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Pure Storage the latest pipes 'n' plumbing playa to slash sales forecast

Look at the troubles facing legacy vendors. We're not immune either

Pure Storage has clipped forecasts for its current fiscal year due to fears over the slowdown in corporate spending that is gripping other infrastructure outfits and a sharp decline in NAND prices.

Revenue for Pure's Q2 of fiscal '20 ended 31 July was up 28 per cent year-on-year to $396.3m. Product sales brought in $300.1m, up 24.4 per cent, and support subscription was up 42 per cent to $96.2m. The company reported $66m in net losses, worse than the net loss of $60m that Pure filed a year earlier.

In recent weeks, Intel, Cisco and NetApp have all reported a wider slowdown in spending on tech pipes and plumbing, the latter two blaming the global economy amid trade tensions between China and the US.

On an earnings call last night, Pure chairman and CEO Charlie Giancarlo said: "Looking at the market as a whole, Pure is clearly out-executing our traditional competitors, some of whom have expressed concerns around the macro economy. We do not believe the macro environment has affected us this past quarter.

"What we do see is a significant transitory NAND supply/demand imbalance which impacted component prices and the storage industry as a whole. We expect this situation to continue to affect us for the balance of the year given the natural lag between component costs and storage market pricing."

Pure, which didn't highlight the traction of specific products, said 74 per cent of revenue came from the US and 26 per cent came from international markets. It gained 450 new customers in the quarter, taking the total past 6,600. Employee numbers went past 3,300 from 2,450 a year ago.

The revenue outlook for the next quarter is forecast at between $434m to $436m – $440m at the midpoint, 18 per cent higher but still down on growth rates in recent years. The full-year outlook has been pared back from $1.76bn to $1.68bn.

Outgoing CFO Tim Ritters said NAND prices have declined faster than it expected in its Q2 – industry supply is outweighing demand – and this, along with a slowdown in major economies, caused it to rethink fiscal '20 revenue estimates.

"While we did not see any specific indications that macro impacted our business in the quarter, we nevertheless want to be mindful of the environment given the recent headlines and cautionary tone of other infrastructure vendors," he said.

Legacy tech or not, all vendors seem to agree they are facing the same issue.

Wells Fargo senior analyst Aaron Rakers said: "We think a reduced forward outlook from Pure has been expected following NetApp's weak July quarter results and reduced F2020 guide... along with weak enterprise results from Cisco and Intel."

Over at William Blair, analyst Jason Ader added: "The guide-down was attributed primarily to a precipitous decline in NAND component pricing in the second quarter (which is affecting end-user pricing and deal sizes) and secondarily to increased caution on the macro environment."

Ritters is leaving the company for personal reasons. ®

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