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EMC’s Information Infrastructure’s Negative Growth in 1Q15

Anne Shields - Author
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May 5 2015, Updated 9:06 p.m. ET

Information Infrastructure’s performance in fiscal 1Q15

As we saw previously in this series, only EMC’s (EMC) Information Infrastructure segment posted negative growth. Its revenue stood at $4.05 billion—a decline of 1% on a YoY (year-over-year) basis. The decline is primarily due to storage revenue that was $75 million short of the company’s expectations.

In its earnings release, the Information Infrastructure segment was impacted by the decline in revenue of high-end hardware and Backup or Recovery that posted a decline of 7% and 11%, respectively, on a YoY basis. According to a Wall Street Journal article on April 22, 2015, reduced buying of EMC’s flagship VMAX systems impacted its hardware segment.

If you’re bullish on EMC’s stock, you could invest in the Technology Select Sector SPDR Fund (XLK). It invests about ~1.27% of its holdings in EMC.

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Emerging Storage is expected to boost revenue growth

In 1Q15, EMC’s Emerging Storage, a sub-segment of the Information Infrastructure segment, stood at $542 million—an increase of 14% on a YoY (year-over-year) basis. The growing relevance of Emerging Storage can be gauged from the fact that its contribution to EMC’s Information Infrastructure segment increased from 1% in 2010 to 18% in 2014. The growth of this sub-segment along with “Storage – Other & PS” that includes Pivotal, prevented EMC’s Information Infrastructure from reporting a further decline in its revenue.

Although EMC gradually changed its segment’s portfolio, increased preference by companies towards flash storage technology poses a threat to EMC’s high-end storage systems. SanDisk (SNDK) is a leading player in the flash storage space. Recently, Seagate (STX) announced a partnership with Micron Technology (MU) to develop flash storage solutions.

Emerging storage encompasses:

  • XtremIO – a software-defined storage platform. EMC claims that XtremIO is the fastest growing offering in its history.
  • ViPR – a scale-out network attached storage platform
  • ScaleIO – a converged storage infrastructure

Due to growing demand of flash arrays, software-defined and cloud storage, and big data, analytics led the above mentioned emerging storage offerings to contribute to the growth in EMC’s hardware revenue in last few quarters.

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