During EMC Corp.'s fourth-quarter earnings report this morning, CEO Joe Tucci discussed the company's progress on a hotly-anticipated clustered storage product, as well as providing an outlook on the storage market for 2008.
"We've already GA'd a new hardware system to a limited number of customers," Tucci said, referring to a new Web 2.0 clustered storage system codenamed Hulk. Tucci said betas are working the bugs out of the hardware before companion software, codenamed Maui, is introduced later this year. Calling Maui a "new operating system," Tucci said that EMC will "make more of a splash" about the clustered system when it comes out.
Since the third quarter earnings call last October, Tucci has been forthcoming about the company's product roadmaps, after admitting that EMC had been beaten to several key markets by startups. In this morning's call, Tucci reiterated pledges that EMC will have data deduplication and spin-down capabilities integrated into its existing storage arrays shortly. He also took a more aggressive stance on iSCSI and multiprotocol storage.
More than 50% of new CX-3 shipments have been for Fibre Channel/iSCSI dual-protocol systems, Tucci said. The new Celerra NS-20 and NS-40, which support NAS, FC and iSCSI and feature new management software wizards for easier setup, have been "white-hot," he said. "In both the third and fourth quarters, we sold completely out of them."
During the call, CFO David Goulden added that the Celerra NS-20 "is one of the fastest-growing products we've ever introduced to the market."
Based on these sales, Tucci now predicts that "multiprotocol systems will dominate in 2008."
Although Goulden said that EMC's storage software division saw double-digit growth, including sales of EMC's Avamar data deduplication software, he noted that EMC customer surveys have the company anticipating a massive move away from tape backups in 2008. Recent surveys show 60-65% of companies still doing some tape backup, but only 30-35% of them predict they'll still be doing tape backup by 2009.
EMC also reported that its Rainfinity file virtualization product, which was refocused last year to hone in on data migration, showed double-digit growth over the last quarter, although the company did not provide more specific numbers. Content management and archiving, which fell short of goals in the second quarter, finished the year strong, although on this call, most of the discussion about products in this space was focused on Documentum. EMC executives on the call mentioned Generation 4 of the Centera CAS system, but provided no growth numbers or statements.
2008 forecast calls for more stormy weather
Despite reporting record quarterly and yearly revenues of $3.83 billion and $13.23 billion, respectively -- each of which represent a 19% increase year-over-year -- there may be some shadows on the horizon for EMC, most of them relating to a volatile economy. During the call, Tucci tried to allay fears that EMC might be headed for the same fate it suffered when the "tech bubble" burst earlier this decade by pointing out that EMC now has a more diverse customer base and product line.
"In 1999 and 2000, most of our customers were new Web-based companies," Tucci said. Those companies disappeared after the bubble burst, and so did EMC's revenue, on a much more specialized product set. "Today, any way you cut it, EMC has multiple ways to attack the market."
Still, VMware and EMC shares were down after Tucci's 2008 forecasts for both companies fell short of analyst expectations—even though VMware is forecast to grow 50%. (By contrast, it grew 90% last year.) "There absolutely will be IT spending growth in 2008," Tucci told Wall Street analysts on the call. "To date, I haven't seen much negativity, but it is prudent to be cautious."
"I don't know what EMC could have done better from a business execution perspective," said ESG analyst Brian Babineau after the call. "The downside is that the company's stock is directly tied to VMware growth rates, [but] the upside is that the EMC's core business, across all segments, is on fire."
However, research from TheInfoPro (TIP) among users points to potential rain on EMC's parade. According to a vendor profile on EMC dated yesterday, "EMC Celerra [satisfaction] ratings have dropped dramatically from the highs reached in [the previous survey]. EMC Legato Backup Software ratings are also falling, with the exception of archiving (EmailXtender)." These ratings were gleaned from a TIP Wave 10 Storage Report, based on recent interviews with 289 storage professionals at Fortune 1000, Global 2000 and U.S. MidMarket organizations.
Users have also downgraded EMC's performance in a majority of TIP survey categories, including "value for the money," which dropped 2.7%, and "product performance," which fell 2.5%. User ratings on whether or not Celerra in particular fulfilled promises "dropped dramatically" since the last survey, according to the report. The TIP research also shows that EMC users are very loyal, and "lock-in strength" for EMC shops is increasing. But the biggest concerns for EMC, according to TIP, are in block virtualization and backup software. "EMC has not been converting Invista products from in-plan into in-use as rapidly as HDS and IBM, and 3PAR is now getting more in-use [reports from users] for block virtualization solutions with thin provisioning demand," according to Robert Stevenson, TIP managing director, storage research. "On the backup software side, Legato has not been having success."