What else is new?
When I talk to EMC customers, many say they are rooting for competition," said Wit Soundview analyst Gary Helmig. "Prices are going to come down and EMC's prices are going to have to come down."
siliconinvestor.com
EMC is no stranger to price wars in the memory business.
We knew we could sell cheaply because again, the storage market was sole-sourced by IBM. But we didn’t realize EMC was about to compete against a truly renegade, ruthless, hard-nosed IBM division. They fought back fast, lowering their prices and improving their drives.
emc.com
Here are some excerpts from a 1994 Computerworld article that captured the intensity of the 1994 price wars in the mainframe storage business.
Storage prices plummet
By CRAIG STEDMAN
(December 19, 1994)
Like the birds, prices on mainframe disk arrays are heading south for the winter. And large systems shops are getting a warm feeling as a result.
Mainframe storage vendors have found themselves in a price war as they jostle for position in an increasingly crowded market. Users and analysts said asking prices on even high-performance arrays have dropped to the $3-per-megabyte range, about 40% lower than the cost at the beginning of the year........
Mainframe disk prices are dropping ``like a stone,'' said Thomas Loane, vice president of computers and communications services at Alamo Rent A Car, Inc. in Fort Lauderdale, Fla. ``The wars have been declared, and it's definitely a buyer's market already..........''
Fortunately for users, the price war comes at a time when demand is trending sharply upward. Thanks in part to the resurgence in mainframe buying, total DASD shipments are expected to increase 23% to 900T bytes this year and then rise another 33% to 1,200T bytes in 1995, according to Meta Group, Inc. in Stamford, Conn.
Normally, that kind of demand would help vendors hold the line on prices. But Carl Greiner, an analyst at Meta Group, said supplies of arrays have become abundant in the past few months as IBM, EMC and other companies shipped new products and increased the intensity of their market share fight.
``The manufacturers are in a cost battle here, and they need to be sure they can compete on cost,'' he said. ``It's commodity stuff now..........''
computerworld.com
Rare patterns of excellence:
EMC went from 0% share of the mainframe storage market in 1990 to 26% in 1994. It surpassed IBM in mainframe storage in 1995 and conducted mop up operations so methodical and thorough that a proud IBM fumbled through 5 high-end systems in the last 5 years and was forced to forge alliances with arch-rival Storagetek (1997) just to keep from falling even further behind Hitachi, which had smartly slipstreamed behind EMC with a faster mainframe that IBM only countered in 1999. During this time frame, EMC's market share shot up to 75% before settling down to 50% in 1999 as the pure mainframe storage market morphed into the mainframe+open system market.
In the open systems market, EMC started out with 0% share of the market in 1995. At the end of 1995, they had sold $200 million open systems storage and then proceeded to capture 35% of this market in 1999.
Celerra started out as a niche video server product developed by some key DEC refugees who were widely acknowledged to be microcode geniuses. It was introduced in 1996 but EMC only started to sell Celerra (with updated Pentiums) with Symmetrix in 1998 to address the inherent limitation of disk-based network-attached file servers: network congestion. EMC took the $307,000 (list price) Celerra from 0% of the NAS market to 18% share in 1999. In dollar terms, Celerra went from $0 in 1Q1998 to $100 million in 2Q2000.
SRDF was EMC's first software product and it was introduced in 1994. EMC Software went from 0% share of the market in 1994 to about 20% in 1999, grabbing the market lead from the Tivoli unit of IBM. In dollar terms, EMC Software went from $20 million in 1995 to $445 million in 1998 to $822 million in 1999 with $350 million sold in the 2Q2000.
EMC acquired Mcdata in 1995, a year after Mcdata had struck an exclusive ESCON director switch supplier relationship with IBM that would eventually allow it to control over 80% of the ESCON director switch market. That acquisition was also timed to close just after EMC finally surpassed IBM in mainframe storage in 1995. After reorganizing Mcdata in 1997 to let it focus on the nascent fibre channel director switch business, a semi-independent Mcdata went from 0% share of the FC-based director switch market in 1997 to 99% share in 1999 generally in line with EMC's 2:1 dominance of the early stage large scale SAN market.
Many good companies know how to survive price wars. The truly great ones know how to survive those routine wars and create the opportunities and the products to preserve their pricing power with a 99% customer retention rate. Note that over $80% of the $2.15 billion in second quarter revenues came from products that were only introduced during the last 3 years with over $500 million coming from products only introduced during the quarter!
My observation is that many people make the common mistake of comparing the price wars in the storage systems business with the routine price wars in the processor business. Unlike PCs or Servers where customers are generally willing to upgrade in 1-3 year cycles (read: market share shifts), companies and consumers generally keep on accumulating stuff, stuff and then more stuff. |
