Original URL: http://www.theregister.co.uk/2010/03/26/symantec_pink_slips/

Has Symantec sprinkled Veritas developers with pink slips?

Rejigs storage strategy - is it right to retreat?

By Chris Mellor

Posted in Storage, 26th March 2010 15:16 GMT

Comment The fate of hundreds of Veritas developers hung in the balance this week as parent Symantec was rumoured to have killed off its S4 object storage development effort.

Last week ESG's Steve Duplessie blogged that up to 600 Veritas developers and engineers of Veritas Volume Manager (VxVM), file system (VxFS) and Cluster Server (VCS) had been laid off, based on scores of emails he received from those with pink slips.

Duplessie quickly updated his blog, saying: "[Symantec] says no way is it 600 and no way are they even remotely all from those groups."

Another authoritative storage blogger, Robin Harris, wrote: "A reader writes that Symantec is laying off about 60 people from the division formerly known as Veritas."

Harris quoted his correspondent: "By now I’m sure you’ve heard about Symantec downsizing the (mostly) Mountain View storage group, cancelling some projects and moving others to India. One of the fallouts was a soon-to-be-rolled out object-based file system [S4], along the lines of a software version of Panasas. There is a lot of technical detail behind the project but ‘software Panasas for the commodity servers of your choice’ is the 35,000ft view.

"Symantec is right to retreat from storage."

Symantec promptly issued a statement denying this:

The bottom line is -- Symantec is not exiting this [Storage and Availability Management or SAMG] space, and we remain committed to helping our customers who face significant challenges in managing storage growth and ensuring the availability of their critical information. ... Symantec is 100 per cent committed to our SAMG product portfolio. None of the SAMG products that we offer today are being discontinued.

Symantec's statement said: "We are continuing to invest significant engineering resources in our core Storage Foundation and High Availability (SFHA) and Storage Management solutions. Some of the core areas where we are increasing investment are around Cluster File System, Dynamic Multi-Pathing, and value-added integration with VMWare environments." It also mentions FileStore - which uses SFHA - and Data Insight as specifically continuing.

There had been speculation that the FileStore filer acceleration product was being canned. It is not. Indeed Fujitsu has recently signed a deal with Symantec to offer it on its Eternus storage arrays.

However, the point above about the S4 object storage development being discontinued is not denied by Symantec, and it does seem that the S4 effort has been killed off. Neither did Symantec deny that a significant number of developers and engineers have been laid off.

Revenue and profit background

Symantec is coming up to the end of its 2010 financial year. At the end of December 2009, its quarterly revenues were $1.55bn, slightly up year-on-year from $1.514bn, and its net income of a mere $300m was a good turnaround from the year-ago figure of a humunguous $6.82bn loss, driven by a huge goodwill impairment.

The nine month figures were not so good, with revenues of $4.5bn (2009: $4.7bn) and net income of $523m (2009: -$6.5bn).

In the earnings call for the third fiscal 2010 quarter, Symantec CEO Enrique Salem said: "The continued strength of our consumer business along with our sales and product initiatives in our enterprise security and compliance portfolio drove the strength of our results this quarter." No mention of storage there.

When he did mention storage he was pretty downbeat. "In our storage business, customers continued to buy licenses for only their current needs. We remain focused on leveraging partnerships to drive sales of our storage products.

"Customers now have the option to select Storage Foundation and Symantec Endpoint Protection to manage and protect their cloud based servers within Amazon’s EC2 cloud platform."

Sun under-performance

James Beer, Symantec's CFO, said: "The server market deceleration continued to put pressure on the Storage business, particularly related to new license sales on the Sun platform."

It's clear that Sun as a channel under-performed for Symantec, with the Oracle acquisition proving a big distraction no doubt.

Salem was asked if Oracle was going to go away as a Symantec partner. He did not think so: "It’s still a little bit too early to say what Oracle will ultimately do, but you’re definitely seeing the SPARC platform has been slowing for some time and I think the uncertainty of the [Sun] transaction... accelerated what was happening on the SPARC platform.

"I expect that there’ll be a continuing relationship with Oracle on the various Sun products. The maintenance streams generate very healthy and positive cash flow for us and expect that to definitely continue."

Indicating that product licence sales may not?

In response to analyst questions Salem said: "I do expect a stabilising storage business for us, given the server sales and the new releases." He expects that new deduplicating versions of BackupExec and Net Backup will help drive upgrades.

The increasing use of cloud backup, which Symantec is heavily involved in, will tend to reduce backup software licence sales.

Salem added: "We want [customers] to not think about backup and archiving separately. We want them to look at that as one integrated capability." Such product function consolidation could mean fewer development resources are needed.

But another driver towards storage developer reductions could be that Symantec gets more revenue dollars from consumer and security product developments than it does from storage products overall. So it's going to concentrate R&D on growth storage opportunities and reduce it on mature storage products.

Symantec is not talking about what R&D initiatives may or may not have been cancelled, saying: "We won't comment on rumour or speculation."

Beer pointedly said: "We will continue to focus intently on our cost structure."

Outlook

At the end of the third fiscal 2010 quarter, fourth quarter revenues were expected to be $1.510bn to $1.525bn, with the mid-point representing a two per cent year-on-year increase. That would make full year revenues around $5.97bn, which would compare, somewhat poorly, to fy2009 revenues of $6.15bn.

Cuttting costs would improve the fy2010 net income figure, and this might be another motivation behind the headcount reductions this quarter, and the movement of resources away from mature storage products and from new product developments like S4. Perhaps Symantec-Huawei could OEM the Caringo product underlying Dell's DX object storage platform?

The picture we're drawing here is one of Symantec focussing resources on the development of existing storage products with growth prospects, and taking the view that storage as a whole is not a market worth developing new products for, at least not until Symantec's overall revenues and profits improve.

Symantec isn't withdrawing from the storage market at all, but it isn't throwing R&D dollars at unproven market opportunities and, to that extent, is drawing in its horns. ®