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Technology Stocks : Vixel (vixl), a fibre channel company!
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To: iknowlarry who wrote (74)10/2/1999 2:29:00 PM
From: Gordon Gekko  Read Replies (3) of 377
 
BRCD, ZOOX and VIXL will all do quite well over the next couple of years in SAN arena.

However, I do have some reservations about VIXL.

1) Revenues are not growing sequentially. They had $22M in sales for the first half of 98, $18M for the second half of 98 and $22M for the first half of 99. That is a year and a half of stagnate growth. Not very encouraging in a market that is experiencing hyper growth. This should change somewhat when they start to pitch their switching business more aggressively.

2) Their existing products have a very high failure rate. It has been so bad that they paid off one of their customers in stock to entice them to stay. This is not an indicator of a healthy business no matter what anyone says.

3) Losses are surmounting. There doesn't appear to be significant cost controls in effect to contain these losses. One of the reasons why BRCD zoomed into the stratosphere was that it reached profitability way before analysts expected it to. VIXL is no where near profitability, but they are making some progress in the gross margins arena. ZOOX is making great strides and should be there in 1 or 2 quarters (assumes their current growth continues and the cost controls remain in effect).

These are the major reasons that come to mind. They still will be instrumental in the development of the SAN market, but as it stands now they have a lot to lose if they don't get their act together quickly.

These are all long-term issues that probably wont effect the short-term volatility. The real barrier will be the immediate movement of ZOOX. If ZOOX rebounds (which it should by the next quarterly report on the 25th) then it will bode well for VIXL. The industry will value VIXL in the ZOOX range with BRCD type numbers not occurring any time soon.

I happen to be more preferential to ZOOX especially since it has sold off big time for unknown reasons. They also have a coming earnings report and a new switch (Capellix) that it supposed to be a dynamo.

This is not to say that a VIXL investment will not reward you, but it is just that they have a lot to prove.

GG
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