The data storage industry remains on high alert for a coronavirus impact, as Dell Technologies and Nutanix this week raised cautionary flags about their early 2020 revenue estimates.
Major storage players have good reason to keep close tabs on the coronavirus outbreak that has sickened more than 82,000 people in 46 countries and killed close to 3,000 since surfacing in Wuhan, China late last year. Many vendors have business offices, production facilities, manufacturing partners or component suppliers in China and other parts of Asia, where the COVID-19 virus has hit the hardest.
"This is a very real concern for us as many of our people are near that region," said Hu Yoshida, vice president and global CTO at Hitachi Vantara.
Hitachi and other storage vendors have been disseminating educational materials and protective supplies, providing support resources, and implementing travel restrictions and recommendations as they try to keep their employees healthy and safe and minimize the impact to their businesses.
So far, none of the major storage providers has adjusted its full-year guidance to investors based on the coronavirus outbreak. But the first hints of a short-term revenue impact emerged this week during the earnings calls, when Dell Technologies, the top enterprise server and storage vendor, and Nutanix, a leader in hyper-converged infrastructure (HCI), tempered their revenue expectations.
Coronavirus impact at Dell
Dell EVP and CFO Thomas Sweet said yesterday that the company expects its normal revenue pattern to be "softer" due to the coronavirus outbreak. He noted that China is Dell's second-largest market, and Dell has experienced challenges there in the server market.
Sweet said, as a result of the COVID-19 outbreak, Dell would "manage the supply chain-related dynamics with extended lead times for certain products, particularly in client." He said consumers might move elsewhere if they can't find the right product when they want it.
Customer impact: Too early to tell
Storage customers have reason to watch for vendors' supply problems, because that could result in product shortages.
"It's still too early to quantify what impact, if any, we will see on shipments of servers and storage systems to end users for the first half of 2020," said Sebastian Lagana, a research manager at IDC.
Chinese factories shut down during the Lunar New Year holiday that extended from late January through Feb. 9, and many vacationing workers were unable to return home due to the suspension of public transportation services. Lagana said there is likely to be supply-chain disruption at the level of components and printed circuit boards (PCBs). He said, the longer that the restrictions on facility reopenings and travel continue, the longer it will take to ramp production back to full capacity.
"Many suppliers do keep a war chest of components and PCBs on hand, which will help offset any supply chain pressure, but this generally would cover somewhere between a two- to four-week disruption window," Lagana said. "After that, production would start to slow. A silver lining, however, is that we've been told by some OEMs that they tend to insulate their supply chain a bit more than usual in line with the Lunar New Year holiday, so there may have already been some shorter-term contingency planning in place."
HCI specialist Nutanix said it does not expect any serious supply chain disruptions for the current quarter. But CFO Duston Williams said Nutanix was forecasting lower-than-expected revenue in part due to the coronavirus impact on demand in Asia.
Hu YoshidaVP and global CTO, Hitachi Vantara
"There are some large deals in Japan that we have to watch out for. Japan's fiscal year closes in March. We're just trying to be more cautious than anything else," Nutanix CEO Dheeraj Pandey said during an interview following the earnings call. Pandey said Nutanix reduced its revenue forecast because the Asia-Pacific region accounts for 16% to 18% of the company's business.
NetApp has issued a statement notifying partners and customers about "a potential for impact" on its supply chain operations. NetApp said, although final assembly and testing of its products is done outside of China, the company has component suppliers in China that continue to experience the impact of "restrictions on movements of people and goods."
Hewlett Packard Enterprise (HPE) remains in "constant contact" with its suppliers and joint venture partners at H3C to assess any impact of the COVID-19 outbreak, according to a company spokesperson. HPE claimed to have "robust business continuity plans" to mitigate disruption, meet customer demand and protect employees.
For instance, HPE implemented a global 14-day work-from-home policy for employees who have visited mainland China or come in contact with anyone who has. HPE also put into place additional screening procedures for visitors to HPE locations.
Hitachi Vantara updated its travel policy on Wednesday, based on advisories from the U.S. State Department. The company now prohibits travel to mainland China and advises against nonessential travel to South Korea, Japan and Italy. Hitachi does not expect any significant coronavirus impact to its supply chain or business operations in the current quarter, according to a company spokesperson.
Pure Storage sees minimal coronavirus impact
Pure Storage CEO Charlie Giancarlo said yesterday the company anticipates no significant impact to supply and operations this quarter, although he acknowledged the situation remains "quite fluid" and it's too early to predict future quarters.
Giancarlo pointed out that China represents a relatively small part of Pure's revenue base and supply chain. He said his company is keeping close tabs on its subassemblies in China, but Pure has a multi-continent supply chain strategy for sourcing components and assembling product. He added that Pure has good visibility into its "fairly well diversified" NAND flash supply, which largely comes from South Korea, Japan and the U.S.
Dave Raffo contributed to this story.