Hitachi Giving EMC Corp. a Run for its Money in the Enterprise Storage Business

Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung sent a note to clients on Hitachi's (HIT) recent gain in market share relative to EMC Corp.'s (EMC) storage business (both as reported and ex-currency) again. Highlights follow:

* Analysis of Hitachi'€™s June-quarter results (released early on July 31) for its enterprise storage business (known outside of Japan as Hitachi Data Systems) indicates that EMC lost share against Hitachi in the enterprise storage business, both on an as reported basis and excluding the impact of currency (see table below). To put this in perspective, Hitachi has grown faster than EMC in three out of the last four quarters (or two out of the past four, excluding currency), which could trigger additional concerns about increasing competition in high-end storage systems given that EMC had gained share for 10 consecutive quarters prior to September 2005. In terms of projections, Hitachi has not updated its forecast for the half-year ended September 2006, which it issued this past April.

* Hitachi'€™s year/year growth is well above EMC's, as reported and in US dollars. As shown in the table below, Hitachi'€™s storage revenue growth of 22% (as reported in yen) was well above EMC's hardware business (up 8%) and stronger than EMC€'s consolidated business (up 10%). If we translate Hitachi's results to US dollars (using rate of 115 yen/US dollar), Hitachi's storage growth was 18% year/year, which was still far stronger than EMC's hardware growth. We would note that EMC'€™s June-quarter hardware results were impacted by product transition issues in the midrange (Clarion) as well as poor inventory planning on the high end (DMX-3).

Stock impact: Negative for EMC (share loss, increasing competition).

HIT-EMC 1-yr comparison chart: