EMC has announced its second-quarter earnings, reporting
growth in its storage systems, especially in the midrange, but CEO
Joe Tucci expressed disappointment in the performance of the
company's content management and archiving (CMA) business unit even
as thedata archivingmarket heats
up."We have definitely not executed to our full potential in this
market," Tucci said on the company's earnings call. Tucci said the
company had an "abnormally tough" comparison between this quarter
and the same quarter last year, when the CMA business reported 52%
revenue growth. This quarter, revenues for this business unit were
up just 5%, and most of that revenue came from maintenance and
services rather than the sale of new software licenses.
Tucci and chief financial officer (CFO) David Goulden both
referenced the consolidation in the archiving market of late in
their remarks as part of the reason for the slowdown. Goulden said
the
recent spate of acquisitions, from Google and Postini to Autonomy
and Zantaz, may be responsible for "purchase pause" among
customers.
"That may have been temporarily handicapping our execution this
quarter," Tucci said. "But that's no excuse -- we can and will do
better in this space." The executives said EMC plans to announce a
new version of Documentum content management software next week.
Meanwhile, the storage systems business is booming, the company
reported, especially in Clariion. The overall storage systems
business is up 21% over the same quarter last year, to $3.12
billion. Within that, Goulden said, Clariion revenues are up 34%,
both in the U.S. and Europe. Goulden attributed the growth to the
increasing popularity of backup to disk, and sales of the EMC Disk
Library
virtual tape library (VTL) product, which is based on Clariion.
(The company did not break out exact revenue numbers by product
line within storage systems.)
Symmetrix, meanwhile, showed just 3% year-over-year growth
despite the introduction of two new models in the last year.
Bookings for the Symmetrix were flat compared to a year ago.
However, Tucci said the company is "clearly focused" on the
midtier, citing the new Celerra NS-20 and NS-40 network attached
storage (NAS) products. EMC also said that its market research
indicates that IT spending in the U.S. has firmed up over the first
quarter, after a spending slowdown that had been blamed by rival
Network Appliance Inc. (NetApp) for shortfalls in that quarter.
Tucci said EMC is seeing NetApp and Hewlett-Packard Co. (HP)
most often in the midrange market and that the company was
continuing to be aggressive with pricing in an attempt to take
share. Tucci also said better multiprotocol support in the new NAS
boxes would make them more competitive. EMC plans to introduce
another, smaller model in this product line, the NS-10, similar to
the CX-10.
Daniel Renouard, analyst for Robert W. Baird and Co., inquired
about the risk of potential "cannibalization" of low-end Clariion
models by the new Celerra systems, to which Tucci flatly responded,
"I don't really care. It doesn't matter if we sell Clariion or
[Celerra] to me."
Meanwhile, Tucci also indicated that startups in this space are
appearing on EMC's radar screen. "Our new midtier NAS strategy will
put heat on … a number of storage startups that have been
attempting to make noise lately in the storage marketplace," he
said. (See
EMC, HDS kick off thin provisioning cage
match, July 18.)
Wall Street analysts also indicated some trepidation over the
release of a new Symmetrix product, the DMX-4, with general
availability slated for August, given last year's inventory
problems that stalled delivery of the DMX-3 and put a dent in
revenues for the company.
"How does the availability of this product at the back end of an
already back-end-loaded quarter not increase risk?" asked Laura
Conigliaro of Goldman Sachs Group Inc.
In response, Tucci said the transition between the DMX-3 and
DMX-4 is not as major, and that the company had "learned from [the]
missteps" when it comes to inventory for new products.