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Technology Stocks : Network Appliance -- Ignore unavailable to you. Want to Upgrade?

To: HDC who wrote (1366)	8/19/1999 1:02:00 PM
From: DownSouth	Respond to of 10934

1) Could you elaborate on the changes in the sales model regarding the creation of a dedicated cache sales organization? As I understand it, sales management recognized that selling a filer and selling NetCache are very different. The market place is different, the motivation for buying is different, to a smaller degree, the expertise of the sales rep is different. Also, the average sale price is different, so to expect a NTAP rep to put NetCache at the top of his "things to sell" list is unrealistic. So, there are now reps dedicated to selling NetCache products only, including in-house marketing reps (telemarketers). Thus the product, which has incredible potential in a rapidly growing market, will get the attention it deserves. 2) RE: "EMC's strategy to criticize NTAP's scalability & NTAP's plan to quadruple capacity to end that discussion." Is this referring to NTAP's plan to increase storage capacity from 1.5T to 6T on filers? Yep. 3) RE: Disk Margins & SUN. Could you elaborate on how NTAP is taking on SUN and how Disk margins relate to that effort? NTAP, from the start, has strived to be in the margin/growth realm of networking companies, like CSCO. That means that their gross margins must be at least above 50%. The problem is that a filer has as a part of its configuration disk storage devices. The margins on disk drives is very slim, as it is an extremenly competitive, commodity market. Heretofore, NTAP has been able to skim the market by selling to customers who were willing to pay a premium price per megabyte to gain the speed, simplicity and reliability of a filer, versus a Sun disk subsystem. Now NTAP realizes that it must get on a $/MB parity with Sun to grow its revenues and take more markeshare away from SUN. So NTAP has decided to reduce severely or eliminate the premium price that NTAP customers pay for disk drives from NTAP, compared to the price the customer can pay for those same disk drives "on the street". So NTAP must reduce the price of its drives, which has a severe impact on the margin. It seems that NTAP is trying to compensate for that margin erosion on disk drive prices by developing more and more software options, thus increasing the software content of the average sale. Software has margins over 90%. Disk drive margins are in the 20% range. So, as far as margin is concerned, $1 of added software revenue is worth over $4 of disk drive revenue. So the customer is going to pay significantly less for the total configuration of software and storage (and other components), competing better against Sun, but NTAP's margins may not significantly erode.