EMC's Focus on Unified Storage a Concern for NetApp

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EMC ( EMC ), the leading storage vendor in the world, has expanded its product line to unified storage with its newly launched VNX storage platform. This comes as a competitive product offering against rival NetApp ( NTAP ), the dominant player in the unified storage market and the third largest player in external disk storage market. Data storage is among the fastest growing industries today and has witnessed tremendous amount of activity over the past year and a half - including a number of high profile acquisitions and an increased focus on the sector from tech giants like HP (NYSE:HPQ), Dell ( DELL ) & IBM (NYSE:IBM) that are shifting to more cloud services.

Unified Storage Growth

While most data center storage systems being shipped today still use traditional block-based technology, there has been tremendous growth in unstructured content such as digital media, which is often stored in file-based systems.

Even as the balance is shifting to file-based storage a typical enterprise will have to manage both types of storage for a long time. Unified storage combines file-based and block-based storage in one system and demand is increasing at a rapid rate.

EMC and NetApp's Storage Market Share

As EMC targets the unified storage market - among the fastest growing segments in the data storage industry - the firm has the opportunity to further expand its leading share in the external data storage market (in GB).

In a scenarios where EMC's storage market share increases to 30% by the end of the Trefis forecast period vs. 27% as we currently forecast would result in upside of just around 5% to our $37.60 price estimate for EMC and a total implied upside of near 40% to the market price.

A higher storage hardware market share is also likely boost storage software market share resulting in further upside potential for EMC.

In the past NetApp has significantly gained share in the data storage market driven by its industry leading unified storage offerings. However, faced with competition from the storage market leader EMC in its core unified storage market, NetApp may find it increasingly hard to gain further market share.

In a scenario where NetApp's market share remains constant going forward due to increased competition, in contrast to our current forecast of growth, there could be a potential downside of 6% to our $53.79 Trefis price estimate for NetApp's stock for an implied downside of around 10% to the market price.

See our complete model for NetApp .



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 , Stocks , US Markets

Referenced Stocks: DELL , EMC , NTAP

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