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IDC: Software Grows Faster

Storage software grew at a faster rate than networked disk storage last quarter, according to market research from IDC
(see IDC: Storage Software Market Grows 15%).

Storage software revenue rose 15 percent year-over-year to $2.2 billion last quarter. For all of 2004, IDC places storage software revenue at $7.9 billion, up 16.1 percent from 2003.

Networked disk storage, in contrast, increased 11.6 percent in the fourth quarter from the previous year, according to IDC figures released earlier this month (see IDC: Networked Storage Up and IDC Storage Tracker Released).

Software growth is driven by the need to manage more complex and diversified storage and the availability of more sophisticated backup technology, says Bill North, IDCs research director for storage software.

Though backup remains the largest storage software segment, storage resource management (SRM) and replication are the fastest growing, per IDC. SRM grew 19.7 percent last quarter from the same period in the previous year, and replication had 14.2 percent year-over-year growth. Backup and archive software grew 9.5 percent year over year.

Archrivals EMC Corp. (NYSE: EMC) and Veritas Software Corp. (Nasdaq: VRTS) -- companies aggressive on the M&A front -- dominated more than 50 percent of the storage software market for last quarter and the full year (see New EMC Group Jabs Veritas and EMC Pulls Switch on Veritas).

EMC led with 31.7 percent market share for the fourth quarter with Veritas at 21.7 percent. For all of 2004, EMC was No. 1 with 30.9 percent compared to Veritas’s 21.9 percent.

EMC has spent more than $3 billion to beef up its software portfolio over the past two years (see EMC Cops Documentum, EMC Gobbles Legato, and EMC Gobbles VMware). EMC claims the lead in the SRM and replication segments, where IDC shows it having market share of 55.2 percent and 43.4 percent, respectively, in the fourth quarter.

EMC’s revenue grew 25.1 percent last quarter to outpace total market growth. IBM Corp. (NYSE: IBM), with 16.7 percent growth, was the only other vendor to grow faster than the industry in the fourth quarter -- a contrast with IBM's lack of growth in IDC's hardware report. Overall, IBM ranked fourth in overall market share with 8.2 percent, nearly flat with 8.1 percent in its ranking last quarter.

Veritas has also been an aggressive buyer of software companies and is in the process of becoming part of Symantec Corp. (Nasdaq: SYMC) in a $13.5 billion buyout that is expected to close by midyear. (See Veritas: All Systems 'Go', No Brainer: Veritas Buys KVS, and Veritas Nabs Ejasent.)

Veritas’s revenue increased 11.4 percent for the quarter.
Though Veritas's overall storage software market share slipped to 21.7 percent last quarter from 22.4 percent the previous quarter, the supplier maintained the lead in backup with 40 percent market share. Veritas also leads in the file system market with a 56 percent share.

Table 1: Q4 2004 Storage Software Revenues

Vendor 4Q04 Market Share 4Q03 Market Share Rev Growth
EMC $693 31.7% $554 29.1% 25.1%
Veritas $475 21.7% $427 22.4% 11.4%
CA $193 8.8% $174 9.1% 11.1%
IBM $180 8.2% $154 8.1% 16.7%
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