EMC Earnings Preview: Stagnating Core Business Could Lead To VMware, Pivotal Spin-Offs

EMC is scheduled to announce its Q2 earnings on July 23. The company posted mixed results in the first quarter, with net revenues growing by less than 2% year-on-year to $5.48 billion. EMC’s information infrastructure product sales, which include storage products, RSA security and content management software, declined by almost 7% year-over-year to $2.4 billion. The company witnessed significant top line growth from VMware (+16%) and Pivotal (+40%).

EMC’s market share in external storage systems declined from 30.2% in Q1 2013 to 29.1% in the first quarter of 2014, according to a recent report by IDC. This was the first quarter since 2008 in which EMC’s market share declined year-over-year. Weakness in the core business has led to market speculation about EMC spinning off VMware and Pivotal. The Wall Street Journal reported that external pressure from EMC’s large institutional investors could lead the company to spin off some of the fastest-growing businesses within the company such as VMware and Pivotal.

We have a $30 price estimate for EMC, which is roughly in line with the current market price.

Speculation Over VMware And Pivotal Spin-off

According to the aforementioned WSJ report, Elliott Management has taken a stake of over $1 billion in EMC, making it one of the top five institutional investors. Elliott Management has previously held shares in Juniper Networks, Riverbed Technology and Brocade Communications Systems, and has subsequently pushed management for changes to aid shareholders.

In the last twelve months, EMC’s stock price has increased by 11% while VMware’s stock has risen by 31%. The hedge fund could point out to EMC that its present operational structure is impeding growth. On the other hand, EMC’s management has stuck to its “federation” business model wherein some of the acquired companies operate as separate entities, while they still collaborate on products for large clients. In the current setup, it’s a win-win for both EMC (since it can offer better products and services to big customers) as well as VMware and Pivotal, as they are able to strike deals with EMC’s larger client base. The company is likely to provide more color regarding these possible developments in its earnings call. According to a Bloomberg report, if the company does go through with the spin-offs, there is a possibility that EMC (minus VMware and Pivotal) gets acquired by a tech giant such as HP, IBM, Cisco or Oracle.

Key Areas Of Growth: Emerging Storage, VMware, RSA Security And Pivotal

EMC’s Emerging Storage products such as XtremIO, Isilon, Atmos and VPLEX were largely responsible for the growth in hardware sales during the past few quarters. Revenues generated by the emerging storage sub-segment constituted only about 10% of the EMC’s Information Storage revenues in 2013. The Emerging Storage sub segment grew by 81% year-over-year (y-o-y) in Q1 2014, which the company attributed to a strong customer response for these products. However, the company did not provide exact figures for emerging storage revenues in Q1.

RSA Security, EMC’s information security division, grew by over 11% to almost $1 billion in 2013. The growth continued in Q1 2014, but the rate of growth was lower than 2013 at less than 5% y-o-y. The information security industry is growing, with customers allocating more of their security budgets to intelligence-driven analytics, where RSA Information Security excels, rather than static prevention.

Pivotal is among the fastest growing divisions within the company, with 40% y-o-y growth in the first quarter. Pivotal’s platform consists of new generation data fabrics, application fabrics and a cloud-independent Platform-as-a-Service to support cloud computing and Big Data applications, which have started gaining traction among customers. Management mentioned that some of Pivotal’s growth may not be immediately realized in the numbers since Pivotal is building out a subscription-based revenue stream, which is likely to be beneficial in the long run.

VMware has given revenue guidance of about $1.45 billion for the quarter, which is more than a 15% increase over the prior year quarter. The company expects to generate close to $6 billion in revenues for the full year. With a healthy customer response to VMware’s new product offerings and the growing services department, we expect the company to meet its guidance. According to our estimates, all these divisions are likely to grow at a rate higher than that of core storage products. But since information security and pivotal combined constitute only about 5% to the company’s value, EMC’s emerging storage division and VMware’s performance are more likely to drive its overall earnings.


