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EMC Faces Growing Competition from Flash Storage Providers

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Declining demand for traditional data storage products

In 1Q16, EMC Corp.’s (EMC) product sales fell by 7.7% YoY (year-over-year) to $2,682 million. Its services revenues rose by 3.1% to $2,793 million in 1Q16.

EMC’s Information Infrastructure segment’s revenues fell by 6% YoY to $3.8 billion whereas revenues from RSA and Information Storage fell by 8.1% and 5.9% YoY, respectively. Revenues from EMC’s Enterprise Content division also fell by 2.9% YoY.

Revenues for EMC were impacted due to sluggish demand for traditional data storage products. As shown in the above chart, VMware’s (VMW) revenues rose by 4.8% YoY to $1,583 billion in 1Q16. EMC’s Pivotal segment reported revenues of $83 million, a massive increase of 56% YoY.

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EMC’s core data storage business struggling

EMC’s pending merger with Dell should impact the former positively. EMC’s core data storage business has been struggling, driven by rising competition from flash storage companies such as IBM (IBM) and NetApp (NTAP).

Although EMC has been gradually increasing its presence in the flash storage segment, it has been unable to offset weakness in its traditional data storage business. IBM accounts for 2.6% of the First Trust ISE Cloud Computing Index ETF (SKYY).

EMC is also looking to streamline its operations to minimize costs. EMC’s information infrastructure expenses fell by 8% in 1Q16, and the company is on track to achieve targeted savings of $850 million in 2016.

David Goulden, CEO of EMC Information Infrastructure, noted, “IT and digital business transformation initiatives require a modern data center utilizing flash, scale-out, software-defined and cloud-enabled technologies that are protected and trusted.

“Anticipating this, we have been actively innovating to transform our portfolio, well ahead of our peers. We are very encouraged by the increasing customer adoption of these technologies and had an exciting start to the year with major converged infrastructure and storage product launches.”

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