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Strategies & Market Trends : Bowling Alleys and Tornadoes: G&K Hunting Grounds -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (9)	7/13/1999 1:03:00 AM
From: John Stichnoth	Read Replies (2) \| Respond to of 153

Mike, Maybe a tornado (and the gorilla spawned therein, it that is a prerequisite) must be defined in terms of the size of the market and adjacent technologies, and the longevity of that market. 1. Defining the market: Consider if you will spreadsheets and word processing software. These were both key, high growth areas that were considered at the time distinct from one another. (Much as Front Office, ERP and Human Resources database packages are considered distinct). In time the distinct packages were overtaken by the suite, and Wordperfect and Lotus lost their dominant positions to MSFT. So, while we were focusing on the "spreadsheet" market, we were wrong. The real market was desktop computer office applications suites. Does Seibel face competition not from the likes Vantive or Clarify, but from an invader from outside its niche? (As I said in an earlier post in G&K, I may bow to you on this--you know much more than I about the applications side of the database market. But, in my mind, Oracle and IBM, and even perhaps Sybase, present the larger long term threats. 2. Longevity of the market. Another thought: Consider the harddrive market. This was once a market in hyperdrive. It was growing both with PC volumes and with the demand for increased storage capacity. For a period, 30-40% growth in earnings was common and expected. That growth has disappeared. The technology became commoditized. Profits collapsed. And even when there are profits, the market gives the company a PE of 8. A proposed tornado market is SAN. My problem with it is looking at the end game. Is there a "network effect" in place so that an early leader in SAN will have a lasting position, and such that SAN will be embraced by lastingly by the market? I don't know, but it seems that there will be alternative storage technologies coming along pretty fast that will displace any current leaders. And SAN leaders won't ever be awarded the high multiples of a gorilla/king or prince. Just some thoughts.