That is exactly what people were saying about CSCO not so long ago: "great company, great products, gaining on competitors, spending on their products is not discretionary, they'll be able to make their numbers no matter what happens to the economy or the industry." My response is: 1)when your customers aren't doing well, neither will you, no matter what else is happening, and 2)all spending is discretionary.
The rap on CSCO for a while has been that their competitors are in fact gaining on them, at least in the core router space. The core router & networked storage markets are of course very, very different, but if you had to make a comparison, I think NTAP is more like JNPR than CSCO in that sense.
Also, given Chambers' involvement in republican politics, I wouldn't be at all surprised if he was overstating CSCO's short-term problems to help GWB get a lower tax cut (or to encourage Greenspan to lower rates). He is crying "recession" louder than any other businessman I know of. It's quite possible that in that behind-closed-doors meeting GWB had with high-tech leaders a couple of months ago, he encouraged them to play up the recession bit. Chambers may feel that it's in CSCO's long-term interests to have the tax cut / interest rate, and he's not above playing Chicken Little to get it.
CSCO had to revise estimates last quarter; NTAP didn't. Does that tell you anything? The fact is, CSCO is a large company, trying to cope with a huge inflection point. NTAP is a small, hungry company riding a huge inflection point.
Will NTAP be 100% immune to a recession? Probably not, but the real question, if you want to remain invested at all times (as I do), is will they weather it better than other companies? Thus far, NTAP has certainly weathered it pretty well. And in the long-run, any recession is a blip. I'm much more concerned with NTAP vs. EMC than Nasdaq vs. Greenspan.
Thankfully, NTAP is winning. You mention that you're "leaning toward EMC as the winner, but I don't think the issue is decided." Fine, I disagree, but whatever. But NTAP is valued at $7 billion, EMC at $77 billion. If you think it's even close, why would you bet on EMC? I mean that just makes no sense to me.
But TheStory is not going to control where the stock goes any more. It's not 1999 or 2000 any more. It's 2001, and things are different now. Nobody is buying TheStory, they are buying an earnings stream.
That kind of short-term thinking is so foreign to me, I barely know how to respond. In the long-term, which is all that I care about, "TheStory" drives the earnings. Period. "TheStory" is, storage is increasingly important, and mission critical, and NTAP's solution is growing in popularity. Sort of like "TheStory" for MSFT ca. 1990 was that the PC is increasingly important, and mission critical, and MSFT's solution was growing in popularity over AAPL's and IBM's. Did people always buy "TheStory"? No. That's called a buying opportunity. Also called "be greedy when others are fearful, and fearful when others are greedy."
Don't get me wrong--I'm sure you're a great short-term thinker, and NTAP may well go down in the short-term. But as a person who plans to live for another 60 years at least, I'm really only concerned about the long-term story.
I'll sell if I think "TheStory" deteriorates. It may. But IMO, it hasn't yet. |
