CommVault (NASDAQ:CVLT), the maker of the Simpana data management software suite, has had a miserable year. The stock has stumbled more than 40% since the beginning of the year, despite hitting all-time highs last September. So what happened, and can the stock still be salvaged?

CVLT Chart

Source: Ycharts

April showers ... but no May flowers
CommVault's Simpana is a suite which packages together data protection, mobile access, disaster recovery, storage optimization, and cloud storage services for businesses. Demand for the suite has been strong ever since CommVault's IPO in 2006, which helped the company's top line grow 288% between fiscal 2007 and 2014. CommVault expects its revenue to rise from $586 million in fiscal 2014 to $1 billion "over the next few years."

But in April, the stock plunged more than 30% following disappointing fourth quarter earnings. CommVault's GAAP-adjusted profit fell 7.8% year-over-year to $15.7 million, or $0.32 per share, while revenue climbed 13% to $156.8 million. CommVault's non-GAAP earnings of $0.52 per share topped estimates by five cents, but its revenue missed the mark by $3.4 million and signalled its worst top line growth in three years. Things didn't get much better in the first and second quarters of 2014:



YOY growth


YOY growth

1Q 2015

$153 million




2Q 2015

$151 million




Source: CommVault earnings reports.

During the first quarter, CommVault topped analyst estimates on both the top and bottom lines. But in the second quarter, it missed revenue estimates by nearly $7 million and earnings estimates by ten cents per share. Its software revenue, which accounted for 46% of its top line, slid 2% year-over-year, but services revenue climbed 15%. Revenue from enterprise deals (those over $100,000 in software revenue per quarter) dropped 5% year-over-year, while the average size of such deals fell from $356,000 to $295,000.

Looking ahead, analysts expect CommVault to post full-year revenue of $668 million, which would represent 14% growth from fiscal 2014. That's a fairly modest target, considering that most analysts believe that CommVault needs to achieve 20% annual growth to hit $1 billion in annual sales by 2017. But that also means CommVault must generate $60 million more in revenues in the second half of the year than in the first half to meet expectations. That would certainly be possible, since CommVault's revenue has traditionally been higher in the second half of the fiscal year, but it could still be a tough target to hit.

Is this a problem with the company or the industry?
To decide if CommVault's problems are internal or caused by industrywide problems, we should take a look at how bigger competitors in the enterprise data storage industry -- CA (NASDAQ:CA), Symantec (NASDAQ:SYMC), and EMC (NYSE:EMC) -- have fared over the past five years:

CA Revenue (Quarterly) Chart

Source: Ycharts.

In terms of top line growth, CommVault blows away its industry peers. But when we compare other metrics, CommVault doesn't really stand out as a much better stock:


Mkt. cap

P/E (ttm)

Operating Margin

Debt to equity

YOY rev. growth (mrq)

YOY EPS growth (mrq)




































Source: Yahoo Finance, Oct. 29.

While it certainly seems like demand for enterprise data software is slowing down across the board, CommVault also admitted to making some big mistakes. During the company's fourth quarter conference call, CEO N. Robert Hammer noted that the North American sales teams were understaffed throughout fiscal 2014, which likely led to a decline in new license sales across the region. The company is also aggressively shifting from on-premise to cloud-based backup solutions, which may have caused the temporary pause in license sales and operating expenses to rise 18% between fiscal 2013 and 2014.

The road ahead
Hammer noted during the second quarter earnings conference call that CommVault would need "several more quarters" for sales to return to a "sustainable, consistent, high-growth trajectory." Hammer also emphasized that the company was "absolutely committed to achieving our $1 billion plan over the next three years."

Yet those two statements completely contradict one another. Even if CommVault meets analyst expectations of 14% year-over-year sales growth in fiscal 2015, it would need to sustain more than 20% growth to hit $1 billion by calendar 2017. That may not happen if CommVault still needs "several more quarters" to get back on track.

Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of EMC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.