"I wouldn't be surprised to see many companies coming up a bit shorter than hoped coming out of Q4 and possibly missing estimates altogether," says Dan Renouard, analyst at Robert W. Baird & Co. Inc. "But how much is related to war worries and how much to a generally weak economy -- exacerbated by $40 per barrel of oil -- is anyone's guess."
Shebly Seyrafi, enterprise storage and hardware analyst at A.G. Edwards & Sons, says his channel checks indicate spending in February was subdued. "A good chunk of these guys clearly think war is impacting spending, but some don't. It's not a uniform response," he says.
If the U.S. does goes to war, Seyrafi believes, the impact on the market will be similar to the spending drop that happened post-9/11, although not as extreme. "We may not get that steep a dive, but it could present a nice buying opportunity for storage stocks once the uncertainty lifts."
Fears about a war with Iraq aren't the only thing weighing heavily on the storage sector this quarter. New product launches, such as EMC Corp.'s (NYSE: EMC) Symmetrix DMX, might not be taking off as fast as anticipated. "When normal business isn't panning out -- in EMC's case, customers aren't writing big checks -- it would be overly optimistic to expect a quick lift in the quarter for the DMX," Seyrafi says. "The sales cycle will be longer, and with the war threat, customers are reluctant to embrace first-generation technology." (See EMC's DMX a Slow Starter?.)
Of course, if you are from the glass-is-half-full school, you could always look at the prospects for the full year, which are more promising. Thomas Weisel Partners interviewed 30 distributors, resellers, and systems integrators recently, and found an overwhelming agreement on positive storage spending prospects. Virtually all respondents the firm interviewed felt the same or more optimistic about 12-month prospects for storage spending than they did only three months ago, strongly supporting the view of pent-up demand in the storage industry.
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