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Veritas Has Double Vision

Beats the Street, doubling year-over-year profit. But will EMC slow Veritas down in 2004?

"On the migration front, we've been in a really strong conversion rate going from Legato to Veritas for some time now," Bloom said. "That's been going on for really several years as Legato's market share has continued to decline pretty much year after year. So far in 2003, we're up to somewhere close to 100 customer migrations to Veritas from Legato."

He called EMC's bid for Documentum "an interesting acquisition. It puts EMC to some extent in competition with what should be their other partners, and I think it will open up some interesting strategic relationship opportunities for Veritas. I think there's an opportunity for the partnerships with some of Documentum's competitors to evolve in a pretty interesting way, and naturally we're not going to be too shy about that." [Ed. note: Hmmmm... interesting...]

EMC isn't shy about its software strategy, either. The company has pointed out that EMC, Legato, and Documentum combined brought in about $2.2 billion in software revenues over the past 12 months -- a sum that even Veritas would have trouble matching (see EMC Swings Into Software Big Leagues). Veritas reported $1.5 billion in revenues in 2002. It has $1.26 billion in sales in the first nine months of 2003 and will finish with around $1.74 billion, if it meets its guidance.

At least one observer doesn't share Veritas's optimism over the long run. Clay Sumner, an analyst with Legg Mason Inc., downgraded Veritas's stock today from Buy to Hold partly because he sees increasing competition from EMC and Network Appliance Inc. (Nasdaq: NTAP). Sumner said he thinks EMC's ILM strategy will reduce the need for Veritas's backup software.

"As early as January [2004], we could have EMC heavily marketing products with the message, 'Stop doing backups,' " Sumner says. "And Network Appliances is already saying that."

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