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Data protection vendors (except for Veeam) struggled last quarter

Not only the big storage array hardware vendors are seeing  revenues declines from last year. This week, backup vendors Commvault, Quantum and FalconStor said they lost money and had revenue declines last quarter.

All three are in transition. Commvault is trying to rebound from a six-quarter slump by rebooting its product, branding and sales strategies. Quantum has had an up and down year, but is looking to become a major player in media/entertainment and video storage with its StorNext scale-out file system to go with its tape and disk backup product. FalconStor is still trying to dig out of a disastrous 2010-11 period with FreeStor, the latest version of its data protection and storage management software that it sells to OEMs, service providers and enterprises.

All three say they are close to turning the corner, but none of them did last quarter.

Commvault lost $9.2 million in the quarter. Its $141 million of earnings was a bit better than expected but down seven percent from last year. Software licensing revenue of $58 million fell 17% from last year.

Quantum’s $117 million in revenue missed its guidance mark. Quantum executives said there was a $7.8 million of backlogged orders, but that still would leave revenue below the $135.1 million last year. Quantum lost $11.2 million for the quarter.

FalconStor’s $9.7 million in the quarter was down 13% from last year, and half of the revenue in the quarter came from OEM partner Hitachi Data Systems. The vendor lost $2.5 million in the quarter.

There is one backup software vendor doing fine, and that is privately held Veeam Software. Veeam does not report detailed earnings but said last quarter its 17% bookings growth, 23% growth in enterprise customer orders and added 11,300 paid customers in the quarter.

Commvault is moving to what the company calls Commvault Next follow a string of poor quarters in the face of increased competition. The changes include rebranding of the company (no more capital V), the main product (no more Simpana), new sales and marketing leadership, and new sales model (selling point products for targeted use cases). Commvault just released the 11th generation of its software, now called the Commvault Data Platform, which will probably be the main factor for whether it succeeds or fails in its turnaround.

“The objective of Commvault Next is to return CommVault to solid revenue and earnings growth in an environment driven by security disruptions caused primarily by the shift to the cloud and SaaS environments,” CEO Bob Hammer said. “A lot of [storage] companies have been disrupted. I said two years ago we had to change fundamentally everything we are doing. First of all you have to be relevant and provide highly differentiated value in the cloud and for SaaS types of applications. That requires fundamental architectural changes to the platform to enable all that to happen.”

Hammer said the company is poised for “substantial growth” over the next six months.

“We have made good progress on our transformation as a result of momentum building and we are positioning Commvault to better financial results in the [next six months]. We have built that foundation for CommVault to generate both revenue and earnings growth in FY 2016 — 2017.

Despite Quantum’s disappointing quarter, StorNext and related scale-out storage revenue of $29.9 million increased 17% from last and has grown 33% over the last six months. But even that is below the vendor’s goal of 50% growth in scale-out storage.

Quantum CEO Jon Gacek blamed its low revenue quarter to an unusually high number of customers placing orders on the last day of the quarter, shortage of supply from disk partners that prevented it from filling all the orders received, fewer large deals and larger competitors’ willingness to lower prices to win deals. With help of the late orders, Quantum’s revenue guidance of $130 million to $140 million for this quarter was higher than expected.

“Scale-out is where the market is expanding for us,” Gacek said. “We have unique position there and that’s where we’re investing money.”

FalconStor CEO Gary Quinn said Volkswagen signed on as the first FreeStor Global 2000 enterprise customer.

“I think once we show two to three quarters sequentially performing in the upward direction and add some additional resources, we will know that the North American business is stable and improving,” Quinn said. “The software-defined storage space is a very exciting and very potentially large addressable market to grow into as the future moves forward here. And we think that we are well-positioned in the center of that marketplace as we enter 2016.”

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