“Did you find everything you need?” You’ll often be asked this at a retail checkout. I guess that a particular grocery not having precisely what you want is understandable; maybe a specific artisan cheese or a type of orange juice–with medium pulp, half-concentrate half-not, with light calcium and/or Riboflavin (no, really, when did OJ go all designer? )–has proven unexpectedly popular and it will be a day or two before it’s back in stock. It’s more surprising when more basic ‘raw’ materials are harder to come by: flour or gas, perhaps.

Recently, I was chatting with Xyratex (while waiting for people to join the call) and, for reasons that escape me now, bemoaning my inability to get a very standard prescription filled at my local pharmacy or, indeed, at any pharmacy within extended driving distance. According to the pharmacist, many drugs are similarly supply-constrained as production was cut back during the recession–and there I was thinking health care was recession-proof! Anyhow, my friends at Xyratex explained that their business had also been negatively impacted by supply challenges when it comes to the basic raw materials needed to manufacture their storage systems. As a result, they saw signs of recovery on the demand side of their business, but had been unable to enjoy the full fruits. As a bellwether of the storage industry, it was good to know the undercurrents of their business looked promising–but it was a shame that the supply side was constraining their recovery.

I was reminded of this discussion when I saw the excellent news that prompted Xyratex to do a pre-announcement this morning of its quarterly results. Depending on where the precise numbers end up, Xyratex will end up somewhere between 10% and over 30% ahead of revenue estimates, with earnings bouncing even more impressively (you can read the details here). Steve Barber, Xyratex’s CEO, specifically stated, “The actions we undertook with regard to the supply chain have helped mitigate the component constraints that impacted our fourth quarter revenue…”

Clearly, Xyratex is itself a key supplier to many storage systems vendors in this business and its improvement is another positive sign for the industry as a whole. The company’s announcement was also positive about the outlook: in other words, this isn’t a ‘blip’ based on fulfilling against a backlog, there looks to be a genuine and sustained improvement in demand. Let’s hope the  supply side doesn’t cause too many more issues to slow economic improvement–whether it be Xyratex’s storage systems, my medication, or your OJ…

Related posts:

1. Flaky Economic Data?

Tags: Steve Barber, Xyratex