Notice: I withdrew this post yesterday afternoon after receiving a challenge from a commenter who insisted that I was mixing up Hitachi's disk drive results with their storage array business. After carefully reviewing Hitachi's published results, I am convinced that the revenue growth numbers I used for Hitachi's storage business are correct (and exclude HGST). Therefore, I have reinstating my post intact, with the addition of a new "Hitachi Math" section (in blue) below.
Hitachi announced their earnings this past Tuesday (May 13th), and their Storage Solutions results (among others) were particularly gloomy. Not as bad as the free-fall in plasma TV sales in the US that they experienced, maybe, but dismal nonetheless.
In what is their fiscal Q4, once high-flying Hitachi only managed to eek out storage revenues that were down 1% from a year ago and down 3% from last quarter, while both EMC and IBM (if you include Tape) actually grew revenues double digits Y/Y in the same period. It marks a notably downward trend in Hitachi's Storage Solutions revenue growth over the past couple of years, as can be seen in this chart:
And Hitachi's projections for the future was for even more revenue contraction for this quarter and next - shrinking perhaps another 5% before they expect a turn-around, they said.
more hitachi math
As I noted above, the above results were challenged yesterday with an assertion that the "decline" was due to HGST. Fact is, these numbers are taken directly from Hitachi's earnings supplement, where they report "Storage Solutions" (array hardware, software and services) separately from "Hard Disk Drives" (see the top of page 2).
You'll note that Hitachi reports by halves (wouldn't want to make it easy to figure quarterly results now, would you?) - but if you go back to last quarters' results, you can do the math to verify that their Storage Solutions revenues were up 2% Y/Y in FQ3'07 and down 1% Y/Y and 3% Q/Q in FQ4'07 - just like I said.
In researching the accuracy of the numbers used in the chart, I was also allowed to see a couple of financial analyst's reports that included additional revenue insights provided them by HDS executives. While I cannot reprint specifically what these analysts published, I must say that there is something that smells an awful lot like Hitachi Math in their reports. Perhaps they just misunderstood what the HDS execs told them, but the numbers the published in their reports simply don't add up.
More importantly, since HDS only sees revenues excluding Japan, their perspective undoubtedly skews any possible analysis - especially since it's not clear whether HP and/or Sun storage revenues are reported through HDS or if they go directly to Hitachi Ltd. (I'm pretty sure they go directly to Japan).
And if revenues really weren't shrinking, then why the heck would HDS execs be trying to spin the story with Wall Street in the first place?
Bottom line: Hitachi Headquarters reported (and documented) that FQ4'07 Storage Solutions (ex-hard disk) was down 3% Q/Q and down 1% Y/Y - just like I said.
And on top of declining revenues, word on the street is that morale in Hitachi's US field operations is at an all-time low. Nobody seems to know if morale is suffering from the recent out-sourcing of customer service, the collapsing of the former solution/consulting business with the former Hitachi Data Systems subsidiary, or the new Japanese management that are running the new US holding company now. Or maybe it's something else?
Given that the flagship USP-V is nearly a year old, it seems very odd that revenues would be shrinking at a time when the new system should be really starting to gain traction.
It all makes me wonder...