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

To: DownSouth who wrote (1842)	12/15/1999 10:32:00 AM
From: MulhollandDrive	Read Replies (1) \| Respond to of 10934

Well, Ok.... NTAP "sale" today (along with everything else)....<g> bp

To: DownSouth who wrote (1842)	12/15/1999 2:17:00 PM
From: BI*RI	Read Replies (1) \| Respond to of 10934

FOOL PLATE SPECIAL An Investment Opinion Keeping an Eye on the CacheFlow By Brian Graney December 15, 1999 Internet caching appliances company CacheFlow Inc. (Nasdaq:CFLO - news) turned in its first set of quarterly results as a public company late yesterday, highlighted by 34% sequential growth in fiscal Q2 revenues to $4.8 million. But despite the rapid sales growth, the company's sales and marketing and research and development expenses increased at even faster rates, leading to a net loss (excluding deferred stock compensation expenses) of $5.3 million, or $0.22 per share. Perhaps scared away by the size of the loss in comparison to the firm's revenues for the period, investors dumped the stock for about an 8% loss this morning. In sync with the current modus operandi for companies in fast-growing sectors of the Internet economy, CacheFlow is spending big bucks today in the hopes of seeing a return of substantially bigger bucks in the future. "CacheFlow continued to invest heavily this quarter in infrastructure to support our customers and operations worldwide for long-term growth,' vice president and CFO Mike Johnson explained. Unlike most of its veteran public market competitors, CacheFlow is really just getting started in its spend-to-grow life cycle and still has plenty of money left over from its $120 million initial public offering last month to burn through. Unfortunately, the company could have had a lot more money to spend if its IPO had been priced anywhere close to what the eventual demand for its shares ended up being. On its first day of trading, CacheFlow's shares opened far above the $24 per share IPO price before closing at $126 3/8. If they had been offered at the closing price instead, CacheFlow's 5 million common shares would have raised more than $630 million for the company's coffers. But that's simply a fact of life for a newly public Internet company, especially one operating in a business sector that has attracted investors like bees to honey recently. As the title characters in the 1980's cult classic Heathers eventually found out, being popular can have its downsides, too. CacheFlow's stock market popularity is directly related to the fact that the main purpose of its products is to provide speed to the Internet. The company makes dedicated appliances that use fancy algorithms to provide an active caching ability for online content by figuring out the probability that certain sets of data will be asked for by users again and again. Once data is deemed "popular" enough to make it into the cache, the company's appliance will serve the data locally upon demand without fussing with contacting the original content server. The idea is to save time, which is the ultimate "scalable" concept. The caching business is fairly crowded with companies such as Microsoft (Nasdaq:MSFT - news) , America Online's (NYSE:NSCP - news) Netscape unit, and Novell (Nasdaq:NOVL -news) offering caching solutions as integrated parts of proxy server operating systems. In dedicated appliances, CacheFlow competes with Cobalt Networks (Nasdaq:COBT - news) in the low-end as well as Network Appliance's (Nasdaq:NTAP - news) NetCache boxes. Inktomi (Nasdaq:INKT - news) is also in the thick of the caching business with its TrafficServer product, which operates on a dedicated high-end server. Overall, caching is becoming a very segmented business with some firms focusing their efforts exclusively on either the corporate or the Internet service provider markets. CacheFlow's product line is currently among one of the most diversified out there, with prices ranging anywhere from $5,000 to over $45,000 per box. The tin-wrapped software nature of the business allows for software-like profitability, with CacheFlow's gross margins coming in at 61% in the most recent period. As the business continues to grow and mature, investors should be able to get a better picture of who the long-term caching winners might be and reward those firms accordingly. At this point in the industry's life cycle, such analysis is hard to do for anyone other than the most cyber-savvy network administrator. However, if caching indeed develops into the $6 billion market by 2002 like some analysts expect it to, the business will offer significant opportunities for growth as one of the Web's leading edge technologies.