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Data storage vendors in the hot seat in 2016 outlook

EMC and Dell face the pressures of a $67 billion merger in 2016, but it will be a pivotal year for other storage vendors as well among declining sales and splits.

A tumultuous 2015 places data storage vendors under great pressure heading into 2016. With worldwide networked...

storage sales declining, the cloud eating into on-premises purchases, and the public markets unclear, the entire industry faces an uncertain year.

But for a dozen or so data storage vendors -- including a few of the biggest out there -- 2016 will be especially pivotal.

Merged and divided: EMC/Dell, Veritas, HPE

EMC and Dell stand at the center of the storage universe heading into their $67 billion merger. Because the deal won't close until late 2016, customers, competitors and Dell and EMC employees will spend most of the year wondering what the combined company will look like. No one can be sure what products will stay and what will go, and every bit of news coming out before and immediately after the close will be closely scrutinized for hints of the bigger picture. Historically, such uncertainty ahead of huge mergers slows those companies' sales. That could leave an opening for rivals this year.

The storage world reacted well to Symantec's decision to spin off its backup and storage management products into a new Veritas. Veritas on its own can concentrate on storage rather than serve as part of a larger security company. But the Carlyle Group, which bought Veritas for $8 billion last August, is a newcomer to storage. Veritas has been operating as a separate company from Symantec since October, and the Carlyle deal is expected to close in January. Because the Carlyle Group has no track record in storage, it might take much of 2016 before we get a feel for its long-term plans for Veritas.

Storage will play a bigger role inside Hewlett Packard Enterprise (HPE) than it did before HP broke into two companies. HPE CEO Meg Whitman says she is excited about the 3PAR array platform, which has been a strong performer among a laggard HP storage business for years. Now HPE has to prove it can put enough strong storage technology around 3PAR to take advantage of the EMC-Dell uncertainty and buck the trend of declining HP storage revenue.

IBM, NetApp, CommVault -- big data storage vendors on the decline

IBM's storage business has been in a freefall for years. There is an opening for Big Blue to rebound in 2016, though. IBM has done better in the flash market than with disk, and the appetite for all-flash arrays is growing rapidly. Then there is the expected pause in EMC sales ahead of the Dell merger. Still, a storage resurgence would require a U-turn from IBM.

NetApp had a rocky 2015, changing CEOs from Tom Georgens to George Kurian in April after a string of seven poor sales quarters. NetApp has been hurt by lack of a pure all-flash platform, and customers have resisted the disruptive upgrade required to switch from its flagship Data ONTAP operating system to the clustered Data ONTAP version. Kurian made his first big move in December, acquiring all-flash startup SolidFire for $870 million. NetApp's main focus entering 2016 is around hybrid cloud implementations, but it's hardly alone there.

Backup vendor Commvault was considered a rising threat to giants such as EMC and Symantec for years, steadily growing its revenue in double digits year over year. That growth stopped in mid-2014, and the vendor's revenue declined overall in 2015. Commvault moved to make its software less expensive and less complicated after finding itself competing with larger data storage vendors that were able to cut prices to compete, and smaller, focused vendors such as Veeam and Actifio. It dropped the Simpana brand with its latest release, placing its 2016 hopes on the newly released Commvault Data Platform.

Nimble and Pure at the crossroads

Nimble Storage was hitting on all cylinders after becoming a public company in late 2013 until its revenue fell below its forecast for the third quarter of 2015. Overnight, Nimble's stock price was cut in half as it pushed back its target date for profitability. Nimble got stung by the lack of an all-flash array, which it is scrambling to design in hopes of righting the ship.

All-flash vendor Pure Storage showed strong revenue growth in its first quarter as a public company, and is among the top three in all-flash market share with EMC and IBM. But Pure continues to lose money at an alarming rate ($28.1 million in the most recent quarter) and doesn't expect to be profitable until 2018. And as Nimble found out, one bad quarter can do a lot of damage to a young public company.

Kaminario, last of the flash startups

The industry was overflowing with pure all-flash startups a few years back but no more. Violin Memory and Pure Storage went public, XtremIO, Texas Memory Systems, SolidFire, Whiptail and Skyera were acquired, and Nimbus vanished. That leaves Kaminario as the only all-flash private vendor entering 2016. Kaminario could be a tempting acquisition target, or it could be on the road to oblivion if it doesn't drastically increase its footprint in the flash market in 2016.

Last chance for Violin, FalconStor, X-IO?

Violin helped create the flash storage market, but struggles to sell any arrays now that the market is taking off. Violin had $6.3 million in product revenue during its last full quarter in 2015, and has hired bankers to pursue strategic alternatives. The money-losing vendor likely needs to be acquired or find a deep-pocketed partner to survive.

FalconStor tried unsuccessfully to sell itself a few years back, and now is trying to revive its hopes around a new FreeStor data protection and storage management platform. FalconStor has been lining up OEM partners, but it will need a significant revenue jolt in 2016 to have a long-term future.

X-IO Technologies named Bill Miller CEO and shifted its strategy in 2015. That's not really news -- the company has had three CEOs in four years and 10 in its 20-year history. What is notable is the vendor stacked its ISE storage blocks into a full SAN platform called Iglu in a directional change. The Iglu Blaze scale-up system launched in July. A scale-out Iglu Inferno was expected in 2015 but hasn't made it out yet. Iglu might be the final chance for this decades-old vendor that continues to lose money.

Next Steps

Dell acquisition of EMC leads a formative year for data storage

Predictions for hot data storage technologies in 2016

Everything you need to know about Dell and EMC

Storage startups may outpace long-time vendors

Dig Deeper on Storage vendors

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Which storage vendors will you be watching most closely in 2016?
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I wouldn't be surprised to see more acquisitions in 2016, either. For one thing, EMC-Dell -- assuming it closes -- will probably be shedding bits and pieces of itself through the year, which could be snapped up. Plus other vendors might want to buy their way into the storage, or especially the flash storage, market, or even buy out competitors or acqui-hire.
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We are closely watching the big mergers but having doubts about their ability to move quickly. It's the start-ups that make the real progress with software and technology. The winners are going to be the software products that allow you to do more with less--increase your storage capacity and management using existing hardware. It's all about data management and the companies that realize this will win. Not sure that Dell and EMC are up to the challenge. Time will tell.
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Sure. The startups make the progress -- and then the bigger companies acquire or acqui-hire them. :)
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