"Network Appliance will be able to hold its margins at 60 percent as neither Dell nor EMC will have much success cutting into its its core enterprise network-attached storage market"
Network Appliance falls on competition fears
Monday December 30, 12:31 pm ET
NEW YORK, Dec 30 (Reuters) - Shares of data storage computer maker Network Appliance Inc. (NasdaqNM:NTAP - News) are off more than 8 percent Monday after hitting their lowest level in seven weeks, on concerns about competitive pressures which could hurt margins in an already tough technology spending environment.
An article in Barron's magazine over the weekend highlighted efforts by EMC Corp. (NYSE:EMC - News) and Dell Computer Corp. (NasdaqNM:DELL - News) to enter the market for storage devices that hook into traditional computer networks, the key market for Network Appliance.
"These are all legitimate longer term risks," said Needham & Co. analyst Glenn Hanus. "But the company seems to be holding its own competitively through this period of reduced information technology spending. Competitors do not seem to be making inroads."
The company's stock is down down 93 cents, or 8.6 percent, at $9.89 in midday Nasdaq trading, rebounding somewhat after dropping as low as $9.77 -- the lowest level since Nov 12.
Sunnyvale-based, California-based Network Appliance was not immediately available for comment.
Merrill Lynch analyst John Roy noted that both EMC and Dell have been unsuccessful in the past in entering the mid-range storage market.
"Network Appliance will be able to hold its margins at 60 percent as neither Dell nor EMC will have much success cutting into its its core enterprise network-attached storage market," Roy said.
EMC Corp., based in Hopkinton, Massachusetts, is the world's largest maker of data storage systems. Dell is the world's top personal computer maker.
Both Roy and Hanus noted that EMC had tried to enter this market previously with its IP4700 product with little success. "It remains to be seen how successful they will be with its new line of Clarion products," Needham's Hanus said.
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