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Long position is not necessarily bad, but the risk here is that REDB's technology edge may evaporate by then. The data warehouse industry has already segmented into two pieces: high-end warehousing for very complex datamining applications, characterized by hundreds of millions to billion+ records, and file sizes of 500GBytes; and low to medium sized applications, which are called "data marts", a buzz word to signify a smaller warehouse catering to specific groups (e.g., marketing or sales). Data marts are a lot cheaper and easier to deploy. This is the fastest growing segment of the industry, and the #1 competitor happens to be Microsoft. In the high-end business, REDB has some technical edge, but the gap is narowing. IFMX, SYBS and ORCL have caught up in many key areas within the last year. As MSFT eats into their lunch at the low end, they have to become a lot more competitive at the high end. If you look at REDB's web site, all their white papers are 18 months old, from 1996. They're still gloating over their 1995-96 prowess. There is not a single white paper from 1997 or 98. So, the question is, how differentiated are they today? See their software sales in Q4: $10M, same as in Q4/96. The revenue growth came from maintenance and consulting. Last, why did PaineWebber forecast a loss for 1998, after REDB had two profitable quarters? Does anybody have a copy of the PW analysis? |
