EMC provided more detail on its revenue and earnings last quarter, and the results could play into its product strategy leading into and following its acquisition by Dell.
EMC Information Infrastructure (II) – EMC’s storage group – reported revenue of $4.3 billion, down three percent year over year as expected. But the product mix was unexpected. EMC’s traditional storage arrays VMAX and VNX accounted for less than 50% of its overall storage revenue. That marks the first time EMC’s main midrange and enterprise arrays made up less than half of its storage business. Thirty months ago, those two platforms accounted for around 70% of its storage business.
EMC’s new hotshot array is the all-flash XtremIO, which more than double revenue over last year and is on pace to generate $1 billion this year.
“In other words, the products with the higher growth profile, including all-flash arrays, scale-out file, software-defined storage, converged infrastructure, and next-gen backup are now the bigger proportion of our strategic storage business,” EMC II CEO David Goulden said on a Wednesday conference call to discuss earnings. “This is a good indicator of the progress we’ve made in our storage portfolio transition.”
Whether the results are good or bad for EMC, they do provide a good indication of where the storage industry is going. Industry transition was a big theme of EMC’s call, which came nine days after Dell disclosed its proposed blockbuster $67 billion acquisition of EMC. The Dell deal is expected to close in mid-2016. EMC CEO Joe Tucci predicted there will be more consolidation among IT vendors as they adjust to secular trends such as the cloud and converged infrastructure.
“This is a different game being played now,” he said. “If you go back to the client/server era or the last era, everybody stayed neatly in their lane. There was a storage lane. And of course, that’s where EMC played. There was a networking lane. That’s were Cisco played. There was a server lane. In the early days you had Sun and HP and others. And then of course, you had even a database lane, where Oracle was the big player. “Now nobody is staying in their lane.”
One thing that won’t change, Tucci said, is the way VMware does business with partners. EMC has been careful to keep VMware hardware neutral to avoid alienating the partners VMware relies on. Tucci said that will continue under Dell. “There will be no change in how VMware manages its ecosystem,” Tucci said. “Like today, they won’t create products that favor one hardware vendor over another. To this end, Michael Dell and I have reached out to the CEOs of the key VMware OEM partners to assure them of this.”
Tucci repeated his claim from last week that Dell competitor Cisco will also remain a close EMC partner, particularly in its VCE converged infrastructure group. EMC has said VCE’s Vblocks will all ship with Cisco hardware, although VCE will sell different platforms than Vblock with other vendors’ servers and networking. Tucci also addressed the finances of the Dell acquisition. He said being part of a private company will allow “more freedom to invest in the short term without the pressure of managing for quarter end.”
As for the roughly $50 billion in financing that Dell took on to buy EMC, Tucci said “over the last three years EMC alone has averaged approximately $3.5 billion annually on share repurchases and dividends which will no longer be relevant in a private company controlled model. “Furthermore, the collective cash flows of the combined company, enhanced by synergies, will allow us to keep investing heavily in [research and development] and in innovation, in go-to-market, and in resources to provide first-class services and support to our customers.”