EMC and VMware both delivered solid quarters, but delivered outlooks that were weaker than expectations.
Neither company is sounding the alarm bells. But EMC and VMware are positioned well in cloud computing, virtualization and storage---three areas doing well---so when they note the brakes are being tapped by customers it's worth listening.
Here are excerpts from the EMC and VMware conference calls and executives' handicapping of IT spending.
EMC CEO Joe Tucci:
We did see a moderate budget flush, but customers continued to be cautious with their IT acquisitions, making sure they lead to acceptable ROIs, increased productivity, and innovation. We also saw a quarter that was back-end loaded. We had a strong December. We saw Europe have more predictability and good growth...
It is pretty easy to starve IT a bit for a while. But if you really truly believe, as most companies do, that it is impossible to get productivity gains or innovation these days without IT, you can't starve it for too long. 2012 was certainly a year of uncertainty and caution. I think there is some lingering uncertainty for 2013 for sure, but I see more of a cautious optimism out there, which is an improvement.
EMC CFO Dave Goulden:
In 2012, as the economy experienced a slowdown, the storage industry did as well. Tighter budgets prompted the increased use of storage efficiency technologies and also caused many customers to keep their storage systems in service longer than they normally would. We have previously experienced each of these effects in varying degrees; and in 2012, they are both quite meaningful. But network storage still grew faster than IT spending in 2012, and we are confident it will again in 2013.
VMware CFO Jonathan Chadwick:
As we look at 2013, we see at least four factors impacting our business. The first is the macroeconomic environment. We experienced general weakness across the U.S. in Q4 2012, and our federal government bookings declined for the year overall. Europe's relatively stronger performance in Q4 appears to have been the result of some pent-up demand preceding customer expectations of a tough 2013. We remain concerned about the region overall. In addition, foreign exchange rates are likely to be a revenue headwind at least for the first quarter.
VMware operating chief Carl Eschenbach:
Our U.S. business definitely experienced macro headwinds within the quarter. The budget flush that we typically see in Q4 did not materialize, and it certainly didn't materialize to the extent we saw it in Europe. And that was impacted across both our transactional business as well as our ELA business. So we definitely saw a headwind there.