US government says online storage isn’t protected by the Fourth Amendment & VBSCS has smth to say about this to Obama 8-)))

A couple months ago, a New York judge ruled that US search warrants applied to digital information even if they were stored overseas. The decision came about as part of an effort to dig up a Microsoft user’s account information stored on a server in Dublin, Ireland. Microsoft responded to the ruling and challenged it, stating that the government’s longstanding views of digital content on foreign servers are wrong, and that the protections applied to physical materials should be extended to digital content. In briefs filed last week, however, the US government countered. It states that according to the Stored Communications Act (SCA), content stored online simply do not have the same Fourth Amendment protections as physical data:

Overseas records must be disclosed domestically when a valid subpoena, order, or warrant compels their production. The disclosure of records under such circumstances has never been considered tantamount to a physical search under Fourth Amendment principles, and Microsoft is mistaken to argue that the SCA provides for an overseas search here. As there is no overseas search or seizure, Microsoft’s reliance on principles of extra-territoriality and comity falls wide of the mark.

From the Justice Department’s point of view, this law is necessary in an age where “fraudsters” and “hackers” use electronic communications in not just the U.S. but abroad as well. Indeed, the Microsoft account in this case is in relation to a drug-trafficking investigation. However, Microsoft believes there are wide-ranging implications for such a statement, and it’s not the only company that thinks so. Verizon also responded, stating that this would create “dramatic conflict with foreign data protection laws” and Apple and Cisco joined in by saying this could potentially damage international relations. In the meantime, a senior counsel for the Irish Supreme Court offered that a “Mutual Legal Assistance Treaty” be pursued so that the US government can get at the email account in question.


Now, that’s a bunch of bullshit!
We here @ VBSCS have got something to say about this:

There’s No Denying Software Defined Storage — EMC Acquires Twin Strata

It’s fascinating to watch the development of new data storage technologies, especially in the context of what has happened with virtualization. In the server space virtualization has decimated the legacy vendors and forced them to embrace more open approaches towards hardware. The same is happening in storage as new approaches allow organizations to pool storage resources and consume them in much more flexible ways. Software Defined Storage, as well as being a nice buzzword to use in media sound bites, is actually a pretty disruptive force.

What has been especially interesting is to watch the traditional storage vendors and see how they react to these disruptive forces – the usual cycle sees legacy vendors deny the validity of new approaches, then move to actually change what they do as the forces of disruption work their magic on the industry.


Veeam Wins Most Promising Data Management Solution Award

Veeam® Software, innovative provider of solutions that deliver Availability for the Modern Data Centre™, announced today that the company was voted the Most Promising Data Management Solution at this years’ NetworkWorld Asia’s (NWA) Information Management Awards in Singapore. This annual awards programme acknowledges industry leaders in Asia for significant advancements made in Information Security, Storage and Data Management.

“Veeam is delighted and honoured to be recognised as the Most Promising Data Management Solution provider for 2014. This is testament to our consistent improvement in building solutions to enable the Always-On Business,” said Don Williams, Regional Director APAC of Veeam Software. “We are dedicated to providing a new category of solutions to help businesses avoid data loss, extended downtime and lengthy recovery time and point objectives. Being voted for this award by key industry stakeholders shows that we are meeting market demand by enabling Availability for the Modern Data Centre.”

The annual NWA Information Management Awards is the only regional Editors’ Choice Awards in the field of information management. Backed by leading Asian publications and portals such as Networks Asia, Security Asia and Storage Asia, the finalists are carefully chosen by experienced editors with broad industry knowledge, as well as publishers, conference producers, marketers and a panel of CIO advisers with domain expertise and deep insights in Information Management.

“The volume, velocity and variety of data are straining network bandwidth, storage capacity, and uninterrupted availability of data centre resources for business-critical applications,” said Victor Ng, South-East Asia Bureau Chief of NetworkWorld Asia. “But solution providers like Veeam have once again proven their understanding of industry needs and market demands in the Asia Pacific region with their innovative technologies and applications.”

