EMC results: It'll all come out in the post-Dell deal wash

Winners, losers... and that dratted Mofcom

+Comment EMC saw many pockets of growth in its first fiscal 2016 quarter’s results but overall revenues declined because core legacy product revenues fell, as did RSA and the enterprise content business.

These declines more than offset the impressive growth rates of newer products.

In the EMC earnings call, CEO and chairman Joe Tucci said:

EMC II had a strong quarter in a number of their product lines, including Data Protection and Isilon, which grew nicely on the back of recent product refreshes, with their converged infrastructure business, which continues to expand strong double-digit growth.

With XtremIO, which remains a clear leader in the all-flash market; with their software defined storage products including Elastic Cloud Storage for objects and ScaleIO for block storage; and with VxRail, which experienced very strong demand after it was introduced in February.

EMC II will be making major new product announcements at EMC World in two weeks. These announcements will cover a number of areas, but one important theme will be geared towards extending EMC II's lead in the all-flash primary storage market.

We saw outstanding market acceptance for Virtustream's mission-critical managed cloud solutions.

Regarding the Dell acquisition, Tucci continued: “We have received antitrust approvals from the US, the European Union, Canada, Japan, Australia and many other countries around the world. China is the remaining country where regulatory approval is required. We are working aggressively on finalising the S-4 with the SEC so we can get to a shareholder vote ASAP.”

Once again, MOFCOM drags its feet.

In the Q and A, Tucci talked about what he might do after the acquisition completes. His verbatim remarks were:

I have a lot of energy left, I'm going to continue to work doing different things. Potential that I could help advise Michael, but I just don't want to go there yet, and Michael and I have not gone there yet. I could tell you, we're working incredibly well together and I have tremendous respect for Michael. ... I'm just not making myself part of this process or a condition of any factor in this process. It's all about shareholders, customers, people. Our people.

EMC Information Infrastructure: CEO's comment

EMC II CEO David Goulden said: “Our overall storage was down six per cent in Q1 … continued customer caution in transactional spending resulted in a very late quarter and a higher than anticipated buildup of unfulfilled orders as compared to Q1 last year.”

The high points were:

  • “According to IDC, in Q4 2015, XtremIO had over 40 per cent market share and was almost three times the size of its closest competitor.” That’s understood to be IBM. “This momentum continued in Q1 with demand for XtremIO plus the VMAX all -flash up more than 100 per cent”
  • “Demand for Isilon, our scale-out file platform, plus ECS, our software defined object platform, was up more than 20 per cent in Q1 … Isilon helped us win over, a top five global account from one of our largest traditional competitors where the customer completely replaced their entire traditional file infrastructure with 45 petabytes of Isilon.”
  • “Demand for Data Domain was up 20 per cent in Q1.”
  • “Our VxRack platform, powered by ScaleIO, was ahead of plan in Q1, while in the appliances space, the initial response to VxRail has been fantastic [with sales of] VxRail appliances in 37 countries in less than 45 days after launch.”
  • “Combined demand for [the converged infrastructure] portfolio grew more than 20 per cent in Q1.”
  • “We [will] announce a brand-new engineered solution in a few weeks that leverages our Pivotal portfolio plus additional cloud-native technologies from EMC and VMware.” This is a new Converged Infrastructure offering.
  • “Demand for the Virtustream Enterprise Cloud grew more than 50 per cent in Q1 … Virtustream won a major multimillion dollar cloud Infrastructure-as-a-Service project in Q1 with one of the world's largest agricultural conglomerates. We'll have more exciting announcements around Virtustream in the next few weeks.”
  • “In RSA, demand for its growth portfolio was up nicely, led by Security Analytics where product demand was up over 20 per cent”. But overall RSA revenues fell by eiught per cent y-on-y to $228m.
  • “Our Enterprise Content [ECD] business continued to execute well and deliver profitable growth. License demand was up over 15 per cent and demand for the Documentum as a service managed cloud grew over 70 per cent in Q1.” But ECD overall revenues fell three per cent y-on-y to $134m.

So what flopped, apart from RSA and ECD? All-disk and hybrid VMAX and VNX were not called out as growing. The Information Storage part of EMC II, which includes VMAX and VNX, saw revenues fall by six per cent year-on-year to $3.81bn. This is such a large part of EMC II that its fall overshadowed growth everywhere else in the product range.

The coming all-flash announcement was described thus: "We have a major new mid-tier announcement at EMC World. I'll save the details, that will be the start of a new cycle for where the traditional VNX plays."

Goulden also talked about the impact of 3D NAND: "The real tipping point here is some of the technology advances, in particular, the advents of some of the 3D NAND Flash technology working at one write per day with very large capacity drives."

"If you mirror that up with a high-performance platform like the VMAX, and obviously you can incorporate that technology in all the all-flash, that really is the tipping point where you can effectively get a customer into an all-flash system at the same or slightly lower dollar per gigabyte than the effective dollar per gigabyte for a hard disk drive system."

Primary data storage on disk is headed for the graveyard: "In primary storage, we're going to move industry rapidly to all-flash for the vast majority of new systems. We expect to do that throughout the course of this year. ... by the time we get to year end, we're expecting over 50 per cent of the new VMAX systems that we ship will be all-flash."

Comment: Dell takeover

Once MOFCOM assents to the Dell takeover then we would expect EMC and Dell to race as fast as possible to the shareholder vote for their merger. If, as everyone expects, they vote in favour then the largest and most successful stand-alone storage company in the world, ever, will become part of an $80bn systems conglomerate. It will be Michael Dell’s biggest company and product portfolio integration exercise ever as well.

Its largest competitors Cisco, HPE, and IBM will have sales forces posed to strike at any go-to-market weakness, as will HDS, and NetApp plus the mass of aggressive, energetic and nimble startups pushing software-defined storage, hyper-converged storage, cloud storage, object storage, all-flash storage, scale-out storage. multi-tier file/object lifecycle management storage, copy data reduction storage, and primary and secondary data consolidation storage.

How Dell manages and develops what will be the largest and most complex storage product portfolio in the industry will be watched by everyone. They’ll be anxious to know whether it will be am impregnable wall covering every market need with integrated, co-ordinated and best of breed products, or a ramshackle, rickety structure of overlapping products causing customer confusion and scope for competitive takeouts.

Will Dell-EMC be a slow-moving behemoth hindered by sheer portfolio bulk or a nimble, fast-moving army attacking every developing storage market? We all wish we knew the answer to that question. ®

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