barrons
EMC and Veritas Swap Insults Over
Storage Efforts
By MARK VEVERKA
Half the battle in communicating effectively by e-mail is getting the
other party just to open your message. In a spam-filled world, the
ability to craft a compelling subject line is an art -- not a science. That's
why we were particularly impressed by a catchy missive sent our
direction by EMC spokesman Michael Gallant, who wrote, "Are you
drinkin' the 'Bloom-in' Kool-Aid?"
His salvo was in response to an earlier column in which we cited
several assertions by Veritas Software Chief Executive Gary Bloom
about rival EMC ("Storage Bubble Soon to Burst," April 22). Chief
among them was that EMC tried to steal some of Veritas's marketing
thunder by scheduling a product launch on the same day Veritas was
making a big presentation to customers at its annual user's conference.
"The suggestion that our April 29 announcement in New York was a
response to Veritas is completely absurd. We neither knew nor cared
about Veritas's user conference or its narrow announcement with IBM
when we planned our launch," Gallant retorts.
"EMC's announcement was a culmination of more than a year of R&D
in conjunction with a strategic acquisition. A large number of partners
participated. You were way off the mark if you thought the timing and
scheduling of our announcement had anything to do with Veritas," he
adds.
We admit. We sipped, but we aren't under any kind of a spell as
Gallant attests. He knows how to punctuate a point, but it wasn't
enough to get his adversaries at Veritas to back down. "Maybe it was
just a miraculous coincidence," rebuts Jeremy Burton, Veritas's chief
marketing officer.
Of course, all of this petty bickering over who planned whose party
first doesn't amount to beans, especially among friendly competitors.
EMC happens to be a significant customer of Veritas, but it also is
charting a course for future growth that undoubtedly will collide with the
software concern. In fact, EMC's aggressive plans to shift more
emphasis away from hardware and into software has raised the hair on
the back of Bloom's neck. Enough so, it seems the Veritas CEO isn't
afraid to engage in a war of words, accusing storage giant EMC of
chasing his firm into the storage-software market.
It is an accusation EMC isn't taking lying down. "Gary Bloom and
Veritas want people to believe EMC is following Veritas into the
storage-management software market. It's a clever ploy and they
sometimes get away with it," EMC's Gallant says. "The fact is, the
exact opposite is true."
Both companies can make legitimate claims to being a leader in storage
software, depending on how you define that broad category. EMC has been shipping disks of software
with its hardware for years and has begun expanding into new areas of software-only initiatives. In
addition, Gallant says EMC first started selling storage software separately from hardware in 1994 --
first geared toward a feature called "remote data mirroring." The company sold about $25 million in
software revenue that first year. EMC now sells more than 35 separate software products in a few
specialized segments, raking in software revenue that exceeded $1.5 billion last year, Gallant maintains.
"These results make us the largest storage-management software company -- validated by the analysts
who measure the market -- and one of the largest software-application providers of any kind in the
world," Gallant says.
Veritas' Burton plays down EMC's gaudy revenue figure, which dwarfs his company's 2001 software
revenue of $977 million, saying much of that software revenue comes bundled as part of the company's
core hardware offerings. Burton compared EMC to BMW, whose cars are loaded with silicon and
software but isn't in the software business.
"EMC sells software that makes its storage hardware work. The software isn't sold, per se, it just came
with the hardware," Burton retorts.
The rhetorical sniping can get rather thick. "EMC's software revenue comes from replication and
management products," Gallant argues back, whereas Veritas is a backup-software vendor trying to
transition into a storage management company. "We are starting to make a lot of money off of our
second group of products," he says. "Clearly, Veritas is trying to join EMC's parade."
To the contrary, Burton insists that Gallant has it backwards. "We are in the market they are trying to get
into, and Wall Street's perception, judged by our stock prices, is that Veritas is the center of the storage
universe," snipes Burton. EMC trades at 8 and change, while Veritas's shares fetch more than 28. For
the record, the market values Veritas at $11.8 billion, while EMC has a market cap of $18.1 billion.
We could go tit for tat forever with these savvy purveyors of spin, but the battle will be won on the field,
as EMC tries to leverage its position as a top hardware provider into a broad seller of software to users
of hardware other than its own. Meantime, Veritas is trying to broaden its reach beyond backup
software. To achieve this, both companies are investing heavily in research and development. Last year,
EMC spent about $700 million on software R&D, compared with $250 million in total R&D for Veritas.
But Veritas is upping the ante with plans to spend an average of $1 billion a year over the next three
years, Burton says.
Because Gallant called us in protest of our earlier column, we promised him the last word … for
now. "We think that Veritas is a competent back-up software vendor," he says. "Unfortunately for them,
that is the slowest-growing segment."
Corporate Dudes Get Dells
Fortunately for EMC, corporate technology chiefs across the land are beginning to repeat a familiar
refrain to their staff: "Dude, you're gettin' a Dell."
A Dell Computer enterprise server, that is. The Austin, Texas maker of hardware has a marketing
relationship with EMC, offering its customers a broader selection of storage products as Dell delves
deeper into hardware for large companies. Dell reported late last week that total enterprise units were up
2% year-over-year and 9% quarter-over-quarter. Meantime, enterprise revenue was up 16% compared
to last year and about 5% from the previous quarter.
Dell picked up about three percentage points of market share in domestic servers, giving it a 30% share
of that market, says financial analyst Ashok Kumar of U.S. Bancorp Piper Jaffray.
"Dell's relationship with EMC has been successful thus far, with its pipeline of storage business up 65%
quarter over quarter," Kumar writes in a research note. Dell also saw its service revenue rise about 5%
from the previous quarter, giving it annualized service revenue of $3.2 billion, or 10% of total sales, he
further states.
Kumar joins the chorus of analysts who maintain that personal-computer replacement cycles aren't
robust. Commercial demand for hardware continues to be affected by tight spending budgets, with PC
replacement cycles beginning to stretch to four years. Conventional wisdom has been that PCs should be
replaced every three years.
Kumar says chief information officers continue to shift their spending away from PCs, suggesting that a
replacement cycle will speed up only when an economic recovery begins to pick up its pace. |
