Yep. It almost broke through its 52-week high ($30.125) yesterday on the highest trading volume of the year. The fundamental story continues to be underappreciated.
The proprietary ESCON environment is generally acknowledged to be the original SAN environment. McDATA continues to be the dominant ESCON Director Switch provider with more than 85% market share. CMNT continues to be the dominant ESCON channel extension vendor. Inrange continues to be the preferred second source for both ESCON Directors and ESCON channel extenders.
In the open standards-based Fibre channel market, or the second generation SAN environment, Brocade dominates the fibre switch market with over half of the fibre switch market while McDATA dominates the fibre channel Director Switch market with 99.8% market share. McDATA, CMNT and Inrange are the only 3 vendors with field-proven and disaster-tolerant director switch technology. McDATA is starting to use its own ASICs while CMNT is using Brocade ASICs and Inrange is using Q-Logic/Ancor ASICs.
That said, here's an interesting comparison based on yesterday's closing prices:
TTM Revenues Market Cap
Brocade $ 227.03M $ 25.1B
McDATA 164.67M 14.0B
Inrange 196.67M 5.0B
CNT Technology 164.69M 725.1M
Note that each company's competitive positioning is different in first generation and second generation storage networking. For example, only 50% of Inrange's TTM revenues come from storage networking and only $3.7 million of 1H2000 revenues came from its fibre channel director. Another example is Brocade which is a non-factor in first generation ESCON storage networking and is the only one without any director switch technology. The director switch is generally considered to be critical backbone technology that will be in strong demand as the world's top 2,500 companies increase their spending on storage from an average of under $4 million last year to an average of just under $20 million by 2003.
CMNT Revenue Summary
1997 1998 1999 2000 (1H)
SAN
(mainframe +
open systems) $ 6.6M $32.9M $53.6M $37.5M
Channel
Extenders* 49.5M 42.1M 35.6M 21.6M
Services 24.1M 28.1M 36.7M 23.9M
Revenues $80.2M $103.1M $126.0M $83.0M
*Channel Extenders are based on ESCON protocols. The installed base for ESCON consists of more than 6,000 sites in more than 65 countries.
Fastest growing product lines:
SAN over IP** - - - $ 2.4M
Professional
Services - $1.5M $ 4.6M $ 4.1M
**SAN over IP introduced during 4Q1999. CMNT's SAN over IP is the basis for EMC's SRDF over IP introduced during 1Q2000. CMNT has exclusive rights to package this product
with services to EMC's SRDF installed base of more than 6,000 sites. Both EMC and Nortel have strategic alliances with CMNT.
Some notable excerpts from the CMNT prospectus:
EMC
We have established a relationship with EMC for remote disk mirroring applications. This existing relationship was recently enhanced by an agreement to provide an exclusive package of remote disk mirroring hardware, software and
implementation service. We are offering an exclusive package of our hardware, software and implementation services to EMC's customers. Together with EMC, we offer omplementary professional services and linked customer support organizations. We work with EMC to provide our mutual customers with timely, effective service. For the six months ended July 31, 2000, sales of our storage
networking products to customers using EMC's disk mirroring systems accounted for 26% of our total product revenue. In the year ended December 31, 1999, sales of our storage networking products to customers using EMC's disk mirroring
systems accounted for 35% of our total product revenue. We also market our remote disk mirroring applications with other vendors, including Hitachi Data Systems and IBM.
IBM
IBM is one of our oldest strategic partners. We coordinate local market activities with IBM, provide mutual assistance and prepare combined proposals. We also partner with IBM to provide customers with outsourced disaster avoidance and recovery capability and remote disk mirroring applications.
StorageTek
In November 1999, we entered into a three-year agreement with StorageTek under which it resells our SAN over WAN products. In addition, we purchased StorageTek's DXE/RDE product line for $2.5 million in cash and assumed ongoing
manufacturing and engineering responsibilities for this product line. This acquisition will provide us with access to StorageTek's large installed base of customers for cross-selling our SAN products. We plan to discontinue the DXE/RDE product line in March 2001, and transition the customer base to our UltraNet(R) and Channelink products. We have certified StorageTek's tape drives with our UltraNet(R) product and work closely with them to ensure interoperability.
Compaq
Compaq has entered into a multi-million dollar commitment to resell our SAN products. Compaq is packaging our Fibre Channel-based SAN over WAN solutions with their product offerings. Our UltraNet(R) Open Systems Gateway product
supports Compaq's StorageWorks Data Replication Manager over long distances. The relationship with Compaq is significant because we believe Compaq is the largest
provider of storage today..........
SAN applications over IP-based networks. In February 2000, we introduced the first products to allow storage networking applications, such as remote disk mirroring using EMC's SRDF software, and remote tape vaulting to be deployed over standard IP-based networks. We anticipate expanding our product offerings to support additional SAN applications from other vendors. The recent expansion
of support of IP includes what we believe is the only working capability to extend Fibre Channel technology and the SCSI interface over IP-based networks
Partnership with Nortel Networks. We are working with Nortel Networks to design and develop storage networking technologies using IP-based and optical networks to meet the needs of storage and application service providers.
OUR STORAGE NETWORKING PRODUCTS
Our storage networking products include the UltraNet(R) family of storage products, and our channel networking product known as Channelink(R).
UltraNet(R) Storage Director is a high performance switching product that operates at the center of the SAN. It enables SANs to establish a direct connection between storage elements and servers and share data among diverse
servers and storage systems, and networks that are local and geographically dispersed. The switch provides connectivity among SCSI, ESCON, Fibre Channel and WANs. Two sizes are offered -- with 6 or 12 expansion slots.
UltraNet(R) Storage Gateway provides much of the same functionality and performance of the UltraNet(R) Storage Director at a lower entry price. The product is targeted at small SAN applications.
UltraNet(R) Fibre Channel Switch enhances our ability to provide open systems solutions for Fibre Channel only configurations as well as mixed environments. Mixed environments can include SCSI server and storage systems
that require access to Fibre Channel solutions. Brocade manufactures this switch and we resell it alone or with our SAN system solutions. This switch is available in 8 and 16 expansion slot models.
UltraNet(R) Wave Optimizer and UltraNet(R) Wave Multiplexer increase the bandwidth available from fiber optic lines by carrying multiple signals over a single cable using different wave lengths (colors of light) or time slots.
Pandatel manufactures these DWDM, or dense wave division multiplexing, and TDM, or time dimension multiplexing products.
Channelink(R) offers connectivity over unlimited distances and is used for remote disk mirroring and remote tape vaulting in environments using older protocols. |
