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Issue Date: April 2007

EMC promises online services, posts solid results

25 April 2007
Tim Stammers

EMC has posted healthy numbers for its first quarter, and has become the latest vendor to promise online storage services, soon.
The storage giant did not give much away about its upcoming backup and archiving services, and what it said came in two statements from its CEO Joe Tucci. "In software-as-a-service, we have nothing yet, but stay tuned - we will launch an offering here soon," Tucci said during the company's earnings call.
Later he added: "When you think of the backup and recovery space, we will have an alternative for customers. Rather than saying here is your hardware, software, and services, [we can say] we will charge by the drip, and host all of that for you."
Tucci said the hosting might done on premises belonging to some third party. If EMC follows the model set by others, the third party would be a telco or hosting services provider. That was all the information about the services that Tucci gave, and an EMC representative later confirmed that the company has nothing to add, for now.
EMC will be following the lead set by suppliers such as IBM, HP and Iron Mountain, who are already offering online backup and archiving services. Only the day before Tucci's comments, Symantec repeated its pledge to launch online backup services this summer.
The target customers in all cases are small to mid-sized businesses who want to offload their growing backup workload. Other factors that are helping to drive demand are SMBs' increasing sensitivity to disaster recovery and to compliance requirements. Online services improve the reliability of backups by automating the process, and also ensure that backup data is taken offsite, which is attractive to customers who cannot afford a second data centre of their own to replicate data to. Vaulting services can also include e-mail indexing and search facilities.
For the first quarter ended 31 March, EMC reported GAAP net income up 36% year-on-year at $313m, on revenue up 17% at $2,98bn. EMC CFO David Goulden said that revenue growth included a contribution of five percentage points from EMC's RSA Security division, which EMC did not own in Q107, and two percentage points from currency effects.
Without those two factors, the revenue growth was only 10% year-on-year. But that was ahead of Wall Street forecasts. EMC said that the quarter was in line with its expectations, and kept the company on track to reach its guidance of at least $12,7bn revenue and $0,64 EPS for 2007.
EMC predicted that the overall storage market will grow by around 8% this year, and Tucci said that although North America businesses had been 'slightly cautious' about IT spending during the first quarter, spending by their counterparts in EMEA and Asia saw an 'uptick'.
Among EMC's highlights was what it said was the fourth consecutive quarter of double-digit percentage growth for its Legato-originated backup software license sales. In a backup market which is growing only in single digits, EMC's claim means that its backup business is at last managing to increase its market share.
RSA meanwhile saw 25% year-on-year revenue growth, and EMC said that RSA has achieved at least 25% growth in every quarter since it was bought. The slowest areas were content management, where revenue was up only 3% at $172m, and the core business of storage systems, where revenue grew by only 8% to reach $2,4bn. While mid-range Clariion sales were up 9%, high-end
Symmetrix sales were up only 2% on what EMC said had been a strong first quarter in 2006.
The content management and security markets will grow by 13% and 17% this year respectively, EMC forecast. EMC plugged its Rainfinity NAS virtualisation and migration software, which it said had scored 'another' quarter of triple-digit growth, and its Smarts systems management tools which also saw 'another' quarter of double-digit growth. Dell continues to account for around a third of all Clariion sales, and 14% of EMC's overall revenue.
Our view
In a short period that ended around six years ago, several start-ups attempted to make the storage service provider business model fly. It did not, they crashed, and lots of investment dollars were burnt. But ever since then, predictions of an SSP comeback have persisted.
Backup data is not the same as the primary or operational data that the SSPs were hoping to store for their customer. But it is only one step away from it. Arguably the SSP resurrection has already happened, albeit in a limited form.
Source: Computergram

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