Here's what six storage suppliers will be doing for the next year or two

Seagate, QLogic and pals speak out

Analyst haus Stifel Nicolaus' MD, Aaron Rakers, has had some fireside chats with senior execs from Brocade and QLogic, Pure and Nimble, Seagate and WDC at a Stifel Nicolaus Technology, Internet & Media Conference in San Francisco.

The execs gave their thoughts on HDD demand, HAMR HDD tech, NVME over fabrics, Gen 6 Fibre Channel and other topics providing a partial snapshot of the industry state of play. We’ll start with two storage networking suppliers.

Brocade Chief Architect Martin Skagen sees 80 per cent of all-flash array ports are attaching to Fibre Channel (FC). He says Brocade’s Gen 6 (32Gbit/s) FC products are slowly ramping with the GA expected around August. Rakers reckons Cisco will have its 32Gb/s FC product shipping towards the end of the year, giving Brocade a three to four month lead in the market.

Skagen said Brocade will launch additional quality-of-service capabilities and tighter integration with hypervisors in its product.

The NVMe-over-Fabrics draft specification is complete and he expects early adopters to move to that by the end of 2016. It’s unfortunate that the industry was not able to come together and either support NVMe over iWARP or RoCE. They are not compatible with each other, but that problem will be solved in a couple of years. Incompatibility will be a headwind to the adoption rate near term.

In Skagen’s view hyper-converged architectures don’t enable scale, so customers still need a dedicated FC storage network. Brocade has partnerships with hyper-converged vendors and can enable such dedicated networks for deployments, so hyper-converged is a positive for Brocade’s business.

Regarding the cloud, Skagen thinks typical FC workloads (i.e. databases and data warehouses) are not easily moved to the cloud. They will continue to run on-premises for a relatively long time. However, Brocade’s Ethernet switch business will benefit as workloads such as Exchange and Office 365 move to the cloud.

QLogic’s acting CEO, Jean Hu, and VP of Finance, Doug Naylor, told the Stifel Nicolaus audience that QLogic has commenced a search for a permanent CEO. The company continues to access ways to maximise QLogic’s market share and positioning as part of its strategic review. Rakers noted that in early April there were reports that the company had hired a financial advisor to explore a potential sale.

QLogic believes the server-side HBA FC market will be flat-to-slightly-up in the near future, with growth driven by all-flash array storage (e.g., 70 - 80 per cent FC attach rate; see Brocade above). It expects Gen 6 FC (32Gbit/s) revenue will commence in fiscal 2017 as 16Gbit/s reaches more than 50 per cent of its FC revenue (versus 32 per cent in fiscal Q4 2016) and slowly ramp over fiscal 2017.

The Ethernet business should grow double digits year-on-year in 2017, driven by better 10GbitE adoption, and crossing over the 50 per cent penetration mark in enterprises. Intel’s Knights Landing refresh in the third calendar 2016 quarter is expected to be a driver of 10GbitE adoption.

QLogic has gained design wins with 25/50/100GbitE across enterprise, storage, and telcos; however, this is not expected to be a revenue driver until fiscal year 2018.

Two array suppliers

Nimble Storage CFO Anup Singh and CMO Janet Matsuda said new customers accounted for 45 per cent of total first quarter 20127 bookings, down from 52 per cent and 49 per cent in the prior and year ago quarters. There were 580 new customers in the April quarter.

Nimble’s AFA accounted for 12 per cent of total array bookings during the quarter, with 55 all-flash array customers, including 25 new-to-Nimble. Its all-flash product deals are as much as twice the normal size in addition to a high attach-rate (around 64 per cent in the first quarter) to Nimble’s existing Adaptive Flash Platform.

The two said Nimble had a strong win rate against Pure Storage as well as other incumbent vendors and expected the all-flash array bookings contribution to be inline with its all-flash market share in the overall market, or roughly 25 per cent of total bookings towards the end of fiscal 2017.

Pure Storage CEO Scott Dietzen talked about competition. In most deals Pure is competing against EMC, HPE, HDS, and NetApp, seeing EMC the most with a two-thirds POC win rate, and attributing deals lost to aggressive pricing.

He’s seen a shift in EMC’s sales force from leading with XtremIO to leading with all-flash VMAX. Pure says this is not optimised or designed for flash, missing key technology such as data reduction.efficiency

Dietzen stressed the opportunity for Pure’s FlashBlade offering. It enables Pure to address the entire storage market ($24bn), targeting unstructured file and object-based storage .

The company is continuing to ramp its sales capacity in the first half of its fiscal 2017, with Pure’s 10-Q SEC filing citing greater than 50 per cent year-on-year growth in its first fiscal year 2017 quarter.

Disk drive manufacturers

WDC's Steve Milligan told the Stifel Nicolaus conference that he expected the HDD industry will decline, both in units and revenue, at a mid-single digit rate going forward. This differs from Seagate’s view below.

He sees two main risks ahead; ensuring that WDC executes on the technology transition to 3D NAND and reducing the historical volatility in SanDisk’s gross margins. He said SanDisk was caught off guard with how quickly Samsung transitioned to 3D NAND but is now confident that SanDisk is on track with its 3D NAND transition.

Chinese entities like XMC and Unisplendour Tongfang Guoxin are a long-term threat, not having any viable way to get into the NAND market in the short term, both from an IP perspective as well as how those entities will gain the knowledge to be successful in all areas of the NAND business.

WDC will be open to doing what it needs to (i.e. partnership?) in order to ensure its long-term competitive advantage.

Seagate CFO Dave Morton said his expectation was for roughly flat HDD industry revenue with the opportunity for some slight growth long-term, which is at odds with WDC’s view above.

There, declines in PCs (which make up around 30 per cent of total revenue) and Mission Critical disk drives (around eight per cent of revenue) will continue to be offset by growth opportunities in enterprise high-capacity/nearline, surveillance, and gaming markets.

Seagate continues to highlight a shift of total storage capacity shifting to the cloud. During the March quarter it saw slower demand for PC and mission critical drives, and was unable to fulfil its high-capacity drive demand. There was strong uptake of its 8TB drives and Morton sees a potential tailwind into the second half of 2016 driven by cloud demand.

There has been good progress in its development of Heat-Assisted Magnetic Recording (HAMR), with a potential 30 - 40 per cent increase in capacity. He believes the technology is ready to bring to market, though from a cost perspective it will likely not be released for one or two years, dependent on the demand for subsequent 12TB drives. ®