Storage Last Quarter Financials: Sales Growth Falls, With Few Exceptions

Of the top publicly-listed storage vendors, all-flash storage vendor Pure Storage was once again showed its peers what growth is, followed by good growth for Carbonite and an uptick for HPE.

Storage Not Looking Good Last Quarter

While Pure Storage and Carbonite reported strong growth for their most recent fiscal quarters, and Hewlett Packard Enterprise showed anemic growth, the other publicly traded storage vendors saw sales fall. The big takeaway here is that the storage industry, whether it’s independent storage vendors like Pure Storage or NetApp, or system vendors like Dell EMC or HPE, or storage software or component vendors, are facing what appears to be a declining storage market.

This quarter, CRN is expanding its look at how the storage industry is doing by going beyond the traditional hardware-focused vendors to include storage software-focused Commvault, cloud storage-focused Carbonite, and component focused Seagate, Western Digital, and Marvell. This will hopefully provide an even more clear picture of the current state of the all-important storage market.

To see how the storage industry is faring as of the last quarter, turn the page.

But First, Here's Last Year For Comparison

By comparing the latest storage sales numbers from some of the publicly-listed storage vendor with last year, we can see that growth overall has slowed considerably.

For comparison, here are the first quarter 2019 revenue figures for external enterprise storage systems for the top six vendors, as reported June 5, 2018 by analyst firm IDC:

Dell EMC -- $2.06 billion, up 44.6% YoY

NetApp -- $890.1 million, up 21.7% YoY

HPE -- $652.2 million, up 9.4% YoY

Hitachi Vantara -- $457.9 million, up 2.0% YoY

IBM -- $364.2 million, down 17.3% YoY

Now let's look at how storage vendors fared in the most recent quarter.

Pure Storage 1Q'20: $326.7 million, up 28% YoY

All-flash storage technology developer on May 22 posted first fiscal quarter 2020 revenue and earnings that fell short of investor expectations. However, the Mountain View, Calif.-based company said it is investing in the technology and the sales force it needs to get back to growth.

For its first fiscal quarter 2020, which ended April 30, Pure Storage reported revenue of $326.7 million, up 28 percent over the $255.9 million the company reported for the first fiscal quarter 2019. However, that missed analyst expectations of about $333 million, as reported by Seeking Alpha. All of Pure Storage's revenue is considered storage revenue.

That included product revenue of $238.7 million, up from last year's $195.4 million, and support subscription revenue of $88.0 million, up from last year's $60.5 million.

The company posted a GAAP loss of $100.3 million, or 41 cents per share, which was much higher than the $36.0 million, or 12 cents per share, the company reported last year. On a non-GAAP basis, the loss was $27.6 million, or 11 cents per share, compared with last year's loss of $16.2 million, or 7 cents per share.

Analysts had been expecting a GAAP loss of 32 cents per share and a non-GAAP loss of 8 cents per share, according to Seeking Alpha.

Dell EMC 1Q'20: $4.0 billion, down 1% YoY

Dell Technologies, which according to IDC is the number one provider of overall storage, storage software, and all-flash storage arrays, saw its storage sales slip in its first fiscal quarter 2020, which ended May 3. The company on May 30 reported quarterly storage sales of $4.0 billion, down 1 percent over the same period as last year. That accounted for a part of the 4-percent drop in sales of Dell Technologies' Infrastructure Solutions Group.

Jeffrey Clarke, vice chairman of products and operations, told investors the company's external storage business is delivering solid year-over-year order growth, and that it saw good velocity in its high-end PowerMax line, its Isilon unstructured data line, and its Unity midrange products.

Dell Technologies is counting on several new Dell EMC storage products introduced at May's Dell Technologies World, as well as the expected release of "Midrange.next," a new midrange storage line that the company will use to unify multiple midrange storage lines, for future growth.

Hewlett Packard Enterprise 2Q'19: $942 million, up 3% YoY

Hewlett Packard Enterprise on May 23 reported second fiscal quarter 2019 storage revenue of $942 million, which was up 3 percent on a GAAP basis and up 5 Percent when adjusted for currency. For the quarter, which ended April 30, HPE saw "notable strength" in its Nimble Storage portfolio, sales of which grew 45 percent over those of last year, said Tarek Robbiati, executive vice president and chief financial officer, during the company's quarterly financial analyst call.

The quarter marked HPE's eighth consecutive quarter of growth, and also saw HPE expand its storage margins as clients embraced the company intelligent storage offering, Robbiati said.

NetApp 4Q'19: $1.59 billion, down 3% YoY

NetApp, the storage industry's largest independent vendor, took a bit of a hit during its fourth fiscal quarter of 2019, which ended April 26. The company on May 22 reported revenue of $1.59 billion for the quarter, down 3 percent over the $1.64 billion it reported for its fourth fiscal quarter 2018. However, for the year, total sales rose 4 percent to $6.15 billion. All of NetApp's revenue is considered storage revenue.

NetApp CEO George Kurian told investors on the company's quarterly financial conference call that the company had three areas where it did not perform as well as it should have: inconsistent go-to-market execution, which it is fixing with more sales resources for acquiring new enterprise accounts, poor execution on renewals, and a fall in its OEM business.

While NetApp's all-flash array revenue for the full fiscal year 2019 grew 25 percent over that of the previous year, it only grew 11 percent in the fourth fiscal quarter, Kurian said. However, he said, the company's cloud-focused business is growing strong, and is expected to contribute to growth in fiscal 2020.

