EMC Hiccups, Waits for Clariion
Hopkinton misses forecast due to fewer sales in midrange systems, SRM, and backup
April 21, 2006
![Network Computing logo Network Computing logo](https://eu-images.contentstack.com/v3/assets/bltde8121fc52c5c8f3/blt3f3d0318f746b1c2/65a530e4187606040a1d8b8c/placeholder.png?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Disappointing earnings forced EMC CEO Joe Tucci into an unusually defensive stance today to explain what went wrong last quarter. (See EMC Reports Q1.)
EMC didn't miss by much. Its first-quarter revenue of $2.55 billion was just under previous guidance of $2.57 billion to $2.59 billion, and its earnings per share of $0.14 hit its forecast. But as Tucci pointed out, "It's the first time we missed even a piece of our guidance in a long time."
Tucci used the earnings conference call to address poor sales in EMC's midrange Clariion systems and storage software, as well as bad performance in the Asia Pacific region.
Tucci also defended EMC's executive compensation, addressing negative feedback about a December award of performance stock shares to senior management.
There were positives as well. High-end Symmetrix sales increased more than expected following a system launch, Documentum content management software increased about 30 percent year over year, and VMware continued impressive growth by increasing 64 percent from last year. But after coming in a tad short of its guidance, EMC executives had a lot of explaining to do."Revenue was a bit light," Tucci admitted. "I'm obviously disappointed we didn't do the extra $20 million to $40 million. But nobody's hanging their heads. There's ample opportunity for upside in the second half of the year."
That opportunity comes from the new Clariion systems EMC is preparing to launch, perhaps as soon as next week at its annual EMC World conference in Boston. Sources say the new systems codenamed "Sledgehammer" -- will support 4-Gbit/s, SAS, and iSCSI and will be built on new Intel Blackford chips with twice the memory channels of its predecessor. (See EMC, NetApp Ready New Wares.)
EMC execs say the impending new systems hurt sales of existing Clariions last quarter as customers chose to wait. "The worst-kept secret in storage is there's a Clariion refresh coming," CFO Bill Teuber said.
Tucci wants to keep details secret, including when the new systems will be available. Although he said the new systems represent "a whole new design" rather than a refresh, he wouldn't say when they will ship.
"I really can't give you a date," Tucci said when pressed for a launch date. His repeated references to a big opportunity in the second half of the year suggests the new Clariions won't be available before late this quarter.According to Tucci, poor sales of high-end Clariions hurt SRM sales because management software often accompanies those sales, and customers who upgraded to new Symmetrix DMX-3 systems already had management software licenses. (See EMC Makes Good on DMX-3.)
Storage resource management (SRM) revenue decreased 7 percent year over year and Legato backup and archiving software was down 21 percent. Tucci blamed poor Legato sales on the combining of backup and content management sales forces into one, which concentrated on content management at the expense of backup last quarter.
"We lost focus [on backup]," Tucci confessed. "I believe we did it to ourselves. Not that [combining sales forces] was a bad move, we just didn't execute it properly."
It's too early to tell if EMC lost share to rivals during the quarter. IBM is the only competitor to report revenue yet and did seem to hurt EMC more on software than on systems. IBM's Tivoli software revenue increased 24 percent while revenue from storage systems was up only 6 percent.
EMC was also disappointed that Asia Pacific revenues grew just 1 percent year over year. The firm this month hired Steve Leonard as head of Asia Pacific and Japan (APJ) operations and forged reseller deals with Intel and NEC aimed at helping sales in that region. (See EMC, Intel Forge SAN Deal.)Regarding other resellers, Tucci says EMC maintains close ties to Dell. Dell's OEM sales of EMC gear accounted for 14 percent of EMC revenue last quarter.
Tucci, who received a compensation package worth nearly $30 million last year, also defended EMC's awarding of nearly 6 million performance shares to the CEO and other senior executives.
Tucci pointed out that besides being based on performance goals, the shares will not vest for three years and the executives need to be employed at EMC when they vest to collect. "The aim is to keep a first-rate senior management team together," he says. "The war for talent is fierce out there."
— Dave Raffo, Senior Editor, Byte and Switch
Organizations mentioned in this article:
Dell Inc. (Nasdaq: DELL)
EMC Corp. (NYSE: EMC)
IBM Corp. (NYSE: IBM)
NEC Corp.0
You May Also Like
Maximizing cloud potential: Building and operating an effective Cloud Center of Excellence (CCoE)
September 10, 2024Radical Automation of ITSM
September 19, 2024Maximizing Manufacturing Efficiency with Real-Time Production Monitoring
September 25, 2024