Is SEBL similarly exposed? Am trying to rationalize why its down more than BEAS and VRTS today.
Naw, it just seems like more wholesale selling.
Veritas derives 50% of its revenues from the Solaris platform, but it recently disclosed that it had a good January in sharp contrast to Sun, which had already admitted that its January didn't improve much from December before it preannounced that current quarter revenues and earnings are going to be down significantly. Still, the stock got hit. BEAS beat estimates and raised guidance, but the stock still got hit. SEBL's stock is probably under pressure simply by association. BEAS and SEBL sell very popular enterprise applications that generate a lot of data that require more storage so if these companies keep on growing the way they are growing, the current lack of visibility in storage may be short-lived.
Is EMC in any way affected by fibre channel woes as is BRCD
Support for Brocade switches is provided by the services unit of EMC's Data General subsidiary, but I doubt it's a significant part of EMC's overall Service revenues. EMC also resells Brocade switches under Connectrix for departmental and workgroup purposes, but EMC has been selling Connectrix Directors from McData since 1999. With SAN deployments going from trial to full-blown enterprise-wide deployments, I doubt that EMC is selling more Brocade switches than McData directors under Connectrix.
Brocade is a mid-range switch maker trying to move to the high-end market dominated by McData and Inrange so it's still heavily exposed to the SME (small to mid-sized enterprises) market, which Dell indicated as early as December was starting to soften. Brocade's sales went from $65M in FY1999 to $330M in FY2000 so in addition to sequential quarterly growth normalizing from the 40+% levels of the last 4 quarters to 25% in 1Q2001, the concerns about Brocade revolved around the deterioration in visibility from its normal 90-100 day window and the upcoming technology transitions. Qualification times for high-end deployments are typically longer than mid-range deployments.
EMC's fibre channel business is showing the same growth patterns as the open system Symmetrix which EMC took from $0 in sales in 1994 to $200M in 1995 to $768M in 1996 to $1.5B in 1997, a period which included the 1994 cyclical downturn in the US and the 1997 Asian economic crisis which spread throughout the world and ultimately turned the US into the importer of last resort. EMC is an organization that can really sell so it remains to be seen if EMC's high-end fibre channel business will show the same flat growth as Brocade's mid-range business especially now that EMC has a much more powerful storage product line and a rapidly expanding services unit. Parts of the mid-range Clariion line may be exposed to the same market pressures as Brocade, but this is still a small part of EMC's overall business.
Assuming this is true, how long will it take companies like EMC to see orders starting to re-accelerate?
Not long, I would think. We'll probably see it in the supply lines and the applications like emarkets, CRM and supply chain, etc. The supply lines are heavily JIT (just in time) and new applications generate a lot of data that beget more data in the elusive search for information defined as the property of an event in context (Claude Shannon). |
