Last weeks financial news may give optimists encouragement that the storage market is finally picking up steam. More-pessimistic observers (they call themselves "realists") may prefer additional evidence, such as purchasing surveys or a change in the penny-pinching course of venture-capital firms. Those portents were also visible.
While we had, after all, just a weeks worth of announcements, some results came from big players as well as bellwethers of the enterprise storage market.
- EMC Corp. last week reported $1.48 billion in revenue and $82 million in profit in the second quarter of 2003. The results followed close on the heels of EMCs acquisition this month of Legato Systems Inc. The second quarter earning beat both its prior quarter as well as the year-ago quarter. (See "EMC Announces Robust Earnings" for more information.)
- QLogic Corp. followed the Fibre Channel camp and reported first-quarter revenues of $126.2 million, up 5 percent from the previous quarter. The company said sales from Fibre Channel products rose 9 percent in that period and accounted for 74 percent of its total revenue.
- Seagate Technology also reported a boost for the quarter. Revenue totaled $1.55 billion for the quarter ended June 27, with net income of $160 million. While the revenue of the year-ago quarter was similar ($1.47 billion), the year-ago quarter generated a net loss of $198 million. The company said there was increased demand for its enterprise Cheetah lines.
A couple of companies showed the barest profit (or loss) in the past quarter—still, that was an upswing from past performance. MTI Technology Corp. reported a $602,000 profit, up from its net loss of $10.8 million in the year-ago quarter and $1.4 million in the previous quarter. (The companys fiscal 2003 year ended in April.) In addition, storage services company Datalink Corp. reported increased revenue of $26.4 million for the quarter ended in June, an increase of 25 percent from the previous year. This performance almost brought the company into the black; it reported a net loss of $186,000.
Meanwhile, tape vendor Quantum Corp., which will announce its quarterly results later this month, warned investors of lowered expectations for revenue and earnings. In the release, the company said it hadnt met sales targets for media and that sales growth had slowed this spring.
Certainly, another positive sign for the storage market would be a loosening of venture-capital purse strings for startups. There were several such rounds of funding reported last week.
One notable beneficiary of venture funding was NAS vendor BlueArc Corp., which announced it has received $47 million. According to reports, this is the largest single round of venture funding in more than two years. BlueArc said it had increased its revenue 57 percent over the year-ago quarter and added 20 percent more customers. (Of course, such yearly statistics can be dramatic for startups.)
Buyouts are always a consideration when it comes to startup companies, as weve seen from recent actions of larger players such as EMC. According to Thomas Lahive, senior analyst with Enterprise Storage Group, we will see similar acquisitions over the rest of the year. At the same time, he said companies on the buying side will be more picky than in bubble days. Large companies will avoid impulsive shopping.
Candidates for todays buyout must meet two important criteria, according to Lahive. "First, there needs to be a cohesive fit into a companys technology strategy," he said. Secondly, startups must bring an existing customer list and established support infrastructure to the table. Startups that seek to be bought out "need to be run as an independently owned, successful organization. That means customers," he said.
At the same time, a recent poll of enterprise customers should provide even more assurance that the upward trend should continue.
"The 18-month recession looks like it might be breaking," said Lahive, pointing to a just-compiled survey of purchasing plans of storage managers. He said the second quarter spending survey showed an up tick. The spending should increase over the next quarter.
Enterprise storage buyers "looked at the food in the second quarter. But they may really taste it in the third quarter," Lahive said.
Still, he cautioned against over-optimism. A realistic expectation will be a growth rate in the upper single-digit range or even a bit higher.
Of course, there will be more results announced in the weeks ahead and the current picture may change. I savor the moment.
David Morgenstern is a longtime reporter of the storage industry as well as a veteran of the dotcom boom in the storage-rich fields of professional content creation and digital video.
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