Signs Point to Storage Slump

6:00 PM -- With earnings-reporting season around the corner, Wall Street analysts are scrambling to anticipate who had good and bad second quarters. According to a survey conducted by one firm, the storage industry as a whole probably failed to come out of its first-quarter malaise. (See After the Flush.)

Robert W. Baird & Co. surveyed 59 VARs from around the world with total annual revenues of more than $10 billion, and 30 percent said the quarter that ended in June went below plan compared to only five percent above plan. The VARs expect things to pick up the rest of the year, with 85 percent expecting second-half revenue to grow more than five percent from last year.

Despite the second quarter slowdown, Baird's survey indicates some of the major storage systems vendors did well. For instance, VARs expressed more optimism about Hewlett-Packard than any time since the Compaq merger. (See HP's Relevant Again.) "Anecdotal comments from the field suggest that HP's good performance is a result of pent-up demand in its large installed base and modestly better execution in the field," Baird analyst Dan Renouard wrote in the report.

Only a handful of VARs sell Network Appliance products, but all of them were optimistic perhaps because of NetApp's new StoreVault line that will sell through resellers. (See NetApp Zeroes In on SMBs.)

EMC also drew a good response, which was surprising given the pessimism among financial analysts and investors about EMC's second-quarter. (See Did EMC Overpay?.) Renouard pointed to "a slower-than-expected ramp of the new Clariion, and management's admission that EMC 'Had a lot of work to do to make the quarter.' " Yet twice as many VARs said they thought EMC had the best quarter as said it had the worst.Not surprisingly, Sun received the lowest scores among VARs asked to say who had the best and worst quarters. One-third expect Sun's storage business to improve over the next three to six months although there is more interest in its product after a recent refresh. (See Sun Ships Little, Talks Big and Sun Signals Say 'Storage'.)

— Dave Raffo, News Editor, Byte and Switch