The winners for each of the 30 categories were selected based on their industry reputation, product features and unique selling points (USP), users’ feedback on the solution, durability, scalability, quality of service and whether there was widespread acceptance of the technology or brand. Finalists were short listed by NetworkWorld Asia’s editors and put up for online voting with 100 regional CIOs and IT leaders invited to vote.


Asigra’s Next Attempt To Upend Backup and Recovery Pricing

Asigra Inc. is seeking to cut expensive, proprietary secondary storage arrays from the backup-and-recovery equation.

At the backup and recovery specialist’s partner conference this week, the company introduced Asigra Software-Defined Data Protection, defined as an architecture to turn commodity infrastructure into scalable cloud backup storage.
Asigra compiled its code onto FreeBSD and provides it for free to service provider partners as an ISO image. “It’s the first Software-Defined Data Protection platform,” said Eran Farajun, executive vice president at Asigra. “It’s the entire stack. It’s not just the backup software, it’s also the file system and the monitoring. We disintermediated the software that comes with these expensive storage arrays from HP, EMC and NetApp.”

Asigra will support the stack, but doesn’t plan to make money from it directly. “Our strategy is to help our partners free up dollars to generate more demand and win in the marketplace,” Farajun said.

It’s not the first time Toronto-based Asigra has tried to rock the boat in order to build market share. A year ago, Asigra decoupled backup pricing from recovery pricing — offering very low prices for backing up data and charging considerably more for recovery. The company’s bet was that the current pricing models are unsustainable given the exponential growth in data storage.

Farajun admits that Asigra expected to take a revenue hit at first from effectively lowering prices by 40 percent or more, but he said the company was pleasantly surprised: “Our revenues grew out of volume. We picked up new customers and our existing customers [increased] their existing licenses.”

According to Farajun, some partners are turning that pricing model into additional business. “This is performance-based backup because the less recovery you do, the cheaper it is. The analytics about the recoveries is given to the customer and the partner can then help the customer improve their IT infrastructure,” Farajun said.


Veeam Cloud Connect for Availability Suite v8 Announced

Today Veeam Software announced Cloud Connect as part of the new Veeam Availability Suite v8. This new functionality will give customers a secure and efficient means to move backups to an offsite repository without the upfront capital investment in an offsite infrastructure or management.

Using a reliable, secure SSL connection, Cloud Connect enables Veeam customers to send offsite to a hosted repository. No additional Veeam licensing is required. It offers a simple way to protect against risk of disaster loss, managing and maintenance of offsite hardware, and customers don’t have to struggle with data transfer and security issues of a public cloud backup.

Additional features include:

Complete visibility and control through Veeam backup console, where customers can track cloud repository consumption, access and recover data, and receive reminders for hosted storage renewal.
Modern backup architecture including backup copy jobs with built-in WAN acceleration, forever incremental backups, and GFS retention policies.
End-to-end encryption encrypting data in transit
Current and new Veeam service providers can leverage Cloud Connect to help grow their customer base. A simple setup, only requiring one server and about 10 minutes of setup time, gives service providers all the infrastructure management capabilities they need to offer offsite repository services.

Features for service providers include:

Cloud gateway: Virtualizes all traffic between the customer and the service provider through a single
SSL connection: Reliable, secure connection over SSL
Multi-tenancy built-in: Manage multiple customers, cloud repositories and cloud gateways from one all-inclusive management and reporting console.
Resource management: Allocate storage for each customer, while leveraging built-in reports and alerts to track storage consumption, manage expiration dates, and send automatic renewal reminders.
Scale-out architecture: Easily scale Veeam Cloud Connect infrastructure by deploying multiple cloud gateways, thus enabling automatic load balancing and high availability.
End-to-end encryption: All data is protected in-flight with SSL, and customers can additionally encrypt data at-source (before it leaves their network perimeter) and still get all the benefits of Built-in WAN Acceleration.

Availability and Pricing
Cloud Connect along with Veeam Availability Suite v8 will be generally available in the third quarter of 2014. Prices will be monthly per VM licensing and tailored to the specific need.

Symantec Backup Exec 2014 fixes BE 2012′s mistakes

Symantec took a different approach to the launch of Backup Exec 2014 than it did with Backup Exec 2012.

