Traditional Storage Continues to Weigh on EMC Prior to Dell Buy

By Pedro Hernandez

In what may be one of the final earnings releases before being folded into Dell, the privately-held IT giant, EMC announced that sales rose a percentage point in the third quarter (year-over-year) of 2015 to $6.08 billion. Profit was $0.43 per share, a cent short of Wall Street analyst estimates.

On Oct. 12, Dell announced that it was acquiring Hopkinton, Mass.-based EMC for a whopping $67 billion. If completed, the deal will rank as the biggest technology acquisition in history and result in a massive IT vendor.

"The coming together of EMC and Dell is a game-changer," said Joe Tucci, CEO of EMC, during this morning's earnings conference call. "It creates a powerhouse in the technology industry with more than $80 billion in revenues."

EMC's customers are "overwhelmingly positive" about the deal's prospects, he claimed. "Starting on the all-important technology front, post-closing the company will have an end-to-end product portfolio spanning four of the world's great technology franchises, in servers, storage, virtualization and PCs," continued Tucci.

While effusive about the deal and combined company's chances in the $2 trillion market for IT solutions and services, EMC admitted to challenges affecting its biggest moneymaker, traditional storage arrays. Revenues at the company's Information Storage business fell 3 percent year-over-year to $4.35 billion, largely due to $100 million worth of unshipped orders.

In contrast, its Emerging Storage division, home to the company's flash-based and software-defined-storage product slate, improved sales by 27 percent year over year. XtremIO alone, the company's all-flash array unit, is on track to hit $1 billion in bookings this year, the company reported.

"As the broader market shifts toward cloud, mobile, social and Big Data, we continue to expect newer storage technologies revenue to grow at high teens while traditional stand-alone storage systems revenue to decline at low teens," said David Goulden, CEO of EMC Information Infrastructure, in a statement. "For the first time in Q3, our newer storage products6 now make up more than half of our strategic storage business."

VMware sales grew by 10 percent year-over-year in the third quarter to $1.66 billion. Controlling 80 percent of the virtualization innovator's stock, EMC is VMware's majority shareholder. Yesterday, the companies announced they would spin off and jointly own (50:50) Virtustream as an enterprise Infrastructure-as-a-Service (IaaS) and hybrid cloud services company.

The financial picture at Pivotal, the cloud-centric joint venture from EMC and VMware. Sales improved by 16 percent year-over-year during the last quarter to reach $67 million.

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

This article was originally published on October 21, 2015