By Dave Simpson
The Robert W. Baird & Co. investment firm interviewed more than 40 VARs (server/ storage/infrastructure software) at the end of last month and concluded that while financial results for the third quarter were generally in line with expectations, the outlook for the fourth quarter was more positive than normal seasonality would imply.
Surprisingly, many VARs said that the impact from Sarbanes-Oxley (SOX) was actually positive in the third quarter. For example, almost half (49%) of the responding VARs reported that Sarbanes-Oxley helped Q3 revenue, while the other half said that the compliance regulation had no impact on revenues. More importantly, 60% of the VARs think that SOX will help Q4 and 2005 revenues, while only 1% expect SOX to hurt sales in Q4 and 2005.
Overall, 57% of the VARs said that Q3 performance was "as expected," while 28% said "better than expected" and only 15% reported "worse than expected" results. Regarding Q4, 63% of the resellers were positive, 37% were neutral, and none of the VARs expected a weak Q4. (The fourth quarter is historically a strong quarter for the channel due to "budget flush.")
When asked to rank the large storage vendors' recent performance, 38% of the VARs thought EMC had the best third quarter, while 31% selected IBM and 16% chose Network Appliance. More than 50% of the resellers thought that Hewlett-Packard had the worst Q3 performance, while 22% chose Veritas as having the worst quarter. Among the reasons for HP's poor performance were sales and marketing (cited by 62% of the VARs), product weakness/deficiency (56%), channel policies (49%), and supply chain/execution issues (23%).