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Technology Stocks : Network Appliance

NTAP 115.66

-2.9%

Dec 12 9:30 AM EST

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To: slacker711 who wrote (3363)	5/19/2000 2:16:00 PM
From: Lynn	Read Replies (1) of 10934

New ML research report titled, "Network Appliance: Escape Velocity Sends NetApp Into Orbit," by [our friend] Steven Milunovich, CFA, First Vice President and William Crawford, Vice President BUY, BUY Long Term Reason for Report: Earnings Report 12 Month Price Objective: $85 Estimates (Apr) 1999A 2000E 2001E EPS: $0.11 $0.21 $0.35 P/E: 625.0x 327.4x 196.4x EPS Change (YoY): 90.9% 67.4% Consensus EPS: $0.21 $0.31 (First Call: 17-May-2000) Q1 EPS (Jul): $0.05 $0.08 Cash Flow/Share: $0.15 $0.26 $0.44 Price/Cash Flow: 458.3x 264.4x 156.3x Dividend Rate: Nil Nil Nil Dividend Yield: Nil Nil Nil Opinion & Financial Data Investment Opinion: C-1-1-9 Mkt. Value / Shares Outstanding (mn): $24,612.5 / 358 Book Value/Share (Apr-1999): $1.33 Price/Book Ratio: 51.7x ROE 2000E Average: 19.0% LT Liability % of Capital: 0.0% Est. 5 Year EPS Growth: 45.0% Stock Data 52-Week Range: $124-$9 7/8 Symbol / Exchange: NTAP / OTC Options: Pacific Institutional Ownership-Spectrum: 51.1% Brokers Covering (First Call): 17 ML Industry Weightings & Ratings** Strategy; Weighting Rel. to Mkt.: Income: In Line (07-Mar-1995) Investment Highlights: We think that NetApp?s results and increasing competition are legitimizing the NAS market. We take the view that NAS is a disruptive technology. NetApp could become the next EMC. Our price objective of $85 is 28X our F2001 revenue estimate of $1.08 billion. Fundamental Highlights: Revenue growth accelerated to 120% with the book-to-bill easily exceeding one. EPS of $0.07 beat our estimate. This underscores strong storage demand generally as well as the flourishing of the NAS market. The new 6 terabyte product with increased disk content could bring the operating margin down by one point in the second half. The company promoted Tom Mendoza to president from his position as the head of sales and marketing, which should help deal with burgeoning growth. Watch for a coming product announcement allowing file and block commands to run over Ethernet as we outlined in Storage Futures. [remainder of report deleted] Lynn

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