Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Seagate Technology - Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: tom pope who wrote (1153)	10/25/1999 10:17:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 1989

Tom and all, Since the VRTS thread is almost non-existent, I thought I would post this Merrill report on Veritas. <<<Summary We are initiating coverage on Veritas Software with an intermediate-term Accumulate and a long-term Buy investment opinion. While the enterprise storage management sector has seen a tremendous rise in valuation over the past 6 months, we believe there is potential for price appreciation over the next 12 months, as investors continue to realize the importance of data protection and availability. Our initial price objective for VRTS is $94, based on a 18x multiple of CY 2000E revenues. Investment Thesis 1. Veritas is a franchise company in the enterprise storage management industry, which we believe is in the early stages of a strong multi-year growth cycle. IDC expects this market to grow at almost 30% annually between 1998 and 2003. We believe that these estimates may be conservative given the recent recognition of the importance of 24x7 information availability and the rapid rate of adoption of networked storage models like Storage Area Networks (SANs) and Network-Attached Storage (NAS). 2. There is an increasing awareness in the IT and investor communities about the importance of information management. The need for basic data protection will continue - Y2K and beyond. eBay's recent problems have highlighted the need for a comprehensive data protection and availability solution. We expect other dot.com companies to experience similar problems as they rapidly grow out of their existing infrastructure. Focused storage management companies like Veritas and Legato offer key solutions to meet the needs of these fast-growing companies. We believe that the investor community is also recognizing the importance of the storage management sector as evidenced by the tremendous stock performance over the past 6 months. Veritas offers a complete solution through comprehensive distribution channels to meet the entire enterprise storage management needs of its customers. This suite includes its operating system products, data protection products and high availability solutions. Through its portfolio of products, Veritas offers its customers centralized administration of their storage requirements across heterogeneous environments and all major databases. The company's acquisition of Seagate Software NSMG has provided it with a strong foothold into the Windows NT storage market. Additionally, Veritas now has a comprehensive distribution strategy -OEMs, 2-tier channels, and a large direct sales force. We believe that Veritas' strong revenue and earnings growth, its industry leadership, and its proven track record should command a premium valuation. For FY 2000, we expect revenue to grow 48% and EPS to grow 35%. These high growth rates should be sustainable over the next 2-3 years since it is our opinion that the storage management industry is in the first few years of an extremely strong growth cycle. We believe that VRTS should maintain a 18x multiple on CY 2000E revenues. 5. We believe that there could be upside to our revenue and earnings projections as Veritas leverages the Seagate NSMG acquisition. The company's acquisition of Seagate Software NSMG provides Veritas with a strong NT platform. NSMG was focused on a low end solution with strong distribution through a 2-tier channel strategy. This completes a strong overall distribution plan for Veritas including OEMs, direct sales and resellers. Recent Financial Results Veritas reported Q2:99 (June) revenues of $155.7 million, up 70% over the prior year and 16% sequentially. Pro forma EPS of $0.16 was up 88% from Q2:98 EPS of $0.08. Risk Factors I . Acceptance of new product offerings and technology. 2. Highly competitive markets. 3. Successful integration of recent acquisitions. 4. Slowdown in purchase of enterprise storage software due to Y2K concerns.>>> This report was written on October 5th and as you can see, the price target has already been reached. I'll post if I see the target raised. Let's see 60 million shares at $95....