Many people once viewed the storage industry as the earnings juggernaut of the tech sector but, as with every other...
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industry, the economic plunge of the past two years stopped revenues dead in their tracks. However, a recent series of research reports and company earnings statements are pointing to a rebound that may make the storage sector one of the first to emerge from the economic downturn.
The most recent sign of success in storage came last week, when Framingham, Mass.-based International Data Corp. issued its quarterly report on storage systems revenues. The report showed a 12% increase in overall revenues since December 2002.
According to IDC, worldwide disk storage systems factory revenue was $5.4 billion in the fourth quarter of 2002, up 12% compared with the third quarter of 2002, with sequential growth. Revenue for the entire year was better than expected in 2002.
IDC's John McArthur said the research firm expects to see a return to more normal seasonal changes, since companies have already made their major adjustments to storage spending.
IDC isn't the only firm seeing success in the market. "I've seen pretty favorable quarters coming from most of the people that I talk to," said Mike Karp, a senior analyst with Enterprise Management Associates Inc., Boulder, Colo.
Karp said there are several forces at work driving growth. Data keeps accumulating, and what is being stored is getting qualitatively richer.
"Even in these trying times, nobody is throwing away data," he said.
Karp said users are going to get more out of their existing storage hardware this year through the use of storage resource management software, which may pose a minor short-term problem for hardware vendors.
"What space the users find on their systems will be quickly eaten up by the new data that is acquired. More valuable data will be allocated to the newer, more expensive hardware, while older data will be moved over to the older hardware," Karp said.
He expects hardware revenues to grow, despite disk space found through the use of the new SRM software. Software, Karp said, will grow as well.
Another sign of solid storage sales came in January from software maker Veritas Software Corp., Mountain View, Calif., when it reported record earnings for the fourth quarter of 2002.
Veritas recorded fourth-quarter revenue of $405 million, compared with revenue of $365 million for the previous quarter and revenue of $374 million for the same period a year ago.
The tape segment of the storage market has experienced its own growth in recent months.
A report from Freeman Reports, an Ojai, Calif.-based analyst firm that focuses on the tape market, said shipments of "super tape" drives more than doubled in 2002.
The growth was led by the combined strength of Super DLT and LTO tape drives, which increased to 282,500 units in 2002, up 106% compared with 2001.
Storage switch makers have also tallied high earnings. McData Corp., Broomfield, Colo., reported revenue results of $105.5 million for its fourth quarter, which ended Dec. 31, 2002, The company said the numbers represented 30% sequential growth and a 13% year-over-year increase.
But don't count your dividends before they're cashed. An increasingly unstable geopolitical climate is making companies and individuals alike nervous when it comes to spending, and IT budgets could be chopped if war becomes a reality. The recovery is not over by a long shot, but the industry is definitely alive and kicking.
Let us know what you think about the story. E-mail Kevin Komiega, News Writer
FOR MORE INFORMATION:HP gains top spot in disk storage revenues Networked storage to oust DAS, tape to thrive IDC and RBC confirm confidence in networked storage outlook Comment on this article in the SearchStorage.com Discussion forums