IBM 1Q'19: down 13% YoY

For IBM, its first fiscal quarter of 2019 was a tough quarter for storage. Big Blue on April 16 reported that its storage sales for the quarter, which ended March 31, fell 13 percent on a constant currency basis, or 11 percent on a non-GAAP basis. IBM did not report the actual revenue number. However, analyst firm estimated IBM's first quarter 2018 storage revenue at $387.0 million, and a 13-percent drop from that number would leave IBM with a first fiscal 2019 quarter storage revenue of $336.7 million.

Jim Kavanaugh, IBM's senior vice president and chief financial officer, blamed its storage sales drop in part due to its high-end DS8000 storage sales being impacted by IBM Z series mainframe sales cycle and on " ongoing competitive dynamics and pricing pressures." The storage revenue shortfall was part of a larger 14-percent decrease in the company's overall systems hardware sales to about $900 million.

Commvault 4Q'19: $181.4 million, down 2% YoY

Commvault, developer of a wide range of data protection and data management technologies, on April 29 reported that revenue for its fourth fiscal quarter 2019 slipped 2 percent compared to the same period as last year to reach $181.4 million compared to last year's $184.9 million. The Tinton Falls, N.J.-based vendor reported financials on April 30.

That revenue figure included software and products revenue of 80.8 million, down 3 percent from last year, and services revenue of $100.6 million, down 1 percent over last year.

On a GAAP basis, Commvault reported a fiscal fourth quarter 2019 net loss of $2.2 million, or 5 cents per share, up significantly from the net loss of $1.7 billion, or 4 cents per share, it reported for its fiscal fourth quarter 2018. On a non-GAAP basis, net income for the quarter reached $23.9 million, or 51 cents per share, up from the $14.5 million, or 31 cents per share, in the same period of the prior year.

The quarterly results were the first to be released under Sanjay Mirchandani, who in February took over as Commvault’s new president and CEO.

Mirchandani, in a prepared statement, told investors that innovation has been core to the company's success, but that it needs to simplify its business and improve execution.

"Commvault has implemented extensive operational and organizational changes over the past twelve months, which have enabled us to reduce costs, increase repeatable revenues and deliver significant year-over-year earnings growth. However, we have more work to do to ensure that Commvault reaches its full potential," he said.

Carbonite 1Q'19: $82.1 million, up 27% YoY

Cloud-based data protection developer Carbonite on May 2 said revenue for its first fiscal quarter 2019, which ended on March 31, reached $81.2 million, up 27 percent over the $64.0 million reported for its first fiscal quarter of 2018.

Net income, on a GAAP basis during the quarter reached 2.0 billion, or 6 cents per share, down significantly from the $11.9 million or 42 cents per share it reported for the same period last year. On a non-GAAP basis, the Boston-based company reported net income of $15.4 million, or 45 cents per share, nearly double last year's net income of $8.1 million or 29 cents per share.

CEO Mohamad Ali said in a prepared statement that the big highlight of the quarter was Carbonite's acquisition of Webroot, a provider of SMB-focused cloud-based cybersecurity at the endpoint.

"We are excited to have closed the Webroot acquisition as planned and started the integration process. Together, these leading solutions will provide robust protection of data, devices and networks for our partners and customers," Ali said.

Seagate Technology 3Q'19: $2.31 billion, down 18% YoY

SSD, hard drive, and storage system developer Seagate Technology on April 30 reported that revenue for its third fiscal quarter 2019, which ended March 29, as $2.31 billion, down nearly 18 percent over the $2.80 billion the company reported for its third fiscal quarter 2018.

On a GAAP basis, the Cupertino, Calif.-based storage company reported net income of $195 million, or 69 cents per share, just over half of its net income of $381 million, or $1.31 per share for the same period last year. Non-GAAP net income was $235 million, or 83 cents per share, down significantly from last year's $424 million, or $1.46 per share.

Seagate is seeing the ramping up of digital transformation leading to new applications like machine learning and Smart Cities, which will require faster access to data in the future and which will drive future sales, said Dave Mosley, Seagate CEO, in a statement.

"Seagate executed very well in the third quarter while navigating near-term demand head-winds. Our focus on operational efficiency and expense discipline drove better-than-expected EPS and free cash flow generation," Mosley said.

Western Digital 3Q'19: $3.7 billion, down 26% YoY

Tough times were felt a Western Digital, the San Jose, Calif.-based developer of SSDs, hard drives, flash memory, and storage arrays. The company on April 29 reported revenue for its third fiscal quarter of 2019, which ended March 29, of $3.7 billion. That’s about 26 percent below the $5.0 billion the company reported for the same quarter last year.

The company also reported a GAAP net loss of $581 million, or $1.99 per share, compared to net income of $61 million, or 20 cents a share, for the same period last year. On a non-GAAP basis, Western Digital reported net income of $49 million, or 17 cents per share, compared to last year's $1.1 billion, or $3.63 per share. It blamed part of the fall in income on lower of cost or market inventory charges of about $110 million in cost of revenue mainly due to certain flash memory products that contain DRAM components.

Western Digital CEO Steve Milligan said in a prepared statement that while the business environment remains soft there are indications of improving trends.

"Our expectation for the demand environment to further improve for both flash and hard drive products for the balance of calendar 2019 is largely unchanged. We are executing well on enhancing our product portfolio, driving technology advancements, rightsizing our factory production levels and lowering our cost and expense structure, all of which position us to emerge stronger as market conditions improve," Milligan said.

Marvell Technology Group Q1'20: $287.7 million, down 12% YoY

Marvell Technology Group, the Santa Clara, Calif.-based developer of infrastructure semiconductor solutions, on May 30 reported that first fiscal quarter 2020 revenue from its storage-focused business of $287.7 million, which was a drop of 12 percent over the same period last year.

During the quarter, which ended May 4, sales of storage-related technology accounted for 42 percent of Marvell's overall revenue, down from 52 percent of total revenue last year.