Storage Networks Peter Bell says Cooling Economy Heats up - January 18, 2001
By Hilary Chiba (hchiba@stockhouse.com)
With the Assistance of Ingrid Bakewell
Assistant News Editor
Sarasota, FL, January 18 /SHfn/ -- The economy may be slowing down, but Peter Bell, CEO of Storage Networks [STOR], sees only growth and acceleration for his company. Now more than ever, his customers are looking for ways to save money. That's where Storage Networks comes in by delivering new technology that allows customers to reduce cost and simplify the management of infrastructure. Storage Networks is a pioneer of the storage service provider model (SSP) -- a large market opportunity. In an exclusive StockHouse interview, Bell discusses the impact an economic slowdown will have on the way enterprises view storage and what makes Storage Networks stand out in such a competitive sector.
StockHouse: What will be the important drivers for the SSP market?
Peter Bell: Storage is becoming a very important piece of the IT infrastructure for two reasons. This is really the central underpinning from where all the information sits, so it's really becoming the center of the network. And from a cost standpoint, it's becoming the lion's share of the system cost. Really now in storage, over 50% of the system costs are storage related. The economic issue is that that there is a slowdown happening. If you're selling less because there's a slowdown in the consumer markets for example, you really need to make sure IT spending growth is in line with revenue and earnings growth. So IT budgets are being scrutinized right now. The companies that are able to deliver new technology that allows customers to reduce cost and simplify the management of infrastructure are going to be well positioned. We've developed software technology that really puts storage intelligence into the network, as opposed to into any one single device on that network. This allows customers to save 30% on their cost for managing storage while increasing levels of availability and simplifying management. It's really the value proposition we deliver to our customers.
StockHouse: What are your goals for 2001?
Peter Bell: We're now shipping the third release of our software. I want to continue to focus on adding functionality to the software that allows customers to truly reap the benefits. Continued innovation on software and a continued focus on customer satisfaction are our goals. We believe that by the end of the year, delivery of storage management as a service, which is really what we do at the end of the day, will become the way enterprises want to acquire, implement and manage storage. We see a shift from the early adopters to mainstream customers happening right now. And we want to make sure we capitalize on that. We believe that by doing that, we'll have a 24-month lead from a technology perspective over anyone else in the market place.
StockHouse: The competition in the storage sector is really heating up. How are you coping?
Peter Bell: We look at competition and we worry about competition. But the reality is, where we compete, we don't see competition emerging. I think the reason is twofold. First, the major criterion that customers have is, "Forget what your sales people tell me. Tell me about your track record and your ability to deliver." We can point to two years of history in delivering to our customers, a very important piece of the credibility. The second is that because we've developed software, as opposed to just repackaging hardware, we're really providing unique value. That's allowed us to gain trust with our customers, which is really important because it's the lifeblood of their business. It's where their information sits.
StockHouse: Storage Networks also views it's global network of SPOPs (Storage Point of Presence) as an advantage. Can you comment on that?
Peter Bell: Our ability to deliver is a function of the fact that we have our SPOPs in place in the major markets. And we've continued to focus on improving utilization and the capabilities we can deliver from the SPOPs. I also feel fortunate that we have over $400 million in the bank today. So I think with the slowdown in the capital market, it's going to be tough for the number two, three, four or five player in this space to really raise the right capital.
StockHouse: Dot-com companies represent roughly two thirds of your revenue. Do you perceive risk from that?
Peter Bell: We manage that through very stringent and disciplined credit and collection procedures. Our days sales outstanding went from 73 days at the beginning of last year to under 45 days at the end of the third quarter. We have very conservative accounting policies, so we don't record revenue until we ensure collectibility. In both our revenue and our backlog, we're very comfortable in the credit worthiness of our customers.
StockHouse: Are you comfortable with the analyst's consensus of a 100% five-year growth rate?
Peter Bell I'm not saying I'm not comfortable with the analyst's consensus, but I'd really rather comment on the guidance that we've set. Put it this way, I haven't seen anything in the market that would say slowdown. But I'm very comfortable with the guidance that we've set and we'll set some new guidance. I think you'll see that in a very positive way in a few weeks on our conference call.
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Not up on the company other than it is on Gilders list.
Jack |
