standpoint, vBE is focused, and there are going to be customers only on VMware, who now have at least two options.
“In that scenario, I think Unitrends will win a portion of the business,” Crump said, noting the platform’s price and ability to expand. He estimated the target customer is at the upper end of the SMB market.
The product is meant to be used with other vendors’ storage or compute, Jordan said.
The Unitrends VMware backup can protect up to six sockets. It costs $105 per socket.
By the middle of the year, Unitrends plans to add more features to vBE, including complete disaster recovery orchestration, copy data management and analytics.
Crump cautioned against adding too much.
“When you’re trying to go simple, the more features you add to it, the more confusing it becomes,” he said.
The product will also expand to unlimited socket protection, Jordan said.
Kaleao hit an obstacle when trying to convince its ARM-based hyper-converged systems fit well with traditional enterprises. While its features and services might fit enterprises, the original Kaleao box was a terrible fit.
So Kaleao is adding a 4U KMAX-EP system to go with its original KMAX, which is now called KMAX-HD (high density). The redesign is aimed at bringing the startup into more enterprise deals.
U.K.-based Kaleao aimed its KMAX systems at hyperscalers and cloud providers when it launched in early 2017. Those customers didn’t need KMAX to fit into traditional data center racks and “don’t care how many wires run into and out of the box,” said Kaleao chief scientific officer John Goodacre.
“We’re finding that we fit in the enterprise, but it is taking more effort to plug into an enterprise than to plug into a hyperscalers’ data center,” Goodacre said.
Goodacre said Kaleao has “a few customers, not in the hundreds.” The potential audience is much larger for enterprises, and there is also a hunger for hyper-convergence in the enterprise now. But Goodacre said those cutomers want to put their hyper-converged appliances in their traditional server racks.
The KMAX-EP and KMAX-HD each hold 192 eight-core processor sockets and 48 solid-state drives (up to 370 TB of flash), and up to 960 Gigabits per second of Ethernet networking attached. Both use low-power ARM processing. But Kaleao is counting on enterprises finding the 4U chassis and the new design a better fit in their space than the 3U KMAX-HD.
“This is for people who want to replace 20 Dell servers with one of these, but it [KMAX-HDI] doesn’t quite fit as well into their cabinets,” Goodacre said. “The data center and machine rooms for cloud providers and hyperscalers aren’t exactly what you see in enterprises. You probably share the cabinet that you put your KMAX into. Hyperscalers are buying cabinets just for their system.”
With the new hardware design, Kaleao is also now selling both form factors in Server and Appliance versions. The original KMAX was a Server Edition, built on an open-source Linux platform for ARM-based application development and deployment. In the Appliance version, the hardware is managed by OpenStack software and Kaleao’s microsever-based small footprint hypervisor called a Microvisor.
Four months after the release of Veeam’s Universal Storage API, Veeam and Pure Storage have teamed up to streamline data protection and storage, and speed recovery.
The integration — initiated through the API — between the Veeam Availability Platform and the Pure Storage FlashArray allows joint customers to lessen the impact on production environments by using Pure snapshots, and back up more often to reduce recovery point objectives. Also through the Veeam and Pure Storage integration, customers can create snapshot-only jobs to add more frequent recovery points.
With Veeam Explorer for Storage Snapshots, customers recover individual items or entire virtual machines directly from Pure Storage snapshots for faster recovery time objectives.
Veeam and Pure Storage customers can also use Pure snapshots to create an on-demand isolated test environment to use production workload copies for testing and development, analytics and security.
“It’s really a ‘better together’ story,” especially for virtualized environments, said Ken Ringdahl, vice president of global alliance architecture at Veeam.
In addition, joint customers can use Pure Storage FlashBlade, a scale-out storage system for unstructured data, as a Veeam Ready Repository. That enables customers to use all Veeam software features.
A Pure partnership with Veeam
The API was released as part of the Veeam Availability Suite 9.5 Update 3 in December.
Pure Storage, like Veeam, is investing in the enterprise, said Carey Stanton, vice president of global business and corporate development at Veeam.
In the past year, Veeam has released a number of product updates targeted toward enterprise customers. For example, Veeam Availability Suite 9.5 Update 3 includes a central console to manage backup and recovery across virtual, physical and cloud workloads. Veeam also added physical support through an OEM deal with Cristie Software.
At the end of 2017, Veeam closed its acquisition of N2WS, which extended its enterprise and cloud data protection reach.
Veeam and Pure Storage have had a partnership for years, with features such as snapshot integration. Michael Sotnick, vice president of global channels and alliances at Pure, said that more integration will follow.
“It’s only the first inning in this game,” Stanton said.
The integration, available for download now, is a storage plug-in to the Veeam Availability Platform.
After four straight quarters of growth, IBM storage hardware revenue crashed in the first quarter of 2018. IBM reported a 15% decline in storage hardware revenue, a drop that dragged the entire company’s overall revenue to fall short of expectations.
