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Channel Focus, SMB Push Drive Carbonite To Solid First Quarter

Carbonite sees its bets pay off as it moves away from consumer online backups toward the SMB market and relies more on channel partners.

Cloud backup service provider Carbonite, which last week reported strong first-quarter 2014 revenue and earnings growth, said its move into the small-business space and an increased reliance on the channel have been key to its success.

Carbonite reported first-quarter 2014 revenue of $29.1 million, up 19 percent compared with the $24.5 million it reported in the first quarter of 2013. The Boston-based company also posted a loss of $1 million for the quarter, compared with a loss of $7.4 million for the first quarter of 2013.

[Related: Carbonite's New Database Backup Service To Go Through Partners]

Carbonite has done a good job working with channel partners, said Vernon Keenan, CEO of Telnexus, a Berkeley, Calif.-based telephony and Internet service provider and Carbonite partner.

"As an old channel guy, I like what I hear from Carbonite," he said. "Carbonite reaches out to its partners and brings us leads. These things really pay off for us."

Carbonite CEO David Friend attributed the quarter's strength to sales of the company's Carbonite Server Backup software, which it released in January. The software is based on its October 2012 acquisition of open-source cloud backup provider Zmanda.

Carbonite Server Backup is a hybrid backup solution that simultaneously creates both local and cloud backups, Friend said.

"Hybrid backup combines the speed and convenience of local backup with the safety of cloud backups," he said. "A local backup is not limited by the speed of the Internet and is therefore extremely fast for both backup and restore. Cloud backup, on the other hand, provides complete protection against disasters like fire, flood and equipment theft, all of which might destroy a local backup."

NEXT: Expanding Data Protection Technology, Increasing Channel Business


Carbonite in the second quarter expects to start shipping a hybrid backup appliance with 1 TB of local storage and 500 GB of cloud storage, Friend said. It will make bare metal images of a company's servers that can be replicated to the cloud and is slated to be available for $99 per month, he said.

Just as important is Carbonite's expanding channel business. Friend said the company's base of solution providers increased 35 percent in 2013 compared with 2012, and that Carbonite has relationships with distributors Tech Data, D&H Distributing and Synnex.

"We were pleased with the Q1 results of the channel and look forward to the day when most, if not all, of our sales can be handled by our channel partners," he said.

Anthony Folger, Carbonite CFO and treasurer, said on the earnings call that the company's small-business bookings grew 30 percent in the first quarter of 2014 vs. the same period last year, and accounted for 28 percent of total bookings for the quarter compared with 24 percent last year. Renewal rates for small-business customers are higher than for consumers, he added.

"Our transition from the direct-to-consumer to an indirect-channel-led SMB model is beginning to accelerate, and I expect that the investments we made will position us well in the second half of 2014 and beyond," Folger said.

Folger expanded on the company's increased partner base, saying that it ended the first quarter with approximately 4,700 reseller partners, up from 3,300 to 3,400 partners in the same period last year.

"So we're still continuing to see good traction," he said. "And I guess I would say that the reseller channel is evolving in that we're starting to move maybe from the sort of 'break-fix jobs,' as we refer to them, as the places where you bring your PC for service, and we're starting to see more and more traction in the sort of regional value-added reseller type of community. So I think we're moving up the stack a little bit in terms of the reseller channel, and we feel pretty good about that."

PUBLISHED MAY 6, 2014

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