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FalconStor suffers from OEM woes

HBA vendors QLogic and Emulex say sales last quarter exceeded their expectations, and Wall Street analysts are predicting good numbers for storage systems vendors. But not every storage vendor finished 2009 strong.

FalconStor Software said it finished 2009 below its forecast due to a poor fourth quarter. FalconStor’s revised guidance is for annual revenue of $88.5 to $89 million compared to previous guidance of $96 million.

FalconStor CEO ReiJane Huai blamed the shortage on problems with his company’s OEM business. FalconStor says OEM partner H3C generated more than $2 million less in licensing revenue than expected following Hewlett-Packard’s acquisition of H3C parent 3Com. Oracle’s delayed closing on the acquistion of FalconStor OEM partner Sun Microsystems also resulted in less revenue than expected.

Perhaps the biggest problem for FalconStor was revenue from its largest OEM partner, EMC, also came in below expectations. That’s despite analyst predictions that EMC beat its overall revenue forecast for the quarter with strong sales of its Symmetrix V-Max enterprise systems and Data Domain deduplication appliances.

Along with EMC, Wall Street analysts expect good quarters from other storage system vendors large and small. RBC Capital Market analyst Amit Daryanani predicts NAS vendor Isilon not only beat expectations last quarter but broke even for the first time. 3PAR also exceeded expectations, according to Wedbush Securities analyst Kaushik Roy.

“Industry contacts indicate that all storage systems vendors appear to have met or beat internal expectations,” Roy wrote in a note to clients issued today.

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