Storage vendors are coping with weakening revenues, as expected, as fallout from COVID-19-induced shutdowns. Dell EMC on Thursday was the latest vendor to acknowledge the impact.
Demand for Dell EMC data protection and VxRail hyper-converged infrastructure provided the bright spots to lackluster storage revenue last quarter. Dell EMC midrange storage continues to be a sore spot.
Revenue at Dell Technologies slid 3% to $22.7 billion for the quarter that ended July 31. Revenue generated by Dell EMC storage is reported under Dell's Infrastructure Solutions Group (ISG), which also includes Dell PowerEdge servers and Dell networking products. Quarterly ISG revenue of $8.2 billion fell 5% year over year. Storage accounted for nearly half of all ISG revenue ($4 million), down 4% from last year but up 5% from Dell's prior quarter. Servers and networking accounted for $4.2 billion, down 5%.
Like other storage vendors, Dell EMC said organizations at first were slow to embrace the work-at-home philosophy, but that attitude has softened as pandemic-related shutdowns extended into the summer.
Jeff Clarke, Dell's vice chairman and COO, said the need for cloudlike agility fueled strong demand for Dell EMC PowerMax SAN technology, often combined with Dell EMC VxRail hyper-converged infrastructure. Those hardware products are available as on-premises private cloud deployments that connect to major public cloud providers.
Clarke did not provide a specific revenue breakdown by storage products. He said orders for Dell EMC PowerMax increased by triple digits, with double-digit increases for both Dell EMC data protection and VxRail.
New midrange Dell EMC storage system
The rest of Dell EMC's storage business was soft last quarter, including its overlapping midrange storage platforms. Dell EMC is the market leader in midrange systems, but the midrange sector has been a sore spot since the Dell-EMC merger in 2015. Dell recently completed the modernization of its storage portfolio under the Power branding. The Dell EMC PowerStore midrange array is the vendor's first internally developed storage system since the merger.
Both NetApp and Pure Storage criticized Dell EMC PowerStore in their respective earnings calls this week. NetApp CEO George Kurian said PowerStore is "not being well received" by customers. Pure Storage CEO Charles Giancarlo offered a similar observation, noting that data centers are moving away from forklift upgrades.
"It's a tough time right now to be bringing out a 1.0 product, which is what PowerStore is," Giancarlo said.
Clarke said it was too early to provide details on PowerStore sales, but he disputed that customers were not interested in the new midrange array.
"We continue to build [the] pipeline for PowerStore and are pleased with customer receptivity. We expect it to ramp through the second half of this year and heading into 2022," Clarke said.
Gains in VMware, cloud
While its external storage sales were flat to negative, Dell-owned VMware continued to be a juggernaut, with sales surging 10% to $2.9 billion. Subscription revenue from VMware software licenses were up 44%, and accounted for 22% of Dell's overall revenue.
Dell EMC said revenue from VMware Cloud on AWS, which lets users run the VMware stack in Amazon Web Services, grew by triple digits.
Rounding out Dell's earnings picture is the Client Solutions Group, which includes PCs, notebooks and other consumer products. Its revenue was down year over year by 5%, to $11.2 billion, but Dell said the results were buoyed by increased demand for technology that supports remote learning and home schooling.