EMC (NYSE:EMC), the global leader in the external disk storage market, unveiled a range of lower priced data storage products in January with the aim of expanding its offerings to a cloud platform which happens to be the fastest growing segment for data storage industry. This new development will help EMC to better serve small-to-medium sized clients and compete against NetApp (NASDAQ:NTAP) in the cloud computing space.  NetApp mainly competes with IBM (NYSE:IBM), HP (NYSE:HPQ) and Dell (NASDAQ:DELL) in the external disk storage systems market.
With increased competition, we see downside to our $63.09 Trefis price estimate for NetApp’s stock if EMC manages to take market share from NetApp in the small-to-medium storage market.
EMC Targets Small and Medium Businesses
EMC’s new unified storage line, called VNX, is expected to be the cheapest in its class and will allow EMC to make inroads into the small and medium enterprise (SME) market. The new unified storage also combines EMC’s Clarion and Celerra offerings into a single system for file, block and object data allowing users to manage data from a single device, reducing hardware requirements and simplifying data management. 
Recently EMC also acquired Isilon Systems, a small storage maker with a cheaper and more flexible approach to network-attached storage to extend its cloud offering. Isilon’s technology allows companies to quickly build large clusters of storage devices on inexpensive commodity hardware making EMC’s offering more competitive to NetApp’s.
(Chart created by using Trefis' app)
Potential Downside to NetApp
Over the years, NetApp’s strength in desktop virtualization and its unified storage strategy under a single OS has helped the company boost its external hardware market share. The firm controls nearly 25% of the small-to-medium storage market and has been the dominant player in the cloud storage offerings and lower priced data storage products competing with firms like IBM and HP that also compete in this market. 
With EMC pushing into the SME market aggressively, NetApp may witness flat or even a decline in market share depending on the growth of this market and competition. We currently forecast NetApp’s share in total storage market will increase from just over 11% in 2010 to around 13% in the coming years. However if competition from EMC and others results in stable market share, this would imply about 12% downside to our price estimate for NetApp’s stock.
You can drag the trend line above to see the impact of various storage hardware market share scenarios on NetApp’s stock.Notes:
- EMC Unveils Lower-Priced Data Storage Products, Wall Street Journal