NetApp needs more than SolidFire: Slip Simplivity into your Xmas stocking

Comment NetApp’s SolidFire acquisition is necessary – but not enough on its own. There is still a hole, a hyper-converged infrastructure appliance shaped hole, in NetApp’s storage market coverage.

Sunnyvale-based NetApp is saying SolidFire won’t do much for its revenues. William Blair analyst Jason Ader told his subscribers: “From a strategic standpoint, SolidFire’s products are likely to cannibalize some of NetApp’s current revenue base, especially its all-flash array products, limiting short-term revenue gains.”

He added: “SolidFire’s revenue impact will be immaterial through fiscal 2017, according to NetApp management … Longer term, the addition of SolidFire will boost NetApp’s growth prospects, but only by an underwhelming two percentage points, according to management.”

To put that in context, a two per cent revenue increase in its latest quarter – Q2 fy2016 – would boost revenue from $1.45bn to $1.479bn, which is still 4.1 per cent down on a year ago. The previous quarter suffered a year-on-year decline of 10 per cent, so a two per cent uplift on that would equate to an 8 per cent decline.

The conclusions seems pretty clear: firstly, a two per cent sales spurt is not enough to restore NetApp to growth, and secondly, another revenue booster is needed.

NetApp’s products – shared external storage – are being hit by organizations shifting to shared external flash arrays (hence the SolidFire gobble) and also virtual SANs, like VMWare’s EVO:RAIL and VSA technology. Then there's hyper-converged infrastructure appliances (HCIAs) like those from Simplivity and Nutanix.

NetApp’s strategy here has been to provide external shared storage to its rivals, a seemingly sleeping-with-the-enemy response.

There seems a general consensus by analysts from Gartner, IDC and other places that scale-out server-based storage (VSANs and HCAIs) will grow. In which case, shared external array storage will continue to decline, and NetApp needs a direct VSAN/HCIA product; it needs its own server-based storage.

It could try extending its software-only ONTAP Edge, but this is small beer compared to gear from Nutanix or Simplivity.

Buy Simplivity, NetApp. It’s raised $250m in funding, compared to SolidFire’s $150m, it will probably cost more than SolidFire's $870m price tag, though. (Nutanix has raised $312.6m, and would cost even more.)

If NetApp buys a software-only HCIA product then it has to sort out the hardware itself. Buying a complete hardware-software package would get it out of the gate and running faster.

So buy Simplivity, NetApp. It's Christmas. Throw another log onto your fire. Raise the temperature like you did in the old days when you were pushing filer tin with leading technology and setting the storage market alight. ®