EMC Sales Rise 3% in Q2 During Downturn in Traditional Storage

By Pedro Hernandez

Data storage giant EMC today announced the company had generated $6.1 billion in revenue during its second quarter, a 3 percent year-over-year gain. Net income was $845 million or 43 cents per share, beating Wall Street analyst estimates of 41 cents.

Describing his company's second-quarter results as "mixed," Joe Tucci, CEO of EMC, noted that storage systems maker fell "a bit short of our revenue expectations," during an investor conference call this morning. He noted the company was struggling with "declines in our traditional storage products" while geopolitical concerns continue to crimp the company's sales in those regions, he said.

The industry-wide shift toward hybrid cloud computing is also affecting the IT purchasing plans of EMC's customer base, lowering demand for the company's high-end and unified storage products. "While pleased with many aspects of the second quarter, especially with the market acceptance and rapid growth of our newer products, we also saw customers become more conservative around refreshing their traditional infrastructures as they plan their IT transformations," said Tucci in a statement.

Meanwhile, the Emerging Storage category, comprised of flash-based storage systems and software defined storage products, is on a tear, according to David Goulden, CEO of EMC's Information Infrastructure division. "Emerging Storage grew 49 percent," he said during the call, noting strong adoption of the company's XtremIO all-flash storage systems and the big data-friendly Isilon portfolio of scale-out network attached storage (NAS) hardware.

Goulden said he expected that the market for external storage will expand at a compound annual growth rate (CAGR) of 2 to 3 percent between 2014 and 2018. During those years, he said the flash storage market would grow at a CAGR in the "high teens" while the market for standalone storage systems is expected to contract by a CAGR in the "low teens."

He noted that enterprises that are lagging behind in the digital transformation movement and the shift toward hybrid cloud IT environments are "very cautious about their transactional spending." All told, the "traditional storage market will not improve this year," he cautioned.

"We are seeing success in the growth areas of our portfolio, while our traditional storage category was impacted by customers focusing on their short-term purchasing needs as they develop their digital agendas," said EMC's CEO Zane Rowe, in a statement. "We continue to drive growth, cost efficiency and business transformation, as well as additional alignment across our businesses." Those efforts will include job cuts and an "organizational realignment," he added during today's call.

EMC's Information Infrastructure unit, which includes its storage business, generated $4.42 billion in sales during the second quarter, a 1 percent year-over-year increase. VMware's revenues jumped 10 percent to $1.59 billion while Pivotal, company's the cloud- and big data-focused business, booked $64 million in sales, a 19 percent gain.

Pedro Hernandez is a contributing editor at InfoStor. Follow him on Twitter @ecoINSITE.

Photo courtesy of Shutterstock.

This article was originally published on July 22, 2015