Following the revenue misses announced by Pure and NetApp, in the prior week, Dell and Nutanix reported missed revenue targets on May 30.
Dell Technologies fiscal Q1 earnings missed the consensus revenue target of $21.9 billion compared to the Wall Street expectation of $22.44 billion. Dell’s Infrastructure Solutions Group revenue for the first quarter was $8.2 billion, a 5 percent decrease year-over-year. This was driven by a 1 percent decrease in storage revenue to $4.0 billion and a 9 percent decrease in server and networking revenue to $4.2 billion.
Nutanix reported their Q3 FY19 earnings, missing revenue estimates, and declining slightly y/y, but down 14% q/q, at $287.2M, versus estimates of $297.2M. Product revenues were down 22% q/q at $184.8M showing that hyperconverged infrastructure storage was not immune to the slow down.
An International Data Corporation (IDC) Worldwide Quarterly Enterprise Storage Systems Tracker report that was published on March 4, 2019, seemed to indicate that customers were moving to hybrid storage and that enterprises are starting to look at their total storage environment and looking at the operational aspects of their data to maximize their business outcomes. That report also indicated that revenues for original design manufacturers (ODMs) selling directly to hyperscale datacenters (public cloud) declined 1.5% year over year in 4Q18 to $2.7 billion due to significant existing capacity. Enterprises are not rushing to the public cloud for storage capacity. This new report from Nutanix also shows weakness in the hyper-converged storage market, as a result, all the areas of storage from All Flash Array vendors like Pure, midrange storage vendors like NetApp and Dell, and Hyperconverged storage vendors saw a decline in sales.
Several of the vendors indicated that the sales cycles have extended. Dell reported that server/network/storage was down “due to linearity of orders” which appears to mean that deals did not accelerate towards the end of the quarter as they usually do. This is not surprising since Dell is going through a massive product effort to consolidate their multiple midrange products; Unity, XtremIO, SC and ScaleIO into a single product, which they say will be delivered this year.
The sales organizations came under criticism. NetApp blamed some of the reasons for their shortfall on suboptimal sales resource allocation. Pure expanded their sales force to go after larger accounts, but the results have not followed. Nutanix referenced “sales friction” due to changes in Americas sales leadership and lack of familiarization with their new subscription model.
Enterprises are beginning to extend their purchase decisions, thinking twice about their storage options and evaluating hybrid storage solutions that give them more choice. This indicates that they realize that their problem is not about storing data, but about unlocking the information that exists in the data they have. This takes DataOps to help them eliminate data silos and dark data, and consolidate onto data lakes that are curated and cataloged for easier search and analytics. Fast All Flash Arrays and low cost hyperconverged arrays will not solve that problem.