EMC’s storage sales declined more than expected last quarter as the vendor waits to become part of Dell.
EMC executives offered several reasons for the drop in sales, but not the most obvious one. That would be, customers are reluctant to buy now until they see what happens if and when the $67 billion Dell deal closes.
EMC CEOs Joe Tucci and David Goulden – who heads the storage business – say the decline was due to product cycle transitions and an overall caution in IT spending that caused a backlog of deals. Those reasons are often cited by storage vendors for poor results, and may be valid in this case. But it’s unrealistic to think that none of the reluctance to buy is related to the pending Dell deal.
Tucci did emphasize that the Dell deal is on track to close “under the original terms and under the original timeframe,” on today’s earnings call. The original timeframe called for it to close between mid-2016 and October. And Tucci said EMC’s plans for 2016 call for revenue growth, indicating he expects the sales declines to be reversed in coming months.
Tucci called the Dell deal “a great strategic option” and said “the combination of EMC and Dell creates a powerhouse in the IT industry. Integration planning has accelerated. [Dell and EMC] have developed detailed integration plans to assure we hit the ground running when the merger closes.”
He said regulatory approval has been granted throughout the world except for China. EMC stockholders still have to approve the deal. And of course, the $57 billion in funding must also be secured but Dell and EMC execs have said that is no problem.
Tucci would not comment on what role he would play in the new company, which will be headed by Michael Dell. He didn’t exactly sound like he is resigned to ride off into the sunset for his long-anticipated retirement, though.
“I’m going to punt a little bit, and then I’m going to tell you the absolute truth,” Tucci said when asked about his role after the Dell deal. “To me, this is all about making sure it’s a good deal for our customers, our shareholders and our people, and they’re all priority number one to me. And it’s not about me. I have a lot of energy left, I’m going to continue to work doing different things. Potentially I could help advise Michael, but I just don’t want to go there yet, and Michael and I have not gone there yet.”
EMC Information Infrastructure (the storage group) reported $3.8 billion in revenue for the first quarter, down six percent year-over-year. Storage product revenue of $1.96 billion dropped 10%, partly because of $75 million worth of unfilled late orders. EMC II CEO Goulden said sales of its XtremIO all-flash storage asold well, and the VMAX All-Flash array is one of the new products he expects to pick up steam.
Goulden said he expects VMAX All-Flash arrays to make up at least half of new VMAX sales by the end of the year. And there will be another all-flash array coming at EMC World in two weeks. That will be a midrange all-flash array that will either be part of the VNX family or replace it.
“VMAX All-Flash is a game-changer,” Goulden said. “We will have a major new mid-tier announcement at EMC World that will be the start of a new cycle where the traditional VNX plays.”