Storage Systems Notes: EMC, NetApp, IBM, HP In Focus

September 18th, 2015 by Trefis Team
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Storage systems manufacturers such as EMC (NYSE:EMC), NetApp (NASDAQ:NTAP), IBM (NYSE:IBM), Hitachi Data Systems and Hewlett-Packard (NYSE:HPQ) had a tough year in terms of storage hardware product sales last year, owing to a decline in worldwide spending on information storage. According to data compiled by IDC quarterly reports, global factory revenues for storage systems declined by 0.4% year-on-year to $24.5 billion in 2014. The trend has continued through the first half of 2015 as well, with global external disk storage systems revenue declining by 2% y-o-y to $11.3 billion in the same period. Despite the decline in global factory revenues, smaller vendors have witnessed a rise in revenues. The combined revenues generated by companies outside the top five vendors reported a 9% increase in revenues through the first half of 2015. [1] [2] Over the last six to eight quarters, customer preference is shifting to low-cost original design manufacturer (ODM) storage boxes, which is cutting into addressable market for large vendors. [3] This has impacted large storage systems vendors significantly. Below we take a look at how the companies have fared in storage system sales through the first half of 2015.

EMC

EMC is the largest storage systems vendor, commanding a nearly 30% share in the external storage systems market. EMC’s share grew from under 23% in 2009 to 31.3% at the end of 2013, before declining to 31% in 2014. Corresponding to the share decline, EMC’s storage hardware revenues declined by 1.5% to $7.6 billion for the full year. Similarly, EMC’s storage hardware revenues have fallen by over 5% through the first half of the year. As a result its share in the market stands at 28.6% for Q1 and Q2 combined, which is significantly lower than prior year levels. The company has a strong outlook for its emerging storage product segment such as the all-flash array XtremIO and converged storage infrastructure ScaleIO.

  • Trefis has a $29 price estimate for EMC, which is significantly higher than the current market price.
  • EMC’s stock price has fallen by nearly 10% in the last month.

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See our full analysis for EMC’s stock

NetApp

NetApp’s revenues have fallen significantly in the first half of 2015. The company’s storage hardware revenue fell by almost 15% during the first half this year to just under $1.4 billion. As a result, its share in the external storage systems market stood at 12.2% for the period, compared to a 12.8% share in 2014. The company announced a change in management in June, naming George Kurian as the new CEO. ((NetApp Announces Changes to Executive Leadership Team and Board of Directors, NetApp Press Release, June 2015)) Shortly afterwards, NetApp announced the release of its sub $25k AFF8000 all-flash array. The company intends to compete with smaller flash-array startups including Pure Storage, Violin Memory and Nimbus Data with the product release. [4]

See Full Analysis For NetApp Here

IBM

Similar to NetApp, IBM has witnessed a 12% decline in revenues from the sale of external disk storage systems in the first half of the year. As a result, its share stood at 9.4% in the same period, compared to 10.8% in 2014. Weakness in IBM’s standalone storage systems can be partially attributed to the termination of the IBM-NetApp deal in May last year. Moreover, IBM sold off its x86 servers business to Lenovo in Q4 2014, which further contributed to low product sales. [5] Storage product sales contributed to about 4% of IBM’s net revenues in 2014 and in 2015 thus far.

  • Trefis has a $168 price estimate for IBM which is over 10% higher than the current market price.
  • IBM’s stock price has fallen by about 5% in the last month.

See Full Analysis For IBM Here

Hewlett-Packard

HP was the only large company besides Hitachi Data Systems to post an increase in storage hardware revenues in 2015. HP’s external storage systems revenues were up by over 1% y-o-y to $1.1 billion. Correspondingly, its share stood at 9.8%, up from 9.6% in 2014. HP gained share due to higher demand in the mid-range market and comparatively higher declines faced by competing storage companies. HP’s management projects growth in enterprise storage segments such as converged storage, software-defined networks and cloud infrastructure, where the company can potentially excel in the coming quarters. [6] Storage revenues contributed to about 4.5% of the company’s top line in 2014 and the first half of 2015.

  • We currently have $28 price estimate for HP, which is in line with the current market price.
  • HP’s stock price has fallen by over 30% this year.

See Full Analysis For HP Here

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Notes:
  1. Worldwide Quarterly Disk Storage Systems Tracker Q1 2015, IDC Press Release, June 2015 [↩]
  2. Worldwide Quarterly Disk Storage Systems Tracker Q2 2015, IDC Press Release, September 2015 [↩]
  3. The Rise Of White-Box Storage, Network Computing, August 2014 [↩]
  4. NetApp Targets EMC, HP, Startups With New $25K All-Flash Storage Line Part 1, CRN, June 2015 [↩]
  5. Lenovo says $2.1 billion IBM x86 server deal to close on Wednesday, Reuters, September 2014 [↩]
  6. HP Servers, Storage Decline As Split Begins, Enterprise Tech, November 2014 [↩]