Why EMC sees gains from all-flash storage despite late entry
Must-know: Elliott Management's new position in EMC (Part 6 of 9)
EMC’s gains for all-flash storage
EMC (EMC) shares have rallied recently on news that Paul Singer’s activist hedge fund Elliott Management has accumulated a stake worth over $1 billion in the storage giant. According to unconfirmed reports, the fund expects to unlock shareholder value by splitting up the company and selling its parts, including its stake in its listed cloud and virtualization software unit VMware (VMW).
EMC was a late mover in the all-flash storage space with the launch of XtremIO last year. The company built up its flash portfolio with the 2012 acquisition of Israel-based XtremIO and 2013 acquisition of server-side storage software pioneer ScaleIO. In May, EMC acquired privately-held DSSD, a Menlo Park-based developer of an innovative new rack-scale flash storage architecture for I/O-intensive in-memory databases and Big Data workloads like SAP HANA and Hadoop. A statement from EMC said, “Complementary to our market-leading all-flash and hybrid storage portfolio, DSSD will unlock an abundance of new possibilities for customers as they build out their infrastructures to support the emerging tier of next-generation in-memory and Big Data workloads.”
IDC said the all-flash array market is forecast to grow to $1.2 billion in revenue by 2015 at a 58.5% compound annual growth rate (or CAGR). EMC said in its 2Q14 earnings release that its all-flash array market with XtremIO, surpassed a $300 million annualized demand run rate in its second full quarter of availability.
EMC faces competition from upstarts such as Pure Storage, Violin Memory (or VMEM), and Nimble (or NMBL), and also IBM (IBM), Hewlett-Packard (HPQ), and NetApp (NTAP) in the all-flash storage space.
IBM and Pure Storage lead market share
According to a report from Gartner, IBM and Pure Storage were the market leaders for solid-state arrays (or SSA) in 2013. Gartner said that IBM’s share of the all-flash array market increased from 18.4% to 24.6%. Its FlashSystem product line revenue surged 278% year-over-year (or YoY) from $43.4 million in 2012 to $164.4 million in 2013. IBM enhanced its flash storage offerings with the 2012 acquisition of Texas Memory Systems, a flash storage products manufacturer. The third place was occupied by Violin Memory, which had occupied the number one position last year. Despite a short time frame since the introduction of its flash products last year, EMC all-flash systems was ranked fourth for the year, with $73.9 million in revenue, and a 11.1% of market share.
Technology analysts believe enterprise-grade solid-state drives (or SSDs) and flash storage arrays, which are used in smartphones and tablets, are rapidly replacing traditional storage solutions in data centers. However, a Gartner report refuted the argument last year as cited by StorageNewsletter, and said that although SSDs will improve hardware performance, application workloads will still need software optimization. EMC also noted in its blog that, “we believe flash will have a profound impact on storage infrastructure—whether it be in hybrid arrays, all flash arrays, or server-side flash. These flash deployments will form the ‘hot edge’ of storage infrastructure. But, according to IDC, through 2017, 97% of all storage deployments will still be hard drive based.”
EMC recently announced new product releases across its Flash, enterprise storage, and Scale-Out network-attached storage (or NAS) portfolios, adding that “organizations have been harnessing social, cloud, mobile, and Big Data advances to build new applications resulting in a 29% annual data growth in existing application workloads, a continued 58% ‘drag’ incurred by supporting infrastructure applications on business applications, and an escalating need for faster performance for specific application workloads.”
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