Fibre Channel helps Nimble Storage grow revenue in Q4

Nimble Storage exceeded expectations with $68.3 million in revenue in its fiscal fourth quarter, helped by a new wave of Fibre Channel-based arrays that factored into about 10% of the company’s bookings.

But, the San Jose, California-based storage startup’s stock fell after Thursday’s fiscal 2015-ending earnings call, as financial analysts ratcheted down estimates in response to Nimble’s fiscal 2016 first-quarter guidance. Nimble predicted that revenue will be roughly flat, at $68 million to $70 million, and operating losses will range from $9 million to $10 million.

“Our guidance accounts for the seasonality effects of Q1,” said Nimble CFO Anup Singh. He noted the first quarter is typically the industry’s slowest.

Singh insisted that Nimble remains on target to break even by the end of the fiscal year, on Jan. 31, 2016. He said the company expects similar operating losses in the first and second quarters before improvement in Q3 and breakeven in Q4. He confirmed the nonlinear progression was purely a function of operating expenses – not slowing revenue or gross margin – in response to a question from a Wells Fargo analyst.

Nimble specializes in hybrid arrays combining solid-state and hard-disk drives. During the past year, the company introduced new capabilities such as Adaptive Flash, InfoSight performance monitoring, scale-out clustering, Triple Parity RAID and Fibre Channel (FC) storage networking.

The $63.8 million in revenue for fiscal 2015 marked a 15.5% revenue increase over the fiscal 2015 third-quarter and 64% growth over the fiscal 2014 fourth-quarter, when Nimble began operating as a public company. The $228 million in fiscal 2015 revenue was 81% higher than the prior fiscal year’s $126 million.

The average selling price per deal hit record levels in the fourth quarter, with a significantly higher share of bookings exceeding $100,000 and $250,000, according to Nimble CEO Suresh Vasudevan.

Vasudevan said Nimble added 650 new customers during the fourth quarter and had an installed base approaching 5,000 by the end of fiscal 2015. He claimed 83 Fibre Channel customers were on board by Jan. 31, after the company added support for the storage networking technology in November.

“As we had anticipated, Fibre Channel is helping to increase deal sizes and is helping drive large enterprise penetration,” said Vasudevan. He said the pace of FC adoption exceeded expectations, and more than 70% of the FC customers were net new for Nimble.

Vasudevan cited an example of an unnamed Fortune 100 customer that spends tens of millions of dollars on storage and had been using technology from an industry-leading legacy vendor. “Without Fibre Channel, we would not even have made the consideration list,” he said.

Another area of customer growth for Nimble were the SmartStack pre-validated reference architectures for combining technology from Cisco and software vendors such as Microsoft, VMware, Citrix and Oracle into a converged infrastructure. Vasudevan said the SmartStack customer base grew threefold between fiscal 2014 and fiscal 2015.

“The frequency with which we are competing against hyper-converged vendors has increased . . . but it still represents a very small single-digit percentage of our total frequency,” said Vasudevan. “More often than that what we tend to see is competition against the likes of FlexPod or VCE.”

Vasudevan said Nimble’s Adaptive Flash, which can “dial the ratio of flash from very low to very high levels,” allowed the company to compete in twice as many all-flash array environments in the fourth quarter than in the prior quarter.

“Our win rates against those were higher by a decent margin than what we had seen ever before,” he said.

Vasudevan cited the company’s InfoSight-led support as a driver of repeat deployments. He said four major global companies addressed Nimble’s sales team at a kickoff event this month and told them InfoSight was “game-changing” in their day-to-day operational management of storage.

Several financial analysts asked about Nimble’s product roadmap during the earnings call. Vasudevan did not provide specifics other than to say the company planned to focus on differentiation through technologies such as its Adaptive Flash, file system and InfoSight and through integration efforts with alliance partners.

Joe Wittine, a senior equity research analyst at Longbow Research, said he heard deduplication is in the works and asked about the level of customer demand for the data-reduction technology. Vasudevan said dedupe can help in virtual desktop infrastructure (VDI) environments where there are hundreds of desktop images that look the same. He said one option to reduce space is dedupe and another is zero-copy cloning, which Nimble supports.

“In some of those modes, deduplication can help you optimize cost even more. I won’t comment specifically on timing,” said Vasudevan.