EMC completes acquisition of Data Domain; fate of data deduplication partner Quantum unknown

By Beth Pariseau, Senior News Writer 23 Jul 2009 | SearchStorage.com

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Meanwhile, the fate of EMC's current data deduplication partner, Quantum Corp., remains unclear after EMC executives avoided mentioning the firm during today's earnings call.

EMC reported revenue of $3.26 billion, an increase of 3% sequentially, and net income of $205.2 million, an increase of 6% sequentially. While stronger than first quarter revenue, the number represents a decline of 11% vs. the second quarter of 2008. In addition, net income fell short of the $360.1 million reported for last year's second quarter.

More on storage vendors Hewlett-Packard buys Ibrix for scale-out NAS; takes another step into clustered storage Dell looking for acquisitions; data storage experts scope out the candidates EMC wraps up data deduplication vendor Data Domain; what's next for EMC, NetApp? EMC acquires Data Domain for $2.1B after NetApp drops bid

EMC reported that storage products in its information infrastructure business brought in $1.8 billion in revenue and that it has already shipped a petabyte of solid-state drive (SSD) capacity with its disk arrays. EMC execs said Celerra had its ninth consecutive quarter of double-digit revenue growth, while Avamar data deduplication software revenue grew 40% compared to last year. Content management and archiving revenue increased 3% sequentially, but dropped 12% year over year. The new SourceOne email archiving software was "a key offering in several large solution deals this year," according to David Goulden, EMC's executive vice president and chief financial officer.

Financial analysts grilled the executives on a 3% sequential decline in the Symmetrix high-end disk array business, which "reflected continued pressure on high-end items," according to Goulden. CEO Joe Tucci said shipments of the new Symmetrix V-Max have slightly beat EMC's own internal plan, but added that sales have been tempered because EMC's automated tiered storage software, FAST, won't ship until the end of the year. "As that kicks in, I expect this cycle will carry us into 2010," Tucci said.

"The bottom line is that the overall hardware numbers were good," said Brian Babineau, a senior analyst at Milford, Mass.-based Enterprise Strategy Group. "The lines in storage have been blurred so significantly that customers can use Clariion for almost any workload except mainframe."

EMC executives optimistic about IT spending, growth

EMC execs were more optimistic about IT spending than last quarter. "IT spending was more stable and a little more predictable" last quarter, according to Goulden. Tucci added that customers' IT spending had "firmed up quite a bit." Based on those trends, the executives offered a forecast calling for 2% to 3% growth this quarter and more significant growth toward the end of the year.

EMC also said today that it expects $200 million in revenue from the acquisition of Data Domain over the next two quarters. That acquisition is expected to formally close today, with EMC controlling 94.2% of Data Domain shares after completing its tender offer. EMC reported Data Domain had about $86 million in revenue last quarter, an increase of 40% vs. last year. Tucci predicted that EMC's data deduplication tandem of Avamar and Data Domain will represent close to $1 billion in revenue next year.

Writing on the wall for Quantum?

There was no mention of Quantum on the earnings call. EMC posted a 'frequently asked questions' page on its website this week that vaguely addresses the data deduplication software licensed from Quantum for the EMC Disk Library line. According to the FAQ, "The deduplication engine for the DL4000 will transition to the Data Domain architecture over time," while "The DL1500 and DL3000 models will continue to be offered and supported according to standard EMC policy."

However, to most industry watchers, the writing seems to be on the wall for Quantum. "It's hard to imagine EMC trying to continue to innovate on, support and maintain two different dedupe engines," said Arun Taneja, founder and consulting analyst at Hopkinton, Mass.-based Taneja Group. "There would have to be a reason for it. It seems like the decision is obvious – or at least the signs are all pointing one way."

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