Comment The years of unrelenting double digit quarterly growth are over - VMware's growth is falling back, and EMC's mighty revenue train is slowing as it hits the steep recession grade. CEO Joe Tucci is starting to throw excess weight off the Hopkinton express.
The company is going to restructure to cut its costs, although VMware is not affected. What is affected is EMC's Information Infrastructure business, meaning, it appears, everything else but VMware. Information infrastructure is organised into three businesses which are: David Donatelli's storage division; Arthur Coviello's RSA security division; and Mark Lewis' content management and archiving division.
There will be cross-division cost-cutting such as back office operation, campus and field office consolidation, as well as fewer management layers, travel expense reductions, and less use of contractors and third-party services.
There will also be a rebalancing of investments towards higher-growth products and markets, meaning away from lower or negative growth products and markets.
What about the effects on the three EMC divisions listed above?
If we look at their quarterly results and year-on-year growth for Q1, Q2 and Q3 of 2008 we see this pattern:
- Information Storage (Q1) +12 per cent, $2.71bn, (Q2) +14 per cent, $2.87bn, (Q3) +11 per cent, $2.bn
- RSA (Q1) +13 per cent, $135m, (Q2) +15 per cent, $144m, (Q3) +11 per cent, $147m
- CMA (Q1) +8 per cent, $185.2m, (Q2) +18 per cent, $204m, (Q3) -0.5 per cent, $188m
It's obvious from these numbers that the content management and archiving division, presided over by Mark Lewis, is the sick man of EMC. Q2's burst of growth faded into a revenue decline in Q3. (No jokes about enterprise content mismanagement please.)
The CMA products would seem to fall into a lower and negative growth category. What are they?
Archiving products include Centera content-addressed storage, DiskXtender file archiving software which migrates inactive data off higher-cost storage to lower-cost disk, tape, or optical devices, and EmailXtender which archives multiple source emails and instant messages. They also include Celerra FileMover and NAS gateways, Documentum Archive Services for Imaging, Reports, SAP and SharePoint, plus the Rainfinity File Management Appliance.
Enterprise content management (ECM) products include Captiva document capture (facing strong competition from a revitalised Kofax), Document Sciences document generation, and the Documentum Eroom collaboration products.
There have been persistent rumours about the future of Centera, consistently rebutted by EMC, but the numbers above might add some legs to these rumours.
We don't know anything about individual product revenues but could guess that Rainfinity is not a growth product. Not even Brocade can find sparkling growth in its file virtualization products.
EMC sells its enterprise content management services with high-level consultancy involvement while competitors like Autonomy, Mimecast, Mimosa and others sell it more simply.
What might EMC do in this division?
It could quietly defocus Rainfinity and might shake up its ECM product space through acquisition. It might even try and buy Kofax and get Reynolds Bish, Kofax CEO, to run a combined Captiva-Kofax business. Other potential acquisitions could be in the archiving area with an inject-some-rush-into-the-dead-product-wood intention.
Looking elsewhere around the EMC empire, we might suggest that Invista, the SAN management product that runs in a Fibre Channel SAN fabric and which has made unimpressive market progress compared to IBM's SVC and Hitachi Data Systems' USP, might also have funding switched from it to higher growth products. InVista could just fade away.
We could note that EMC has several deduplication products and that consolidation here could be being examined.
The odds are that the content management and archiving division pram is about to have its toys tossed up in the air and reorganised. The divisional president role might also get shaken up.
Joe Tucci knows about managing EMC in a downturn, as the company was pretty peaky when he joined it in 2001. It is a vastly different company today of course, but we can expect traditional Tucci medicine as he gets cuts costs and swerves away from less profitable or loss-making businesses. ®