On IBM’s earnings call Tuesday night, CFO Jim Kavanaugh blamed the storage turnaround on increased competition, pricing pressures and “some sales execution challenges.” He did say he expects a strong IBM storage product portfolio and new launches in late 2018 to fuel a rebound.
And Kavanaugh emphasized the declines were only on the IBM storage hardware side. He said IBM’s software-defined and cloud object storage revenue increased, but those are attributed to other IBM segments.
Kavanaugh described the storage market as “aggressive,” but said he has confidence in the IBM storage team.
“We were disappointed in our storage performance and it contributed to a modest shortfall to our own expectations of IBM’s revenue growth in the quarter,” Kavanaugh said.
“But I’ll tell you we have a great team with a proven track record. This is the same team that has proven that they’ve revitalized the portfolio in the past, took market share for four consecutive quarters. We have all the confidence in the world that we can get our storage business back to where it needs to be as we move forward in the second half of 2018.”
IBM attributed its 2017 rebound to surges in flash and cloud storage. According to IT research firm IDC, IBM gained share in external (networked) storage in every quarter of 2017. For the full year, IBM increased its revenue to $2.184 billion from $2.073 billion in 2016 while the overall external storage systems market was flat. IBM increased its share from 9% in 2016 to 9.6% in 2017. But unless the overall storage market tanked, IBM dropped share in the first quarter of 2018.
With a fresh $60 million in funding, Scality CEO Jerome Lecat said he expects the object storage vendor to become profitable within two years.
Scality, which launched its Ring object storage in 2010 and added a distributed file system five years later, has now raised $152 million over five funding rounds. Its previous largest round before today brought in $57 million in August of 2015.
The vendor relies largely on partnerships with Hewlett Packard Enterprise and Cisco to drive sales, so Lecat said most of the new funding will go into product development. Lecat said the new Zenko multi-cloud management software will be a main focus but he expects more product launches in 2018.
“We intend to show we can run a profit,” Lecat said. “We intend to be a break-even profitable company by 2020. From there, who knows where we go? We can raise more money and make acquisitions, but that’s not a decision I’ll make now. Sixty million dollars is a lot of money, and our goal is to strengthen our product strategy.”
Scality, which has more than 200 employees, finished 2017 with nearly 90 people on its engineering team. Lecat said that number will grow with the funding.
The 2017 Gartner Magic Quadrant for Distributed File Systems and Object Storage lists Scalilty as a leader, along with Dell EMC and IBM.
Zenko, based on open-source software, stores data and applications under one interface regardless of whether they reside on-premises or in clouds. Scality uses the Amazon S3 API that works with RING or other back-end cloud storage. Scality released Zenko code to the open source community in 2017 and is preparing to make a commercially supported version available in 2018. Zenko can complement Scality Ring or run as a standalone product.
Multi-cloud management is important for Scality, whose customers include service providers and organizations with large data stores. Lecat said the average Scality Ring implementation is for 4 PB of data, often spread across clouds.
“The future of enterprise IT and storage is multi-cloud,” he said. “What we mean by multi-cloud is large enterprises will continue to operate some storage by themselves in a private cloud and also leverage several public cloud services. A few years ago, people said everything would go in Amazon, but we’re not seeing that trend. We see people also want [Microsoft] Azure, Google and possibly other public clouds.”
As a private company, Scality does not disclose revenue but Lecat said the vendor added 51 enterprise customers in 2017. He put its total customer count at more than 200.
The funding round included new investor Harbert European Growth Capital, with previous Scality investors Menlo Ventures, Iris Capital, Idinvest Partners and Galileo Partners participating.
OwnBackup closed its largest funding round to date and will use it to propel product work and double employee headcount, the cloud-to-cloud backup and restore vendor said today.
The $15.5 million round of financing brings OwnBackup’s funding total up to $26 million. New investor Vertex Ventures and existing investor Insight Venture Partners led the funding round. Existing investors Innovation Endeavors, Oryzn Capital and Salesforce Ventures also participated.
OwnBackup provides backup for software-as-a-service (SaaS) platforms Salesforce, ServiceNow and Slack, where data is created in the cloud. The startup has focused on its Salesforce backup, reporting that it backs up 3 trillion records, which translates to about 8 PB of data.
“OwnBackup is an independent application,” said Bridget Piraino, executive vice president of marketing. “In the case of a rare outage of your SaaS vendor, you can always access the OwnBackup application and your data.”
SaaS platforms do not necessarily provide the comprehensive backup and recovery that many organizations need, for example in the case of user error.
“Data protection, especially with regulations such as GDPR, has really come to the forefront,” Piraino said.
Moving Own up
OwnBackup opened a London sales office to go with its research and development office in Tel Aviv, Israel, and its headquarters in Fort Lee, N.J.
