My CC notes.
Cobalt Networks
2Q00 CC
July 18, 2000
- increased position significantly over the past quarter as far as unit marketshare is concerned (more the leader than ever before)
- announced acquisition of Progressive Systems, a Columbus, OH, Linux-based security appliance vendor
- lead times declined to 1 day on web orders, bulk of direct and indirect business between 1-5 days
- exceeded all internal financial targets
- will grow faster than forecasted market growth of 70%
- over 3700 customers, up from 2500 last quarter
- direct sales are 42% of sales, 6 months ahead of internal targets. 31% of sales last quarter
- US sales increased to 56% from 48% of sales last quarter
- Gross margins increased to 47% from 44% in the prior quarter, this was spurred by a continued shift to higher margin products as well as product cost reductions
- DSO's 54 days, down from 55 days in prior quarter
- annualized turns at 60, up from 38 in Q1
- emphasis is on delivery and integration of software and developer tools to deliver a complete system
- Chilisoft acquisition allows Microsoft active server page support on Cobalt platforms (Linux-based), this dramatically increases the size of the developer base
- Progressive Systems acquisition makes Cobalt's technology far more secure than the competition, expands addressable market and R&D reach
- partnership with Seagate adds scalable storage and reliable data protection, NASRaQ is shipping and is seeing strong market acceptance
- developer network is growing rapidly, over 1000 members. No other server appliance vendor has a meaningful developer following. This developer network is the army that will design the niche applications of the future which will drive Cobalt's server appliances into every corner of the market
- international operations are a significant growth driver
Q&A
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- 20-30% sequential growth going forward
- competitive landscape stagnant, no change since beginning of the year
- 3rd generation Qube to ship end of Q3, RaQ 4r (RAID-capable with integrated ASP and database functionality) shipping now, Japanese RaQ 4r next week, dual ethernet RaQ 4i in early part of August, new generation of caching platform also in Q3
- internal gross margin target is 50% across all product lines
- comfortable with profitability in 1Q01, but realistically may be able to drive it sooner
- StaQware clustering technology extremely well received, highly requested by service providers -- allows for real-time, dynamic content replication across multiple appliances offering high availability at under $1k
- doing very well with tier 1 service providers, dedicated hosts -- Verio, HostPro, Rackspace, Dialtone Internet, Concentric, etc all have significant Cobalt marketing plans
- looking to move aggressively into security -- firewalls and VPNs -- through Progressive's technology. This will make the Qube platform unmatched in the business.
- Progressive has about a dozen employees, but Cobalt will be looking to expand its R&D center in the area
- target for revenue makeup is 70% RaQ, 30% Qube. In Q2, 75% RaQ and 25% Qube. NAS and cache are about 10% (included in RaQ). For current product family, 60-30-10 for RaQ, Qube, and NAS/cache seems about right.
- ASPs about $1500, up from Q1. Pushing the low-end of the market while also driving the high-end, bell-curve intact. ASPs should increase going forward.
- were geared internationally from inception. Japan, China, Korea, Australia, and Indonesia expanding aggressively. Pleased with penetration into European service provider market, undergoing a faster evolution towards consumer-priced dedicated hosting offerings. Cobalt's position in Europe is set to explode. |
