EMC Execs Take Aim At Cisco HyperFlex, Flash Storage Competitors After Q1 Revenue Decline

Solution providers make sense of what big vendors jumping into the hyper-converged market means.

With its acquisition by Dell fast approaching, and another quarter of lackluster financial results in the books, EMC execs are striking an aggressive pose to counter hyper-converged market moves by Cisco, and do battle with all-flash storage providers Pure Storage and NetApp.

During a conference call to discuss first-quarter earnings Wednesday, David Goulden, CEO of EMC's Information Infrastructure division, said the company is leading the charge toward widespread adoption of all-flash storage and said no competitor can match EMC's hyper-converged offerings.

Chairman and CEO Joe Tucci said the company's plan for 2016 calls for revenue, earnings and cash flow growth.

But despite red-hot market growth and undeniable buzz, a top exec at one large EMC solution provider said the jury is still out on which of the vendors playing in the hyper-converged space will establish a dominant position.

"It's too early for any of the hyper-converged plays," said the executive, who wished to remain anonymous. "We're getting sales with VSAN, Nutanix, SimpliVity and VxRail, and we're just getting [Cisco] HyperFlex into our labs, so who knows?"

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On the storage front, the executive said EMC's flash storage victories over competitors like NetApp or Pure Storage haven't yet outweighed the declines in the Hopkinton, Mass.-based firm's traditional storage portfolio.

"Sure, we've seen EMC beat NetApp and others, and vice versa," the solution provider executive said. "But one transaction, good or bad, doesn't make a trend, and generally, our EMC business is down."

In partnership with VMware and its VCE unit, EMC introduced its VxRail line in mid-February. Just weeks later, Hewlett Packard Enterprise and Cisco each introduced hyper-converged solutions of their own. Goulden said Wednesday that the appliance is already exceeding the company's expectations, adding that he expects VxRail to be a market leader in short order.

"We've actually taken up our internal expectations for it for the year," Goulden said. "We had an aggressive set of goals coming out of the gate, and we actually increased those based on what we've seen based on a few weeks in the marketplace. We think we can be in a market-leading position with this technology by the end of this year."

Asked how VxRail would compete with Cisco's new HyperFlex solution, or with solutions from hyper-converged infrastructure startups like Nutanix, Goulden said the combined capabilities of EMC and VMware would be difficult for any competitor to beat.

VxRail, Goulden said, "takes better advantage of the VMware capabilities than anybody else out there. We've done some really neat packaging around the system itself in terms of the modular family range, entry price points. We've basically integrated a lot of EMC storage technology. As customers look at it, it's very differentiated, particularly in the VMware environment, where it excels, but the inclusion of replication technology, of backup technology from EMC makes it a really powerful combination and nobody else can offer that kind of combined integrated offering with that feature functionality with our support point."

In storage, Goulden said, 2016 would be a "tipping point," at which all-flash systems begin to dominate the market.

"Of new systems shipped [this year], more than half will be all-flash," Goulden said. The market has reached a point where all-flash systems can be had for the same money, and perhaps even less, than traditional systems.

Pure Storage, Goulden said, has "limited ability to scale out," and EMC replaced all of one large European customer's NetApp gear during the quarter.

"It becomes a no-brainer in the primary storage marketplace. … That will play out in 2016 -- it's been a tidal wave coming, and now it's going to break on the shore."

Goulden said EMC would introduce a new line of mid-tier all-flash storage systems at its annual EMC World conference in early May.

Still, the rise of all-flash and the rapid growth of EMC's other businesses, including VMware, and its Pivotal cloud software business hasn't yet been enough to offset weakness in EMC's traditional storage portfolio. EMC Information Infrastructure, the company's largest division, posted a 6 percent year-over-year revenue decline for the quarter, erasing 56 percent growth at Pivotal and 5 percent growth at VMware.

Overall, the company reported $5.5 billion in revenue for the quarter, a 2 percent year-over-year decline.

Because of its pending acquisition by privately held Dell, EMC did not provide expectations for future financial results Wednesday. If the transaction closes between May and June, this could be the last quarter for which EMC reports quarterly results publicly.

The acquisition, initially valued at around $60 billion, is expected to close between May and October. Tucci said both EMC and Dell are awaiting approval for the deal from Chinese regulators, and that process seems to be on track. EMC's second quarter ends June 30, and it would likely report results for that period in mid-July.

Tucci said the Dell merger, which will create an $80 billion IT industry powerhouse, is "the best deal for our customers, shareholders and people," and he hinted that he may have a role with the combined company after the closing.

"I have a lot of energy left, and I'm going to continue to work," Tucci said. "There's potential to advise [Dell CEO] Michael [Dell], but I'm not going to go there yet. I'm not making myself part of this process."