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Pure Storage shares are trading sharply lower in late Thursday trading on disappointing revenue growth for its fiscal third-quarter ended Oct. 31 and weaker-than-expected guidance for the fiscal fourth quarter ending in January. The company attributed the disappointing results to both softer-than-expected pricing and weakening macro demand.
For the third quarter, the Mountain View, Calif.–based provider of flash-memory based storage arrays posted revenue of $428.4 million, up 15% year over year but below the Wall Street consensus of $440.1 million. The company’s guidance had called for revenue of $434 million to $446 million. Profit was 13 cents a share, ahead of the Street consensus of nine cents.
For the fourth quarter, Pure Storage (ticker: PSTG) sees revenue of $484 million to $496 million, below the previous consensus of $511.8 million. The company sees non-GAAP gross margin in the quarter of 67.5% to 70%, compared with 71.7% in the third quarter.
For the full year, Pure Storage now sees revenue of $1.635 billion to $1.647 billion, down from previous guidance of $1.645 billion to $1.715 billion.
The company also announced that it has named Kevan Krysler as chief financial officer. He has been senior vice president of finance and chief accounting officer at VMware (VMW).
In remarks prepared for the company’s earnings calls this afternoon, CEO Charlie Giancarlo said that “continued pricing declines, which were higher than we expected, accounted for the gap to our revenue expectations at the beginning of the quarter, although we are also seeing signs of a more challenging global business environment as commented on by other large infrastructure suppliers.”
He added that “in setting our guidance for the remainder of the year, we have taken into account the pricing declines we’ve seen in the past two quarters, as well as a more challenging global environment.”
Giancarlo said in an interview with Barron’s on Thursday afternoon that Pure saw pricing per terabyte drop by double-digits in the quarter, after a similar decline in fiscal Q2, a reflection of accelerating competitive price pressures from large-scale players in the market like Dell Technology (DELL). “Customers do competitive bake-offs and we have to respond to that,” he says, noting that some of Pure’s rivals are pricing on a “cost-plus basis” rather than on value.
Giancarlo added that while the competitive pricing issue was the largest contributor to the disappointing performance, Pure is seeing some impact from macro issues, in particular Brexit and international trade tensions. He says that some customers are showing “a little nervousness.”
Pure Storage stock is down 24.3%, at $15.00, in after-hours trading. It had closed Thursday down 1.05%, to $19.85. The S&P 500 was down 0.16%.
Write to Eric J. Savitz at eric.savitz@barrons.com