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IT spending constraints have had a serious impact on purchases of storage products as many organisations have tried to better utilise their current storage investments, instead of buying more capacity, while using storage management software products to optimize performance.

These factors are written all over the latest financial results of the major storage systems and software vendors. In particular, declining quarterly revenue figures at EMC, Quantum and Auspex contrast sharply with a still relatively buoyant picture at storage management software companies Legato and Veritas.

For market leader EMC, a weak economy was not the only reason for its 42% drop in fourth quarter revenues to $1.51 billion. Over 2001, EMC has been losing ground as IBM with its Shark product and Hitachi Data Systems (HDS) with its Lightning and Thunder offerings continue to eat into EMC's market share. Some of that change has also been triggered by a re-alignment of reseller pacts. Most significantly, Sun Microsystems agreed to license HDS' high-end Lightning product in August 2001, scrapping its longstanding alliance with EMC.

Another stumbling giant, Quantum, is also trying to address a range of shortcomings. Having backed out of the hard disk drive business in March 2001, Quantum is now struggling to overcome flagging sales in its primary market of tape systems. As a measure of the decline there, the company's tape drives sales slipped to $99 million in its third quarter ending 31 December from $187 million a year earlier. More stable is the company's network attached storage server appliance business. That SNAP line, along with other products in the Quantum Storage Solutions division, brought in $76 million during the latest quarter, roughly the same as in the third quarter of 2001. Overall revenues were 23% below fiscal 2001 levels, at $284.0 million. Analysts have been arguing that, to prosper, Quantum has to move up market where margins are higher.

An even faster fall is underway at rival network server appliance maker Auspex. In its fiscal second quarter revenues sunk 46% to $8.8 million. Given that, the company is now relying heavily on the take up of its new Network Storage Controller (NSc3000) product, which will begin shipping in April. The NSc3000 enables companies with storage area networks (SANs) sourced from a range of vendors to access and share files via network attached storage (NAS) protocols, without having to buy a complete NAS system. Auspex says it has at least six quarters worth of cash left, which should sustain it until the "high level of interest" in its new product turns into revenue.

These figures from systems vendors contrast sharply with those at vendors of storage management software. Veritas, the market leader in this segment, reported revenues up 1% to $374.4 million, while its rival, Legato, chalked up a 6% rise in sales to $62 million. Both companies suggest their stability stems from organisations choosing to use software to exploit installed storage resources more efficiently.