An interesting and educational series on storage. I'm not sure I understand the ultimate goal of this knock-out, because all of the listed companies are good investment candidates.
wallstreetcity.com
Crossroads Versus Sandisk
by Chris Connor
The Match-Up
Fighting out of the red corner is the leader of storage routers for primarily Storage Area Networks (SANs), Crossroads {CRDS}. Fighting out of the blue corner is the leading provider of flash memory products, Sandisk {SNDK}. Sandisk has been around significantly longer than Crossroads, but this recently public SAN leader should not be underestimated. Let the fight begin.
Round 1: Which Company has the Superior Leadership Position?
Both companies dominate their respective industries. Although both industries are still in their infancy, Sandisk dominates a substantially more established area of storage, flash memory. Flash memory stores data for such popular hand-held devices as digital cameras, Palm Pilots, wireless phones, and MP3 players. Sandisk has its biggest lead in MP3 players. Since the market for storage routers is considerably younger than the market for flash memory, there is a greater chance for a major contender to spring up and challenge Crossroads. Furthermore, Sandisk has over 100 patents in flash memory to protect its lead. These patents provide Sandisk with about 12 to 15 percent of its total revenues. Thus, Sandisk wins this round.
Round 2: Which Company has a Better Growth Record?
Round 2 goes to Crossroads hands down due to its exceptional revenue growth. Crossroads' revenues for the quarter ended 10/31/99 soared an amazing 488 percent to $7.1 million from $1.2 million. The company has also grown its revenues each quarter for seven consecutive quarters, with 40 percent sequential revenue growth generated in the last two quarters. The only negative aspect in the growth department for Crossroads is that the company has yet to turn a profit. On the other side, Sandisk has been profitable since at least 1996, but Sandisk's revenues have been erratic over the past four years. Crossroads is also expected to grow faster over the next five years than Sandisk. Analysts project that Crossroads will grow earnings 40 percent per year over the next five years, while they project Sandisk to grow 27 percent over the same time period.
Round 3: Which Companies' Industry has a Brighter Outlook?
Sandisk gets the nod this round because of the proliferation of hand-held devices and the likelihood that the SAN market will combine with Network Attached Storage (NAS) to form one superior storage standard for networks. SAN will have trouble becoming the preferred storage standard over the long term by itself because NAS is simpler and cheaper. Crossroads is not completely tied to SANs and storage routers could play a major role in a NAS-SAN combination, but flash memory has a much clearer future with hand-held devices.
The Winner
Sandisk defeats Crossroads by a split decision and, therefore, advances in the tournament. Sandisk will next meet the winner of the JNI Corp {JNIC} versus Network Appliance {NTAP} match-up tomorrow. Crossroads could develop into a storage powerhouse in the future, but Sandisk is already a powerhouse in an area of storage that benefits greatly from the rapidly growing hand-held device market.
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