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Technology Stocks : Son of SAN - Storage Networking Technologies
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To: J Fieb who wrote (3034)4/11/2001 3:05:30 AM
From: Gus  Read Replies (1) of 4808
 
They keep putting seed money into storage ideas

The C Section of the WSJ (4/10) had an interesting article on the venture capital fund industry.

Some factoids and quotes from the article:

1) The average VC fund lost 6.3% in 4Q2000.

2) The average VC fund averaged annual returns of 65% from 1998 to 2000.

3) The average VC fund averaged annual returns of 30% from 1990 to 2000.

4) ".....It often takes 12-18 months for the full effect of a stock market slowdown to filter to the private-equity world, in which VC firms bankroll young companies and hope to cash in when the companies go public or get acquired..."

"The current year could be the worst year for returns in the 30 years Venture Economics hs been keeping track of the data," says Jesse Reyes, vice president of Venture Economics.

Publicly-traded storage companies were among the last sectors to buckle under the bear. Privately-held storage companies will probably be among the last private-equity sectors to buckle under the expected funding crunch.

Already, we have seen Chaparral (TTM revenues: $6-7M) pull its proposed IPO. Privately-held FalconStor reverse-merged with publicly-traded Network Peripherals (TTM revenues: $7M). Privately-held Articulent (TTM revenues: $75M) agreed to sell itself to CMNT for cash, assumption of debt and a $10M bonus plan based on performance milestones.

The way ATT methodically picked the carcass of NorthPoint at salvage value (30%) while eschewing Northpoint's 100,000+ subscribers may portend the way the looming consolidation phase may play out for the xSP market. Because of their prodigious capex spending, the shakeout of the xSP market will drastically reduce the opportunities for the smaller storage players and that, in turn, will eventually impact the influx of new funding.

In that scenario, I think well-architected data centers in good locations will retain most of their value and may even command premiums. After all, nobody disagrees with ATT's view that data centers will be the central offices of an optical tomorrow where data accounts for 90% of the traffic and 90% of the revenues.
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