The company has about 60 employees and Piraino said it is on track to increase that to 120 by the end of 2018. She said the additions will come in research and development as well as sales and marketing.
The funding will help OwnBackup further deepen its investment in Salesforce protection. Since its last round of $7.5 million in July 2017, the company has added strategic partnerships with Sage and Veeva, and plans to add more.
OwnBackup’s technology is built on the Salesforce Platform. “We have a real commitment to working in their ecosystem,” Piraino said.
Other vendors that provide Salesforce protection include Datto Backupify, Spanning, Asigra and Druva. Insight Venture Partners, which has a significant backup portfolio, acquired Spanning from Dell EMC in April 2017.
OwnBackup, founded in 2015, secured its first funding round in 2016. OwnBackup CEO Sam Gutmann said last year that the company’s support will likely extend into Microsoft services. He did not provide specifics, but Office 365 is a popular SaaS application that other cloud-to-cloud backup vendors protect.
No data babysitting required
OwnBackup has about 600 customers, most of them using the Salesforce protection. It serves mainly mid-sized companies and large enterprises.
Renovo Financial, a private lender for real estate investors, has used OwnBackup for Salesforce daily data backups for about one year. Salesforce contains all of the company’s lending information, including loan level data and borrower data, said Josh Perrye, a finance associate at Renovo, which is based in Chicago.
“Without any work or checking in, I know that all data is backed up at 3 a.m. every night,” Perrye wrote in an email. “We get an alert if anything needs attention, but it rarely does. Not having to babysit our data gives me the freedom to work on other high value tasks.”
Perrye said the “compare” tools for finding lost data are intuitive and easy to understand.
“Trying to figure out what went wrong in the past was near impossible,” Perrye wrote. “Now, we can essentially run the exact same report at two points in time and hold them side by side to see what changed, when it changed and, if needed, restore to the previous version in just minutes.”
Dell won the trifecta in the latest IDC Quarterly Converged Tracker report.
Dell Technologies-owned technology led market share across the board in converged and hyper-converged systems, according to IDC’s fourth-quarter numbers. IDC shows Dell EMC leading the market in converged and hyper-converged infrastructure (HCI) revenue, and Dell subsidiary VMware was No. 1 in IDC’s new breakout of software-driven HCI sales.
The overall sales trend continues to swing towards HCI, which grew 69.4% year-over-year to $1.25 billion in the fourth quarter of 2017 according to IDC. Converged Infrastructure – including reference architectures and integrated systems – declined 3.4% year-over-year to $1.7 billion.
The combined converged and hyper-converged markets came in over $12.5 billion for all of 2017, according to IDC. That’s a 9.4% increase over 2016.
IDC looks at fourth-quarter HCI revenue in two ways: by brand of the appliance and by the owner of the software. Either way, the total revenue comes out to $1.25 billion but the software-based table credits the revenue of a sale to the vendor that supplies the software.
HCI revenue is dominated by Dell EMC/VMware and Nutanix. Dell and Nutanix combine for more than 47% of the HCI branded market and 70% of the software-based HCI revenue.
Dell was ahead of Nutanix in HCI share in branded systems for the third straight quarter. Dell branded HCI revenue of $347 million in the quarter grew 138% from the previous year and its market share jumped from 19.8% to 27.8%. Nutanix branded HCI revenue grew 51% to $243 million, but its market share slipped from 21.9% to 19.5%.
VMware’s $405 million led the HCI software-based revenue charts, representing an 111% jump and 32.4% share. Nutanix placed second with $369 million for 29.5% share. Nutanix software revenue increased 59%.
Although IDC did not publish the software-driven HCI numbers in previous trackers, its report this week shows Nutanix led in software-driven HCI sales a year ago at 31.4% in the fourth quarter of 2016. VMware was second at 26% a year ago.
Designating HCI revenue based on software allows IDC to recognize VMware, which does not sell branded systems. VMware sells its vSAN software in partnerships with most server vendors, however.
The software-driven HCI list also provides a better view of sales of Nutanix software. Nutanix sells branded appliances, but also sells its software through partnerships with leading server vendors. Nutanix partners include Dell, which packages Nutanix software on Dell EMC XC appliances. IDC credits Dell EMC XC sales to Dell on the branded side and Nutanix on the software list.
Dell, which also sells HCI systems running vSAN and Dell EMC ScaleIO software, placed third in HCI based on software at $96.5 million for 7.7% share.
Hewlett Packard Enterprise and Cisco are the fastest growing HCI players. HPE sales increased 340% year-over-year to $62 million in branded HCI products, largely because of its early 2017 acquisition of early HCI player SimpliVity. HPE increased its share from 1.9% to 4.9% in the course of the year. Cisco increased HCI revenue 200% to $56.3 million, and jumped its share from 2.5% to 4.5%.
