EMC (EMC) Acquisition of ScaleIO as Depth as Enterprise Shifts to Box-Less SDS - Lazard

EMC Corp. (NYSE: EMC) is lower on the session amid recent speculation that the company purchased software defined storage (SDS) start-up company ScaleIO.

Lazard Capital analyst Edward Parker commented, "SDS is an undeniable trend and we give EMC credit for embracing technology shifts that appear to be disruptive to its legacy businesses. Investors should be mindful that EMC's margins have always been derived from providing value in data management/protection, and that value is in software...The SDS space is full of start-ups, but as was the case with new file systems, scale-out platforms, and flash, we bet on the incumbents to build/buy their way to victory."

Parker sees two types of SDS: "1) no more disk arrays, with storage and compute integrated into a single enclosure (DAS) and scaled-out in a modular fashion, made "sharable" by a software controller, and 2) keep the disk arrays but abstract by separating and genericizing the control plane."

EMC already has exposure to number 2 via its VIPR announcement in May. Parker notes that number 1 is more visibly disruptive, but only in certain environments. He notes that some surveyed customers are willing to lever human capital in order to lower CapEx with number 2, but it would add complexity, which is what SDS is supposed to avoid. An incumbent is likely to take up the role shifting customers from box to boxless technology. However, with storage, the motto is generally "if it ain't broken, don't fix it."

Parker maintains EMC at Buy with $28 price target.

For an analyst ratings summary and ratings history on EMC click here. For more ratings news on EMC click here.

Shares of EMC closed at $24.74 yesterday, with a 52 week range of $21.45-$28.18.

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