From Pacific Growth Equities and what the sellers are thinking:
Network Appliance
(NTAP)
Thomas Mancino, Information Technologies
“The procession of customer pre-announcements continues. Network Appliance has been particularly weak recently as a substantial number of its major users have sharply lowered (and re-lowered) near-term revenue expectations for the current quarter and full year calendar 2001. These companies include Broadcom, Cisco, Lucent, Motorola, Texas Instruments and Yahoo. These problems will definitely impact Network Appliance to a meaningful degree in the current and following quarters. Purchasing behavior at some customers bears an eerie resemblance to the much feared late 1999/early 2000 “Y2K IT lockdown” purchasing drought that had minimal affect on the storage industry. Unfortunately, this time the “drought” certainly is a reality, only it is being driven by economic concerns. While we are not changing our current Q4:FY2001 estimates of $319M and $0.11, it is clear that the company will have a difficult time achieving these numbers or those for H1:FY2002. The only certainty is that customers can’t stop buying storage forever. Depending on when the recession ends, FY2002 estimates will also have to come down proportionately. Recent days have seen additional rating cuts and estimate reductions by storage industry analysts. This type of broad capitulation usually creates final bottoms in stocks. Network Appliance shares are 83% below their twelve month high. Under normal circumstances, one would expect the Company’s shares to be pretty close to a bottom at this point. However, these are not normal times. The valuation exaggeration on the upside seen in the 1999-2000 period could very well be seen on this downside for some time to come.” |