Dell’s Converged Infrastructure lead slips
Dell led the certified reference architecture and integrated infrastructure market with $735 million but lost share to its closest rivals. Dell’s revenue fell 14.5% year-over-year. Cisco/NetApp converged revenue grew 16% to $566 million and its market share increased from 27.4% a year ago to 33% in the fourth quarter of 2017. HPE revenue increased 4% to $289 million and its market share grew from 15.7% to 16.9%.
IDC defines certified reference systems & integrated infrastructure as “pre-integrated, vendor-certified systems containing server hardware, disk storage systems, networking equipment, and basic element/systems management software.”
Investors cheered hedge fund Elliott Management’s disclosed stake in Commvault today, which will likely lead to a shakeup of the data management vendor’s management team and board.
Elliott, citing the need for fundamental changes at Commvault, published a letter to the company’s directors outlining proposed steps going forward. After crediting Commvault CEO Bob Hammer and COO Al Bunte for building the company from a startup to a market leader, the letter bluntly criticized Commvault’s performance over the past five years.
Elliott wants a complete review of Commvault’s management. Its letter called for four new directors to replace the four due for nomination this year. Those include Hammer, 75, who is chairman as well as CEO.
“Unfortunately, Commvault has not been a success story as a public-company investment,” stated the letter, signed by Elliott partner Jesse Cohn and portfolio manager Jason Genrich.
Elliott Management, often referred to as an activist investor, has imposed its will on companies much larger than Commvault. In October of 2014, Elliott – roughly a two percent shareholder in EMC – called for the storage giant to break up or explore a merger with another company. Almost a year to the day later, Dell said it would acquire EMC for more than $60 billion. BMC Software, Compuware and Riverbed were also sold after receiving letters from Elliot urging action.
Elliott isn’t urging a sale of Commvault but it wants changes made. Elliott Management holds 10.3% of Commvault stock, making it one of the vendor’s largest shareholders. Commvault’s stock price rose more than 10% today after disclosure of Elliott’s involvement, which can only put more pressure on leadership to take Elliot seriously.
Commvault released a statement saying its management team has already spoken with Elliott.
“Commvault conducts open communications with its stockholders, and the board of directors and management team values their input,” the statement said. “Commvault has had initial discussions with Elliott and we go into these discussions with an open mind, a goal of enhancing stockholder value, and optimistic for Commvault’s future.”
Cohn, at the time a portfolio manager, signed Elliott’s 2014 letter to EMC.
“We want to make clear that we have great respect for what Bob and Al have built over the last two decades,” Cohn and Genrich wrote in their letter to Commvault management. “The value creation opportunity present at Commvault today would not be possible without their leadership.”
However, Cohn and Genrich were highly critical of Commvault management over the past five years.
They said Elliott Management has expertise in the backup market and has studied Commvault for several years. They also said Elliott surveyed hundreds of IT decision makers and retained senior decision makers in enterprise software and broader technology markets as advisers.
The letter said the research “confirmed our view that Commvault’s product quality and feature set are unmatched in the industry.” However, “over the last five years, Commvault has been challenged by several of the most important technology trends in the market (including appliances, virtualization and hyper-converged). … While Commvault eventually released competitive products in response, these releases were generally too late.”
Commvault in late 2017 shipped its first integrated appliance, apparently in response to successful products from newcomers Cohesity and Rubrik. Commvault also lost share to Veeam Software, which concentrates on data protection for virtual machines.
Elliott criticized Commvault for an underperforming stock price, as well as declining operating margins, stalled revenue growth, poor profitability and operational inefficiency. It blamed Commvault’s low stock price on “a lack of credibility with investors.”
The letter said the board has “experienced an absence of accountability” and “would benefit from fresh perspectives, primarily in operational execution, software go-to-market experience and current (emphasis theirs) technology expertise.” It points out nine of Commvault’s 11 directors have been on the board for more than 10 years with six serving for more than 15 years. Elliott also criticized Commvault management for lack of diversity, because it has only one woman director, YY Lee, who was appointed earlier this year.
Elliott proposed two women for the board, Martha Bejar and Wendy Lane. Bejar has been CEO of three tech companies. Lane has served on the board of eight public companies, and is a former investment banker. The other proposed directors are Fidelis Cybersecurity CEO John McCormack and former Skillsoft CEO Chuck Moran.
“The skills and focus Commvault requires over the next five years must be profoundly different than those evidenced over the previous five,” Elliott’s letter said.
Elliott called for a comprehensive operational review of Commvault by a third-party consulting firm, concluding “there is substantial work to be done to transform Commvault.”
“We strongly believe that Elliott and Commvault can work together collaboratively to implement these recommendations and we are eager to sit down in person to discuss the path forward,” Elliott said at the end of the letter. “Please let us know when we can meet to discuss next steps or if you have any questions.”