Thomas Kraemer/James Berlino: Network Appliance: Slowdown? Road Kill? How About Big Enterprise Momentum Instead
9 February 2001
BUY/BUY
Reason for Report: 3Q01 Earnings Update
Investment Highlights:
Network Appliance announced revenues of $288
million and EPS of $0.11, beating our $287 million
and $0.10 estimates.
In a quarter where economic slowing, competitive
pressure, and the dot.bomb explosion were to have
derailed not just NTAP financials and guidance,
but also its business model, NTAP grew its
enterprise (read non-dot.com, SP, etc) business
22% QQ. Enterprise revenues grew from 60% to
66% of total revenues.
Fundamental Highlights:
Our Reality Check Surveys and component checks
revealed strength in the enterprise and yesterday’s
results substantiate it. While many regard it a
niche, fad on the edge, dot.com play, Network
Appliance is an enterprise storage company.
EMC’s entry into the market appears to have
helped NTAP in the enterprise. Momentum here
combined with agreements with Oracle, Microsoft,
SAP, Agile, Peoplesoft, and others should unlock
additional enterprise opportunities.
Higher receivables as a % of revenues, DSO’s, and
inventory turns were the only blemish on the
quarter.
We expect a big day for the shares, but we would
buy as we believe the outlook looks solid and
NTAP is inexpensive.
[snip to end--MLs full report has not been released yet]
Lynn |
