CommVault Software Tackles Data Management Problems

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About 13 years ago, CommVault Systems introduced its signature software product, called Simpana, and continues to disrupt older players in the business of data management.

Simpana is deployed by companies large and small to gain greater efficiency with how they store, manage and retrieve information. Data management has become increasingly complicated with the mass proliferation of computing devices over the past decade. Top providers of this technology that CommVault threatens includeIBM ( IBM ),EMC ( EMC ),Hewlett-Packard ( HPQ ) andSymantec ( SYMC ).

"We are grounded in the belief that we have to out-innovate everyone else," said David West,CommVault 's ( CVLT ) senior vice president of marketing and business development. "We are laser focused on delivering innovative solutions that allow us to stay a step ahead."

The need for innovation was amplified by the emergence of several major trends in computing that include virtualization, cloud computing, Big Data and the explosion of mobile devices over the past decade.

Efficient Computing

With these new forms of computing, businesses can run more efficiently. But it also generates vast amounts of new information. The data need to be stored and archived, but also retrieved at a moment's notice, in more efficient ways.

CommVault develops, markets and sells a suite of software applications and services across the U.S. and Europe, Australia and Asia. Simpana software manages the data across the entire business enterprise, from data centers to the furthest regions where employees work. CommVault says its customers can slash the cost of protecting, managing, analyzing and recovering data by up to 50% compared with older platforms.

"In the past, businesses would deploy multiple products in various areas with different kinds of applications," said West. It can be difficult to manage and scale all that data.

"What we did is aggregate all this onto a single platform that gives you a view of all your information," he said.

The results of that innovation are in the numbers. The company has strung together 12 straight quarters of double-digit revenue growth and nine straight quarters of double-digit increases in earnings per share.

In its fiscal second quarter for the period ended Sept. 30, revenue rose 21% to $118.2 million as EPS rose 58%, both powering past expectations. Since CommVault posted results Oct. 29, company shares are up 26%. For the year, shares are up more than 50%.

For its fiscal 2013 year, consensus estimates among analysts polled by Thomson Reuters look for revenue of $482 million, up 19% for the year, but a deceleration from growth of 29% in the prior year. But it's the 11th year in a row of double-digit gains. The double-digit growth compares with industrywide growth in the single digits, of about 6% annually.

"CommVault has pushed the envelope of legacy technology," said Rachel Dines, a technology analyst at Forrester Research. "They developed robust software tools that can manage many different platforms in ways that are simple and easy."

Revenue is split nearly 50-50 between software and services. The software manages traditional data backup, recovery and search. It can also manage data in virtualized environments and another emerging arena called de-duplication.

Latest Upgrade

In August 2010, the company released its current version, Simpana 9. The next major software upgrade is coming in the first half of 2013.

Though relatively small when compared with IBM, HP, EMC and Symantec, CommVault has advantages, said Robert Amatruda, an analyst with research firm IDC.

"Even though they are a small player in a mature market, their technology is rock solid," Amatruda said. "They have an enhanced ability to bring newer products to market whereas the legacy players are slower to change."

CommVault has partnerships withDell (DELL),NetApp (NTAP), Hitachi Data Systems and Fujitsu, among others. Its partnership with Dell accounted for 21% of revenue in the last quarter. Recently, though, Dell acquired Quest Software, a CommVault competitor, and has been aggressively marketing that software solution into the small- and medium-size segment of the business market.

"We continue to view Dell as a big distribution partner," said West. With Dell's acquisition of Quest he said, "Dell has products at the lower end of the market that are not competitive with us."

Unique Products

CommVault continues to feel that its products are highly different than Dell's offerings and have only limited impact.

Amatruda sees things differently. He thinks Dell could indeed pose a competitive threat to CommVault with its new forays into the data management market. But concerns that Dell still accounts for a big chunk of company revenue are lightened by the ongoing growth of new customers.

"Every quarter, CommVault continues to add new and larger customers. They have forged some key relationships," said Amatruda.

In the last quarter, CommVault added 480 new customers for a total of 17,100. That's up from 13,500 customers as of April 2011.

CommVault also faces the risk that any of its giant competitors could make a bold move that strikes at the core of its key software advantages.

"We live and think every day of the competitive threats," said West.

CommVault CEO Robert Hammer, in a conference call with analysts after the company posted quarterly results on Oct. 29, said: "Our overall funnel and big deal pipeline growth indicate continued demand for our products in the December quarter."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: CVLT , EMC , HPQ , IBM , SYMC

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