Everyone is taking market share from everyone...
Friday March 9, 6:15 pm Eastern Time
Computer storage firms say Europe looks good
(UPDATE: adds Network Appliance on UK Internet weakness, paragraphs 15-17)
By Peter Henderson
SAN FRANCISCO, March 9 (Reuters) - Computer storage vendors, which so far have only been singed by the U.S. economic slowdown, say they have no current fears of getting burned in Europe.
This week a slew of storage companies, including data storage leader EMC Corp. (NYSE:EMC - news), Network Appliance Inc. (NasdaqNM:NTAP - news) and Brocade Communications Systems Inc. (NasdaqNM:BRCD - news), were downgraded by analysts, in part to reflect slower-than-expected growth in international markets.
``We continue to hear feedback over the past couple of weeks that international markets are slowing, which has been a bastion of strength in the past few quarters,'' Salomon Smith Barney analyst H. Clinton Vaughan said.
Wit Soundview analyst Gary Helmig on Thursday downgraded EMC saying it was seeing slowness in Europe -- but added those problems were due to EMC losing some big deals to rivals.
EMC spokeswoman Dana Buchbinder said Helmig's comments did not match with the business opportunity the company is seeing in its overseas markets.
``EMC is gaining market share in all markets and in all geographies against all platforms,'' Buchbinder said.
EMC BATTLING IBM, HITACHI
Analysts had expected late last year that weakness in the technology sector would be restricted to U.S. consumers of personal computers, but that has spread to virtually all customers in the United States, and many have wondered if the trend could jump continents.
Europe is behind the United States in building specialized networks to house and efficiently manage data, one of the hottest technology sectors, and industry executives said on the sidelines of an investment conference here that they have seen no sign of the European market pulling back.
``Our business in Europe is probably growing the most,'' Dave Roberson, chief operating officer at Hitachi Data Systems, a private subsidiary of Japan's Hitachi Ltd. , said in an interview. His European manager had reported there were no signs of general weakness there, and he was gaining market share from competitors.
Helmig said EMC had lost big deals in the financial services sector in Germany, Austria, Switzerland and Spain to Hitachi, and perhaps some to International Business Machines Corp. (NYSE:IBM - news) as well.
Michael Byrd, the chief financial officer at Brocade Communications Systems Inc. (NasdaqNM:BRCD - news), which makes switches that tie together storage networks, said his European sales force had not seen demand drop off.
``Not at all,'' he told Reuters, adding that customers also were not delaying orders. ``They (salesmen) are not seeing stuff pushed out.'' About a third of the company's sales are foreign, much of that in Europe.
His competitor Jack McDonnell, the chief executive of switch maker McData Corp. (NasdaqNM:MCDT - news), said the Europeans were not abandoning ship, since many large companies there were in the early or middle stages of deploying systems.
``We haven't seen anything coming back to us from customers to make us back off our guidance - in Europe or in general,'' he said. About 30 percent of McData's sales are abroad, he said.
Britain's Internet sector, alone in foreign operations, was having a tough time, said Dan Warmenhoven, the chief executive of Network Appliance, which makes standalone storage units that hook into standard networks.
He told Reuters Europe, about 30 percent of business, would be somewhat flat quarter-to-quarter due to usual seasonality and that Asia, about 10 percent of deals, was going strong.
``There is one exception there. The UK seems to be sneezing, early symptoms,'' he said. "The manufacturing sector and the other commercial sectors seem to be doing really well. Telco, ISP and Internet-related stuff in the UK seems to be slowing.
SHARKS CIRCLING
Many U.S. corporate chiefs have scaled back technology budget increases for the year, according to various brokerage surveys of corporate. But storage industry executives said customers would not be able to hold storage spending for very long.
``I could do without some little increment, but I can't do without my foundation requirement,'' McDonnell said.
Network Appliance could last about 60-90 days without buying storage, Warmenhoven said. But companies could also simply cancel special projects, he added.
All of the major storage companies gun for EMC, the heavyweight which is still on target to meet its $12 billion revenue target for this year, according to Buchbinder. EMC, however, recently widened its forecast revenue rise to a range of 25 percent to 35 percent from 33-38 percent.
Both Hitachi and IBM said they were making gains on EMC, including in Europe.
IBM's recently improved 14-month-old Shark storage system was making gains in all geographic areas and winning in head-to-head fights with EMC, Linda Sanford, senior vice president and group executive for IBM's storage subsystems group, said on the sidelines of the conference, organized by Lehman Brothers.
And when IBM lost, customers generally got better deals from EMC, she said. Sanford said IBM's success was the same around the world, but Europeans had special reasons for avoiding EMC.
``European customers are looking for a technological vision. They are saying 'where are you going to take me?', and that is where the contrast with EMC starts to become more and more sharp,'' Sanford said.
But Hitachi's Roberson said he suspected IBM was feeling some pain, too. With a new sales force and strong technology, his firm was outgrowing the competition and taking market share, he said. ``I'm guessing more at IBM's expense than EMC's.''
Lehman storage analyst George Elling said a ripple effect started by the United States could hit Europe, but he had not felt it yet. ``I have not picked up from my contacts that there is a slowdown in storage in Europe,'' he said. |
