According to a recent release by research firm IDC, storage software revenues reached $3.5 billion in the third quarter of 2011, up 9.7% over the same period last year. EMC (NYSE:EMC) maintained its lead with a 24.5% market share for the quarter, almost flat vs. last year, followed by Symantec (NASDAQ:SYMC), IBM (NYSE:IBM) and NetApp (NASDAQ:NTAP) with 15.3%, 14% and 8.8% shares respectively. 
Storage Software Demand Remains Strong
Demand for storage software remains near all-time highs even as the product refresh phase is coming to an end. This is because the storage market is rapidly changing with organizations facing challenges to utilize, manage and protect their valuable corporate data and massive storage resources in the age of Big Data and Cloud. Storage software suppliers are coming up with new products and solutions to help organization with this transition, keeping the sales growth high.
Of the seven functional markets covered by IDC in the report, six saw year-over-year revenue growth and four markets grew at double-digit rates during the quarter. Archiving software & storage and device management software segments experienced the strongest increase in demand with 12.2% and 11.3% year-over-year growth, respectively. Data protection and recovery software accounted for 34.9% of total revenue in Q3 2011.
Potential Downside from Market Share Loss
While the top four storage software suppliers witnessed year-over-year revenue growth as the market expanded, they also lost market share during the same period. The decline was most pronounced for NetApp, whose market share dropped by 80 basis points, and revenue increased only 0.3% over last year – much more muted than the overall market.
We currently forecast NetApp’s share in the storage software market to increase going forward after a drop in 2011 and stabilize at around 9%. However, if its market share remains around current levels in the future, there will be a downside to our $46.75 Trefis price estimate for NetApp.
Similarly if EMC’s market share remains flat going forward, there will be a downside to out $42.15 Trefis price estimate for EMC.Notes: