Friday, January 2, 2009

Why EMC and Spectra Logic, are fueling my optimism for 2009?

No, I am not being Pollyanna, although I do have to admit that in today’s challenging climate there is a tendency towards the pessimistic. Despite that, I still lean to the optimistic. Being optimistic does not mean that you ignore the economic realities but it does imply that you view them with a glass half full mentality. To quote Churchill “An optimist sees an opportunity in every calamity; a pessimist sees a calamity in every opportunity.”

In times of economic boom heroes are plentiful and companies survive, even grow, despite questionable value propositions and poor business fundamentals. However, downturns have a penchant to expose those weakness and separate companies that are market driven and deliver market resonating solutions from those that are marketing driven with products characterized by a fuzzy, end user value. If you are a vendor I suggest you give some serious thought to that last statement.

While recessions can be a time for cutting back they can also a time of great opportunity, as history will attest. Worth noting that 16 of the 30 companies that make up the Dow industrial average were started during a recession or depression. General Electric started during the panic of 1873, Disney started during the recession of 1923-24, HP began during the Great Depression, and Bill Gates and Paul Allen founded Microsoft during the recession of 1975. If your business fundamentals are sound and you have a product that resonates in the market then there is reason for optimism.

Recently I met with two totally dissimilar storage companies both in size and in business philosophy but each having equally robust reasons to express optimism. EMC, a company that has positioned themselves to turn today’s challenges into opportunity and Spectra Logic a relatively small, privately held company that does not enjoy the mass and market clout of EMC but shares their appetite for success and the corporate vitality to make it happen.

EMC was founded in 1979, just a year before the US economy entered into the recession that peaked in 1981/82. While not without its challenges, the history of EMC is a well known litany of success and growth since they first opened their doors in Newton Massachusetts to develop memory boards for Prime computers. Earlier this month I was exposed to a briefing describing the strategic retooling of EMC that positions them well to morph today’s economic challenges into opportunities. EMC has every right to be optimistic as they head into 2009.

Spectra Logics was also founded in 1979 by the current CEO, Nathan Thompson in his dorm room at the University of Colorado. Originally known as Western Automation Labs and, as with EMC, its initial product was memory boards. With an impressive track record of persistence and growth (although not close to the trajectory of EMC) Spectra Logic has grown to a 300+ employee, dept free organization while remained a privately held company.

Both companies take justified pride in their TCE (total customer experience) performance with neither apparently suffering from the malaise described by Jack Welch in Business Week; “stickiness also known as customer retention and loyalty does not obsess managers nearly enough.” It certainly appears to obsess both of these organizations with Spectra Logic claiming that 94% of their customers would highly recommend Spectra Logic to their business colleagues and EMC having formalized their TCE process with employee compensation riding on the results.

At the recent analyst meeting EMC talked about 21 consecutive quarters of double digit growth, including a 13% increase in Q3 revenues and 14% increase in EPS. In a December dated letter to customers Thompson (Spectra Logic) boasted of record growth in the second half of 2008 with revenues, profitability and market share all increasing. No doubt aided by the myopic and Neanderthal perspectives of SUN who are exposing previously committed STK tape customers as opportunities to competitors such as Spectra Logic.

These positive financial performances in troubled times, their focus on the customer experience and delivering what resonates with them convinces me of the legitimacy of their optimism.

So yes I am optimistic. I have experienced numerous recessions, navigated the difficult entrepreneurial stages of nascent technology ventures and survived the dark days of chapter 11 bankruptcy when Storage Technology hit the floor only to dramatically rebound and enjoy many years of profitable growth. By the way being optimistic is much more fun and anyway, who wants to hang out with a pessimist!

Best wishes for 2009!!

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