Stocks in Focus Feb 4 2000 9:00AM CST
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Data Banks of the Post-PC Era*
EMC Versus Veritas
by Chris Connor
Click here for the introduction to the Ultimate Storage
Championship.
The Match-Up
Fighting out of the red corner is the world's
largest storage hardware maker, EMC
{EMC}. Fighting out of the blue corner is the
world's largest storage management software
maker, Veritas {VRTS}. This match-up could
be considered a match up of storage
hardware against storage software. At first
glance, this is the most exiting match-up of
the first round of this tournament because the
two largest storage companies in this
tournament are facing off against each other.
That being said, this match-up truly is a battle
of storage titans.
Round 1: Which Company has the
Superior Leadership Position?
Not only is EMC the world leader in storage
hardware, EMC is also the largest storage
company in the world - by far. Veritas may
be the world leader in storage management
software, but its annual sales of nearly $600
million pale in comparison to EMC's annual
sales of about $5.6 billion. EMC was able to
overtake computer giant IBM {IBM} for market
leadership dominance in mainframe storage
and never look back. Veritas dominates
storage management and seems to be pulling
away from Legato {LGTO}, but the nod for this
round will have to go to EMC.
Round 2: Which Company has a
Better Growth Record?
This round is nearly a tossup because both
companies have demonstrated superior
growth. EMC has generated rapid but
consistent earnings and revenue growth for
the last five years. In fact, EMC has grown
its earnings about 30 percent a year over that
time. However, EMC cannot boast the
degree of sequential revenue growth that
Veritas has charted. Veritas has increased
its revenues on a quarterly basis for 13
consecutive quarters with the lowest increase
being 6.5 percent and highest being 60
percent. Veritas has also grown its annual
sales for at least 12 consecutive quarters.
With respect to total revenue growth for the
last four years, Veritas grew its revenues from
just $15 million in the first quarter of 1996 to
an amazing $226 million in the fourth quarter
of 1999, while EMC's revenues grew from
$521.5 million in the first quarter of 1996 to
$1.876 billion in the fourth quarter of 1999.
Veritas' revenue growth of 1,378 percent
during this period dwarfs EMC's growth of 260
percent. Looking at projected growth for the
future, Veritas wins again. Analysts project
that EMC will grow earnings 30.7 percent per
year over the next five years, while they
project Veritas to grow earnings 47.8 percent
per year over the same time frame. Round
Two goes to Veritas.
Round 3: Which Company's Industry
has a Brighter Outlook?
With each company winning a round so far,
this last round will decide the outcome of this
match-up and it all comes down to the future
of storage hardware versus the future of
storage software. Hardware will always be a
growing component of the storage industry,
but software will be substantially more
important as companies continue to
accumulate storage hardware. In fact,
International Data Corp (IDC) says that
storage capacity is increasing by 100 percent
per year. The more storage capacity that is
added, the harder it will be to manage.
According to Jon William Toigo's The Holy
Grail of Data Storage Management, "For
every dollar that a company spends in
storage hardware, it can expect to spend ten
times that sum in management costs." Data
must be continuously and efficiently managed
- which is where software plays a crucial
role. For example, management software is a
key component of the recently announced
Storage Area Network (SAN) and Network
Attached Storage (NAS) combination of
Veritas and 5 other storage vendors; Legato,
Network Appliance {NTAP}, Quantum ATL,
Spectra Logic, and Vixel {VIXL}. The final
round goes to Veritas.
The Winner
Veritas beats EMC in the battle of the storage
behemoths, and will face Novell {NOVL} in the
next round. EMC is getting more involved
with SAN and NAS, but Veritas is already
established in SAN and NAS with
partnerships with almost all of the leading
NAS and SAN companies. EMC could be
considered to be the king of a vast, but
relatively mature kingdom (storage hardware)
while Veritas could be considered to be king
of a realm (storage software) that is not as
vast as EMC's, but has significantly more
room to expand.
*This report is part of a multi- part series
about storage in the post-PC era. Click here
for the initial report that profiled the entire
storage industry.
Disclaimer: This report is published solely for informational
purposes and is not to be construed as advice or a
recommendation to buy or sell a security. Trading involves
risk, including possible loss of principal and other losses.
Your trading results may vary. No representations are
being made that utilizing techniques mentioned in this
article will result in or guarantee profits in trading. Past
performance is no indication of future results.
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