ANALYSIS: Pure Storage opens up to SMBs, but will there be profits?

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Tuesday, March 15, 2016

Nearly five years after launching its first product, all-flash storage solutions provider Pure Storage is seeking to broaden its market scope beyond the segment of large data centers.

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The company wants to lower barriers for the adoption of flash equipment by small and medium-sized businesses (SMBs), which will also help diversify its revenue streams.

During the Pure Storage // Pure Accelerate 2016 conference in San Francisco, US, the company announced a new set of solutions that, in most cases, share a low-cost take and a focus on unstructured data.

The firm's new FlashArray/m10 line, for example, is an attempt to ramp up an entry-level flash storage segment, with more accessible prices in the 5-terabyte configuration.

Another company launch was the Pure Storage FlashBlade, an elastic scale-out system that delivers all-flash performance to multi-petabyte-scale data sets.

With that, the company is also going after rivals such as NetApp and particularly EMC.

Flash technologies enable a lower-cost path compared to disk-based storage or SSD, because they can be cheaper as more bits of data are packed into the same space. 

But costs have been an issue for Pure Storage. The company invests large sums in R&D and sales and marketing and is yet to become profitable, although it has had stellar revenue growth in the past few years.

Pure Storage reported its best results ever in the fourth quarter, ended January 31, 2016, nearly tripling sales from the year-ago period to US$150mn. In the same three months, losses reached US$44.3mn, down from US$47.6mn in the same quarter 12 months earlier.

According to Steve Brazier, CEO of British consultancy Canalys, Pure Storage is a 'hyped' company and spends twice what it makes.

At a Canalys event in Cartagena, Colombia last November, Brazier said that for every dollar in revenue received in 2014, Pure Storage spent US$2.

According to Forbes, from 2012-2014, the firm's cost of revenues, R&D, sales & marketing, and general and administrative costs have risen 324%, 174%, 277%, and 301% compounded annually.

However, the company still went ahead with an IPO six months ago, fueled by its rocketing sales. 

Pure Storage set its IPO at US$17 per share, but the price reached US$13 at the end of trading on March 14 session; a sign that investors might not be that enthusiastic about the company.

The new solutions announced, therefore, are not just a new gamble by the fastest-growing storage vendor worldwide, but will also be a key indicator to find out whether Pure Storage is set to cool down or heat up.

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