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Pure Storage cloud sales surge, but earnings miss the target
Although its pedigree is all-flash storage hardware, Pure Storage cloud products and services are a strong growth engine. But the vendor said global demand is starting to slacken.
Add Pure Storage to the list of infrastructure vendors that sense a softening global demand. The all-flash pioneer put the best face on last quarter's financial numbers, focusing on solid margins and revenue, while downplaying its second earnings miss in the last three quarters.
Demand for Pure Storage cloud services boosted revenue to $428.4 million for the quarter that ended Oct. 31. That's up 15% year over year, but lower than the $440 million expectation on Wall Street.
Pure Storage launched as a startup in 2009 and has grown steadily to a publicly traded company with $1.5 billion in revenue. On Pure's earnings call last week, CEO Charles Giancarlo blamed the revenue miss on declining flash prices. Giancarlo said U.S. trade tensions with China and uncertainty surrounding Brexit create economic headwinds for infrastructure vendors -- concerns also voiced recently by rivals Dell EMC and NetApp.
Pure: Looking for bright spot in cloud
Like most major storage vendors, Pure is rebranding to tap into the burgeoning demand for hybrid cloud. Recent additions to the Pure Storage cloud portfolio include Cloud Block Store, which allows users to run Pure's FlashArray systems in Amazon Web Services, and consumption-based Pure as a Service (ES2), formerly Pure Evergreen.
Pure said deferred licensing revenue of $643 million rose 39%, fueled by record growth of ES2 sales. The Pure Storage cloud strategy resonates with customers that want storage with cloudlike agility, company executives said.
"Data storage still remains the least cloudlike layer of technology in the data center. Delivering data storage in an enterprise is still an extraordinarily manual process with storage arrays highly customized and dedicated to particular workloads," Giancarlo said.
Pure claims it added nearly 400 customers last quarter, bringing its total to more than 7,000. That includes cloud IT services provider ServiceNow, which implements Pure Storage all-flash storage to underpin its production cloud.
"Companies are realizing IT services are not their main line of business -- that a cloud-hosted services model is generally better. We're right in the middle of that. We build enterprise data services and do all the work to manage the cloud" for corporate customers, Keith Martin, ServiceNow's director of cloud capacity engineering, told SearchStorage in an interview this year.
Pure will use its increased product margin -- which jumped 4.5 points last quarter to 73% -- to ensure it "won't lose on price" in competitive deals, outgoing president David Hatfield said.
A strong pipeline of Pure Storage cloud and on-premises deals gives it the ability to bundle multiple products and sell more terabytes. "It's just taking a little bit longer from a deal-push perspective, but our win rates are holding nicely," Hatfield said.
Hatfield said he is stepping away from president duties to deal with a family health issue, but he will remain Pure's vice chairman and special advisor to Giancarlo. Former Riverbed Technology CEO Paul Mountford was introduced as Pure's new COO. Kevan Krysler, most recently VMware's senior vice president of finance and chief accounting officer, will take over in December as Pure's CFO. He will replace Tim Ritters, who announced his departure in August.