EMC’s Storage Software Market Share on the Mend

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EMC's ( EMC ) market share in storage software is back on track after falling for the past few years. Competition is stiff among the top five software storage vendors, namely EMC, Symantec ( SYMC ), IBM ( IBM ), NetApp ( NTAP ) and Hitachi. Although EMC still leads the market with close to 25% share, players like NetApp and Hitachi are soon catching up with stronger revenue growth than EMC's.

While we estimate EMC's storage software share will rise to 28% by the end of our forecast period, Trefis members predict the share will cross 30% implying some modest upside to our EMC stock price estimate.

We currently have a Trefis price estimate of $35.11 for EMC's stock , about 30% above the current market price of $26.20.

EMC Gaining Share in Hardware Market

Both hardware as well as software have done well in 2010 in the overall storage market. EMC has maintained its leadership in storage software, its share increasing by almost 2 percentage points from 2009 to 2010. A major factor responsible for this increase is EMC's equally brilliant performance in the storage hardware market, which influences the sales of software products. The acquisition of Data Domain in 2009 is also showing positive results for the firm.

Hardware sales influence the sales of software products since they are bundled by storage vendors. EMC's storage hardware market share increased from 22% in 2009 to 25% in 2010, boosting sales of its software products as well. We believe that EMC's increasing hardware sales, boosted by new products launches, will continue to drive software sales in the coming years. EMC recently launched a new unified storage line, VNX, which is expected to be the cheapest in its class.

The new product allows users to manage data from a single device, reducing hardware requirements and simplifying data management. EMC is expected to make inroads into the small and medium enterprise (SME) market through VNX, competing with NetApp in cloud computing space. (see EMC's New VNX Storage Line a Threat to NetApp )

EMC Maintains Leadership, But Competition is Stiff

EMC is benefiting greatly from the recovery in the software storage market. According to IDC, the overall storage software sales rose 10.3% to $12.7 billion for full year 2010, a sharp contrast of a 3.2% decline witnessed in 2009. The market research firm attributed new product innovations and desire to address inefficiencies related to storing, protecting, and managing corporate data as partial factors for the sustained recovery.

While EMC maintains its #1 position in the storage software and hardware market, it's getting tough competition from players like Hitachi and NetApp. While EMC saw 18% revenue growth (year on year) in Q4 2010 for storage software, Hitachi saw 47% growth during the same period. In the total disk storage systems market while EMC's 2010 revenues grew 32.5% (year on year), NetApp's revenues grew near 50%. EMC also shares its No. 1 position in total disk storage systems market with HP for full year 2010, according to IDC.

Our complete analysis for EMC's stock is here .



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: EMC , IBM , NTAP , SYMC

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