<![CDATA[Another day the Red Herring conference begins….
Notes come with a warning: These are not verbatim in any sense.
So, he's just come from the Laguna Seca racing school and that has him thinking about the recent changes in speed in the IT business. Racing analogies promise to proliferate.
He says Veritas is on track to exceed its $1.5 billion in revenue last year by a long shot.
I'm not a believer that there will be a dramatic recovery, it will be very measured. The problem with predictions is that IT surveys look at budgeting, which doesn't reflect actual spending. Right now, we're looking at better budgets but that won't necessarily result in actual spending. We've been through tight budgets and a lot of scrutiny for spending. He isn't saying it, but the sales don't seem to be coming.
Veritas used the downturn to grow geographically and in specific technology markets. Veritas has added 2,000 employees, to reach 6,800, since the end of 2000. Bloom says the companies that cut back will not be prepared for growth.
The last quarter: Sales were up 23 percent over the previous quarter. Veritas is the fourth largest software company by market cap as of the end of November.
He talks about a European telecom customer…. The company reduced IT headcount by 47 percent by introducing Veritas (not the most compelling argument for IT guys to support this stuff, but hey, we're all pawns in this game).
9/11 changed the concept of disaster recovery, he says, because the worst disaster most companies were used to was a failed drive. Veritas had more than 100 customers with data loss that day — the same occurred with the New York and London blackouts, when many companies were affected and lost data because they hadn't put enough backup power in place.
The next trend that fueled data integrity was the corporate scandals, which increased regulations and disclosure practices. Even private companies that hope to go public have to be concerned with compliance issues going forward. As compliance considerations became front and center in management concerns, the data storage and integrity industry got a huge boost.
I agree — this is only the beginning. We’re moving toward increased transparency in corporations, just as we went through eras of growing transparency in government. This is not only about storage of, and access to, data, it is about reporting and making information useful for critical examination of the state of a business.
Bloom is a firm believer that there will be massive consolidation in the computer industry, starting this coming year, but lasting a very long time. Companies that try to consolidate others will face great challenges as they try to integrate competitors into their business after acquisitions; Bloom is clearly saying that Veritas will take this slow and steady rather than racing into a round of acquisitions.
His strategy slide describes Veritas as a universal integration layer in the heterogeneous computing environment. He says utility computing will be real, but that it will be an archipelago of individual enterprise utilities rather than a world where everyone plugs into services from single vendors.
At this point, Bloom is joined by two Herring interviewers….
The question of EMC’s position in the market comes first. Bloom says EMC bought Legato and got only a seven percent market share, which doesn’t position them to become a leader. He says they have a robust “Legato replacement” business and that EMC is not ready for the open hardware environment that is developing in the corporate backup market. Veritas has grown while EMC has declined in revenues, Bloom points out.
Lee Bruno asks if Veritas will make aggressive moves in M&A this year. Bloom says they have 1,800 engineers building technology that are complemented by an acquisition strategy — this can be a challenge, because you can go too far to the not-invented-here approach that closes out external innovation or you can try to buy everything and face an insurmountable integration challenge. “We define our strategy through the eyes of the CIO, who is our customer.”
In core storage and disaster recovery, Bloom says Veritas already has the market leading products to which they will add features, and that they will work to automate more of those processes through strategic acquisitions.
Alex Vieux asks about recurring revenues and the utility computing market. Bloom says a company should always be a transition in terms of sales and pricing models. Companies that haven’t changed very much suffer from resistance to new pricing models. He says the whole executive team at Veritas has turned over (odd thing to brag about) and this is a strength. He hasn’t made the cast that Veritas is really changing its pricing strategy to a utility model — what he is describing is a pricing model for monolithic IT infrastructures within individual enterprises, rather than being a plug-and-play option for companies, like Computer Associates has tried, which Bloom said “horribly hurt” CA’s business.
When talking about how quickly Veritas will become the number three software company, we get to the racing analogy — ultimately, Bloom says one of the leaders will have to have an engine failure for Veritas to move up in the rankings.
Alex Vieux then asks about the revelations that Veritas’ former CFO, Ken Lonchar, had no MBA from Stanford, which the guy claimed he had. Bloom says, essentially, mistakes happen. The CFO was there when he arrived in 2000, so he didn’t check his credentials. “You trust that people are telling you the truth until they do otherwise. You’re looking for a personal fault, but there is none.” Apparently, Stanford contacted Veritas about this after seeing the CFO’s claims on the Veritas Web site. Bloom said the main concern was not his degree, but his accounting credentials, which the CFO did have — he was let go because he lied in a position of trust.
Lee Bruno asks about threats to Veritas from open source and to margins.
“I see open source more as an opportunity than a threat,” Bloom says. Linux is going to be in many systems. Software costs have been outpacing hardware costs, but the biggest cost is always labor. So, as long as Veritas can help customers lower labor costs it can remain competitive. “I believe Linux will take a long time to [be recognized as a viable enterprise system],” which is a remarkably skeptical statement in the face of statistics.]]>
<![CDATA[Another day the Red Herring conference begins….