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CommVault slump continues

CommVault CEO Bob Hammer insists his company isn’t broken, although he has a plethora of fixes lined up.

The backup software vendor Tuesday reported rocky results for last quarter (it’s third straight disappointing quarter) and indicated this quarter won’t be much better.

CommVault’s $151.1 million in revenue last quarter was close to $7 million below Wall Street expectations. The revenue was up seven percent year-over-year and down one percent from the previous quarter, disappointing for a company that not long ago was growing in the 20 percent range year-over-year every quarter. CommVault executives said on the company’s earnings call that they don’t expect much revenue growth this quarter.

Hammer did maintain that CommVault will bounce back to post revenue growth in the 20 percent range by the end of 2016 and hit $1 billion in annual revenue within three years. He blames the poor recent sales mostly on the way the company has packaged and priced its Simpana software. His cures include management additions (new global sales VP and chief management officer) and structure, new product bundles and pricing models, and product upgrades that include Simpana 11 and an appliance partnership with NetApp.

“We knew this quarter would be challenging … and that it would take us several more quarters to get back to sustainable consistent high-growth trajectory,” Hammer said.

Hammer said he realized change would be needed for more than a year and put them in place, but not fast enough. “We possess strong underlying business fundamentals, our target markets continue to have solid growth potential and we are well-positioned to take advantage of the increasing demand by both enterprise-level and mid-sized companies,” he said.

“We see our current challenge as difficult but resolvable.”

Much of his optimism is based on Simpana 11. Hammer said Simpana 11 will be open so “anyone will be able to access and read data that we store under more sophisticated security functionality” and APIs throughout the stack. Simpana 11 will also index and transport data differently.

Hammer said CommVault is also emphasizing fast access to data and native copy capabilities that allow customers to store data in the same format the original application created it in. That allows recovery without having to use a backup copy.

Integrated backup appliances are catching on in the market, and CommVault has not followed Symantec’s lead of selling its own appliances with its software. However, CommVault is adding hardware partners, and Hammer said NetApp will begin selling its E Series storage appliances with Simpana software this quarter. Fujitsu is also adding a CommVault appliance in Europe this quarter.

“We didn’t want to be in the hardware business,” Hammer said. “So it took us more time to put programs together with our hardware and distribution partners. It took us a long time but now we have them.”

CommVault’s revenue from enterprise deals – considered deals above $100,000 in software revenue – fell five percent from last year and 14 percent from the previous quarter. The average enterprise deal fell to $281,000 from $396,000 the prior quarter.

Still, CommVault executives said its problems are mainly in the mid-market. Because of CommVault’s pricing structure, smaller companies targeted at specific use cases have taken business away, Hammer said.

CommVault has already switched to per user or per VM licensing for new solution sets launched in August. Those bundles were for virtual machine and cloud backup, endpoint protection, email archiving, and snapshot management. It has also set up business units for data protection, cloud ops/orchestration, information compliance, mobile and vertical solutions to concentrate on those market segments. Each business unit will be responsible for technical roadmaps and executing against strategic and revenue goals.

Veeam Software is not among the vendors hurting CommVault, according to Hammer and CommVault COO Al Bunte. Veeam specializes in virtual machine backup and has rapidly grown into close to a $400 million annual revenue company. Hammer acknowledged that data protection for virtualization is the fastest growing part of the data management market, but said CommVault does well there. He said Veeam plays at the low-end of the mid-market, and he expects the new packaging and pricing to help CommVault there. Bunte added that CommVault faces more competition from its traditional larger rivals EMC, Symantec and IBM in the mid-market.

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