Veritas CEO Coughs Up Vision
Despite a chronic bout of laryngitis, Veritas Software Corp. (Nasdaq: VRTS - message board) Chairman and CEO Gary Bloom took questions Friday from analysts and investors in the first of a series of CEO interviews to be conducted by Salomon Smith Barney.
Bloom was asked several times about how Veritas views the competitive landscape now that many of the leading storage hardware companies are starting to sell software and encroach on its space -- EMC Corp. (NYSE: EMC - message board) being the most obvious offender in this category (see EMC Goes Soft).
Clint Vaughan, storage analyst at Salomon, said: "Despite ISVs [independent software vendors] being better suited to selling heterogeneous software, the reality is the hardware companies are doing a good job supplying applications... EMC has been particularly successful supplying these areas."
Bloom agreed that Veritas needs to address this issue. "We have to do something different when you look out there in terms of competing with hardware companies," he said. "However, we only compete with EMC in a couple of small areas... It's a cooperative relationship today." He added, "But there may be a bigger collision in the future." [Ed. note: Think of a train hurtling down a track at 200 miles per hour...]
However, Bloom said the barrier to entry for a hardware company entering the software market is "enormous" and puts Veritas "in a preferred position with customers, which drives relationships with vendors in the marketplace."
One clear way to see who is making the most impact, according to Bloom, is to compare the rhetoric from the hardware vendors with the results from Veritas. "They are reporting massively declining revenue lines and losses," he said, "while at a minimum we are showing license revenue growth and cash generation" (see EMC Stagnates and Veritas Numbers Add Up).
Investors asked several questions about Microsoft Corp.'s (Nasdaq: MSFT - message board) plans to incorporate backup features, such as snapshot, into Windows .NET Server 2003, and how this will affect Veritas's core market.
"Even if .NET server has backup features, the cost of labor and process changes involved in backing up different Windows platforms and different Unix systems still makes Veritas a more cost-effective solution," Bloom said. Veritas has about 48 percent of the backup market today, which Bloom insisted has not "topped out yet." Analysts suggest the market for backup software is slowing down, leading them to wonder where Veritas's future growth will come from.
Bloom pointed to the non-array-based storage management software market, worth about $3.3 billion today, of which Veritas claims to have captured about $1.1 billion to $1.2 billion. "We have a third of the current market out there, giving us plenty of room for growth here," he said.
Another important growth area for the company will be storage networking. "There's not a lot we can do today in a go-to-market sense. It's all about innovation, and we are working closely with about 40 partners in this area," he said. "Like we did with server platforms, the plan is to establish our footprint in network devices... This is a good measure of our future potential."
Today Veritas prices all its products on a per-node basis, but Bloom says it is too early to tell how this will work in the network. "Stop analyzing the model and look at the value," he said. "The question should be, 'Are you adding value, and how much is that worth to the customer?' "
Bloom, of course, must have an idea how Veritas will collect revenue from embedding its software in network devices, as its volume management software is slated to be part of Cisco Systems Inc.'s (Nasdaq: CSCO - message board) MDS 9000 series Fibre Channel switches. These will ship before the end of the year, with the more advanced software features coming in the first quarter of next year (see Cisco Ducks the Veritas Question).
Perhaps Bloom has decided not to count his chickens before they hatch?
— Jo Maitland, Senior Editor, Byte and Switch
www.byteandswitch.com |