This time it listened to customers before the rollout.

From a technology standpoint, Symantec Backup Exec (BE) 2014 was largely a fix for shortcomings in BE 2012. Symantec’s BE 2012 gaffes included taking out popular features and its failure to support new applications.

Symantec expected to impress users with a new interface and redesigned work process in BE 2012; instead, it made long-time customers angry.

The reaction to BE 2012 proved backup admins are a conservative group, and they don’t want something “fixed” unless it is broken. When Symantec made a host of supposed improvements to the backup process in BE 2012, it received strong negative feedback.

Symantec execs at first reacted to the BE 2012 uproar by saying they were “skating to where the puck is going” and predicted their customers would come to appreciate the new features. But too many BE users thought they were already skating with the puck and didn’t welcome the changes. They always seek faster backups, of course, but when it came to process, they wanted to keep doing backups as they were used to doing them.

Many unhappy BE 2012 customers wanted Job Monitor back, and they wanted support for the latest Windows applications rather than new features. They also wanted an easier way to upgrade from previous versions. They finally got those things last week in BE 2014, two years after Symantec promised fixes.

Grateful customers gave Symantec credit for finally making the changes in BE 2014, and also listening to their concerns this time before launching the product. Symantec had a large open beta program for BE 2014, including a High Touch group of users who were visited by Symantec personnel during the process.

Julian Moorhouse, a vocal BE 2012 critic, was a member of the High Touch group for Symantec Backup Exec 2014. The IT manager at Commercial and Industrial Property in Australia said Symantec sent a senior product manager from Florida and another from India to his Sydney office during the beta program.

“I think Symantec learned a valuable lesson by missing the boat on platform support in the 2012 version of BE,” he wrote in an email to SearchDataBackup when asked about the BE 2014 beta. “By the sounds of things at Symantec, this is something they will never let happen again.”

Moorhouse admitted he came to embrace the server-centric backup job creation method added to BE 2012, although he complained at first when that replaced the multi-server job function. Now that the multi-server function is back, he said he doesn’t use it because he likes the new way better. He understands Symantec’s point that backing up all servers in one job means an entire backup can be ruined by a problem with one server.

Similarly, Horizon Business Services director of IT Jacob Ackerman said he barely uses the Job Monitor now that is back, even though he was unhappy when Symantec removed it from BE 2012. He also grew to like the new interface from BE 2012.

“I really hated it at first,” he said. “But once I got used to it, I actually liked it better, especially with virtual servers.”

Better communication between Symantec and its BE customers could have smoothed reaction to the new features in BE 2012 before their release.

After the release of BE 2012, Symantec was criticized for not having an extensive beta program that would have pointed out the problems before general availability (GA). The BE 2014 beta program started in February, nearly four months ahead of GA. Brian Greene, Symantec senior director of product management, said more than 3,800 customers registered for the beta and more than 900 provided feedback.

“We did our homework with this release,” Greene said. “We wanted to get back to our roots to fill unmet needs our customers were asking for.”

By replacing popular features with newer ones, Greene said, “We forced customers to pick a path in 2012. With this release, we brought [the paths] together. Now they don’t have to pick a path.”

Enterprise Strategy Group (ESG) senior analyst Jason Buffington said it is obvious that Symantec listened to customers before the BE 2014 release.

“They took it on the chin a little with so much radical change [to BE 2012],” he said. “To their credit, there were a lot of executives on a lot of planes flying to meet and listen to critics. They put back the things that needed to be there for the faithful, and kept the innovation [from BE 2012]. This brings back the things that people have relied on Backup Exec to do for decades and adds manageability needed for the modern data center.”

Interestingly, a lot of unhappy BE customers stayed with the product despite the 2012 changes, even if many did not upgrade from BE 2010. That proves customers are reluctant to rip and replace their backup software. Still, Symantec took a financial hit with BE revenue over the past two years. Its executives — including two fired CEOs — often found themselves having to assure customers and investors they were working on fixing BE.

Symantec still has problems, but at least now it is listening to what customers want.