Feeds

Is EMC looking away from STEC?

The silence is deafening

Intelligent flash storage arrays

Comment Since STEC revealed that EMC had over-ordered back in November last year, the company has been waiting for EMC orders to get back on track. Will they?

It's now five months since STEC revealed this:

One of our customers entered into a $120 million supply agreement with us for shipments covering the second half of 2009. We recently received preliminary indications that our customer might carry inventory of our ZeusIOPS at the end of 2009 which they will use in 2010.

That customer was STEC's most important one, EMC, and the latest news from STEC is that EMC's order rate has still not recovered, with STEC CEO Manouch Mossayedi recently saying:

We believe that the first half of 2010 will be a trough period for our business due to an inventory carryover by our largest customer [EMC]... We now anticipate this inventory carryover to continue to negatively impact our sales to this customer during the first half of 2010, as we do not expect any meaningful production orders from this customer during that time.

EMC ordered $120m worth of the ZEUS SSDs from STEC in November last year and still hasn't exhausted its inventory. That stock might not be emptied by June and the EMC order rate might not pick up until past the mid-year point.

STEC has a current monopoly on the supply of Fibre Channel interface SSDs that can replace Fibre Channel hard drives. The product is quite high-priced and it's being suggested that the EMC over-order problem reflects an EMC under-selling problem - customers just aren't buying the stuff.

The internet is full of suggestive whispers about this. Reuters reports a recent class action against STEC, one of many filed by lawyers ambulance-chasing on behalf of investors wanting to get compensation for buying what they now think were over-inflated STEC shares when STEC directors were selling some of their own holdings, stated this:

The problem was not a lack of sales force effort or consumer knowledge about SSDs, but consumer resistance to purchasing the ultimate product due to its cost, performance, and flexibility of use.

Obviously, EMC's customers are not ordering the flash drives fast enough and someone in EMC's purchasing department, it appears, goofed. Another pair of whispers: 3PAR has added STEC SSDs to its enterprise storage arrays, but not Zeus product. Instead, it chose the significantly lower-priced Mach8IOPS ones. Ditto Pillar Data with its 2.6TB SSD Brick.

Both could have chosen the Fibre Channel-connected and higher-performing Zeus product, but they didn't.

Financial analyst Aaron Rakers of Stifel Niklaus offered this fourth whisper of a thought: "I definitely think that EMC will get someone else qualified - Samsung, HGST/Intel, etc. - in 2010."

EMC's Rick Lacroix, its PR Director for storage platforms and SW, said: "We have a multiple supplier strategy for components [and] we've never positioned our relationship with STEC as exclusive."

Is EMC qualifying a second supplier for its SSDs? "We can't provide any details about this [but] we prefer a multiple supplier arrangement."

Second-sourcing would be a lever to force STEC's prices down, as well as ensuring continuity of supply if one vendor experienced production difficulties. If, by the mid-year point. EMC orders had still not picked up, STEC would be desperate to get an EMC order. Then let EMC drop the bombshell that, er, yes, it actually had a second source whose product was 30 per cent cheaper and, unless STEC adjusted its pricing, EMC would prefer to order product from the second vendor.

If this happens, and the other STEC Zeus customers follow suit - and why wouldn't they, second-sourcing being normal - then Zeus revenues take a heavy hit.

Join these dots up and the picture revealed is that STEC's good times with its Zeus SSD product are over. Other vendors are not taking up the Zeus slack from EMC, and indeed, two of them have rejected Zeus all together. EMC itself is highly-likely to find a second source, and Zeus prices will then just have to come down. ®

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
The cloud that goes puff: Seagate Central home NAS woes
4TB of home storage is great, until you wake up to a dead device
Azure TITSUP caused by INFINITE LOOP
Fat fingered geo-block kept Aussies in the dark
You think the CLOUD's insecure? It's BETTER than UK.GOV's DATA CENTRES
We don't even know where some of them ARE – Maude
Intel offers ingenious piece of 10TB 3D NAND chippery
The race for next generation flash capacity now on
Want to STUFF Facebook with blatant ADVERTISING? Fine! But you must PAY
Pony up or push off, Zuck tells social marketeers
Oi, Europe! Tell US feds to GTFO of our servers, say Microsoft and pals
By writing a really angry letter about how it's harming our cloud business, ta
SAVE ME, NASA system builder, from my DEAD WORKSTATION
Anal-retentive hardware nerd in paws-on workstation crisis
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Internet Security Threat Report 2014
An overview and analysis of the year in global threat activity: identify, analyze, and provide commentary on emerging trends in the dynamic threat landscape.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.