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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Bruce Brown who wrote (11484)	11/30/1999 11:17:00 AM
From: James Sinclair	Respond to of 54805

The material that's been posted concerning Brocade's quarterly results certainly convinced me that this was an area that I needed to try to develop a better understanding of if I'm going to try and do a GG analysis. Not really knowing a lot, I went looking for some overview material. I found a link to a site run by the Storage Networking Industry Association. Apparently they had a conference last spring, and a lot of the slide presentations that were given are posted on the site. I'll be going back tonight to start reading, but thought I'd share the link with the group: snia.org

To: Bruce Brown who wrote (11484)	11/30/1999 11:15:00 PM
From: GuinnessGuy	Respond to of 54805

Bruce, Did you see my follow up post about the results of the latest quarter from Brocade? 457% revenue growth year over year. Yes, very impressive growth. Brocade has a good product in what I'm convinced is going to be a great market. We are, as I stated, just at the beginning of an adoption phase. Much of those sales were undoubtedly for pilot programs. Just imagine what happens when those programs go into production rollout! What has Ancor's revenue growth been year over year? 1900% Do you still see that only early adopters are in need of FC equipment? Most definitely they were in need, otherwise they wouldn't have adopted what almost everyone will tell you is an immature technology. In other words, the risk(high) was worth the chance of getting rid of their considerable storage headaches. I think that some pragmatists are now testing FC SANs and will adopt full force whenever Veritas can get their SAN management software out the door. That is scheduled for June from what I'm hearing in the press. Yes, I think you are right; the acceptance of SANs as a concept is a done deal(while the incorporation of the technology of any kind of widespread basis is nil). I saw indications of this in the press back in January or so. They stopped, for the most part, bashing SANs for their interoperability problems and started talking more about their potential. It was an interesting shift of mindset. After that, many of the FC SANs companys' stock prices really took off, especially the ones mentioned in the press. Brocade has been very good about dealing with PR, although I'm not thrilled with their ethics(i.e. - the Keylabs tests). My problem with Paul Johnson is that he didn't even mention Ancor as a Brocade competitor. That was not an oversight on his part IMO. He was, IMO, acting as a PR man for Brocade, not as an analyst. As I said before, the pre-IPO documents from Brocade clearly pointed to Ancor as a key, if not the key competitor for Brocade. I believe that the rules of the game(Inside the Tornado) state that you don't dare mention serious competitors' names at this stage of the ball game. And Mr. Johnson obliged. This omission actually gave me more confidence in my Ancor investment(thank you Mr. Johnson). As far as Brocade having more sales than their competitors combined - that is true. It is also true that they were six months ahead of their competitors with a product that takes around six months to qualify. Having said that, it is only natural that they have the relative revenue numbers that they do. Assuming Sun doesn't fumble the ball and HDS comes on line in a reasonable time, we should see Ancor come on very strong no latter than Q2 2000. Also, keep in mind that some dual sourcing will happen once things get going in volume. Since Ancor now has the broadest product line, I suspect that this effect will favor them considerably. If you care to do some due diligence using SI I would suggest the Ancor and Fibre Channel boards. There are lots of informed people contributing there. Also, the Yahoo board isn't all that bad. Here's a post from Yahoo that was cited in this thread back in July: Message 10384221 Her comments can be read fairly regularly on the Yahoo Ancor message boards. There are quite a few others worth reading that contribute as well. Bottom line for me here is that Brocade and Ancor will be fighting it out in a royalty game, and possibly, but not likely, a gorilla game. Because of Brocade's lead time, they appear to be a king/gorilla. And their stock price reflects this. Ancor, on the other hand, has been in the fibre channel switch market for a lot longer and has only recently re-focused on the storage side. In the end, I think that they grab a considerable market share(30-50%), and, as such, have some way to go before their stock is fully priced. Craig