Storage giant EMC has witnessed stagnation in its core information storage business over the last couple of years, with its smaller business segments contributing to top line growth. The growth in EMC’s net revenue has slowed down from over 21% in 2010 to 17.6% in 2011, 8.5% in 2012, 6.9% in 2013 and further to 5.2% in 2014. On similar lines, growth in revenues generated by the company’s information storage stood at over 15% in in 2010 and 2011, which has subsequently fallen to under 2% in 2014.

Taking into account the latest IDC report, worldwide spend on storage hardware declined by 0.4% in 2014 to $24.5 billion. In this article, we take a look at EMC’s performance in the storage market through the year and how it fared against other storage systems providers such as IBM, NetApp, Hitachi Data Systems and Hewlett-Packard. We have a $30 price estimate for EMC, which is about 10% higher than the current market price.

See our full analysis for EMC’s stock

EMC’s Presence In The External Storage Systems Market

EMC’s information storage product and services revenues combined for 2014 were $16.5 billion, up from $16.2 billion in the previous year. Within information storage, services revenues grew by 4.2% to $5.7 billion while product revenues (hardware and software combined) stayed flat over the previous year at $10.8 billion. The company has been a clear leader in the external storage systems market over the last few years, with its share growing from under 23% in 2009 to over 31% in 2014. However, EMC lost market share in the external storage systems market through 2014, with its share declining by 30 basis points from 2013 levels of 31.3%. This was the first time since 2008 that EMC’s share in this market segment declined on a y-o-y basis. More worrying for EMC was the fact that its decline in revenues (about 1.5%) was higher than the industry-wide decline (0.4%) in storage hardware sales. This was evidenced across major storage systems providers including NetApp, IBM and Hitachi Data Systems. Some of the smaller storage vendors such as Pure Storage, Violin Memory, Nimbus Data and Solidfire gained share at the expense of these large companies.

EMC’s Emerging Storage products, such as the all-flash array XtremIO, software-defined storage platform ViPR, scale-out network attached storage platform Isilon and converged storage infrastructure ScaleIO, were largely responsible for the growth in hardware sales during the year, with core storage offerings witnessing low sale volumes. Net revenues generated by the Emerging Storage sub-segment stood at $2.3 billion in 2014, up by 52% on a year-over-year basis. The company attributed the robust growth rate to a strong customer response for its new products. The company expects the growth in emerging storage to continue through 2015 and resulting revenues to rise by over 30% to $3 billion for the full year. This would translate to about 12-13% of the company’s expected net revenues of about $25 billion. Comparatively, emerging storage contributed to only about 6-7% of net revenues in 2013.

How Competitors Fared Against EMC

HP was the only large company which gained share in the external storage market in 2014. Its revenues grew by 1.5% y-o-y to $2.3 billion while its share increased from 9.4% to 9.6% this year. Similarly, the company’s revenues in the total disk storage systems market (which includes internal storage as well) also increased by 2% to $5.2 billion for the full year. HP’s management projects growth in enterprise storage segments such as converged storage, software-defined networks and cloud infrastructure, where the company can potentially excel in the coming quarters. Additionally, the company announced a revamped product line for its 3PAR midrange StorServ storage systesms in January this year, which could further expand the HP’s presence in the market.