IIS could be ready for recovery
New investment, hot market could spur revival
<<I like the new Israeli companies like GILTF CMVT.. I would think a great prospect.. I would like
to study these companies more closely...Ike>>
By Eliav Alalof, CBS MarketWatch
Last Update: 11:58 AM ET Dec 21, 1999 Silicon Stocks
HAIFA, Israel (CBS.MW) -- IIS Intelligent Information Systems, an Israeli storage network company whose shares collapsed in the mid-1990s, may soon see a revival as demand for more storage space boosts the fortunes of the networking computer group.
An expected six-fold growth in storage capacity in the next three years and a tripling of storage connections has shares of many companies in this group rising. But IIS has until recently sat out the party as it struggled to recover from several wasted years pursuing a mainframe technology instead of a software one.
IIS is banking on its year-old offspring, StoreAge Networking Technologies, to write its success story. Recently, IIS and StoreAge got a vote of confidence from Ophir Holdings and Israeli venture capital firm Genesis, which invested $1.6 million each.
"IIS has an excellent solution for large organizations with massive loads of storage," said Eddie Shalev, managing partner at Genesis Partners. "I think that (IIS spinoff) StoreAge is positioned to be a leader in this area and is one of the few companies that still remain independent."
On Tuesday, the company's (IISLF: news, msgs) shares rose 2 1/8 to 5 7/16.
The SAN revolution
StoreAge develops systems to connect servers and storage peripherals but also offers software features such as information and volume management.
"In essence, the SAN revolution is going to do to centralized storage companies the same thing the PCs did to the mainframe industry," said IIS Chief Executive Robi Hartman.
The action in the storage area network sector, sometimes referred to as "fiber channel," is just starting to heat up. "Fiber channel has the potential to be the next tornado within the overall networking industry," according to a recent report from Robertson Stephens analysts Paul Johnson and Ara Mizrakjian.
International Data Corp., a leading research firm, projects that fiber channel will grow from 20 percent of storage interconnections this year to 60 percent by 2002. With storage capacity expected to grow about sixfold in that time, IDC figures the market for products based on fiber-channel technology will blossom from $2 billion in 1998 to $15 billion in 2002.
IIS's history
IIS went public in November 1984, when it raised $5 million on Nasdaq at a split-adjusted $4.50 per share. In August 1993, IIS did a secondary offering, raising $20 million at $63 per share. In the following weeks, the stock reach its historic high at $100. Then it was all down hill till the rock-bottom low of 31 cents per share in December 1998.
Hartman, formerly the CEO of Teledata, an Israeli telecommunications equipment manufacturer, took the reins in late 1998. Up to that point, IIS had been unsuccessfully engaged in the development of intelligent peripheral products targeted at the IBM mainframe computing environment.
Hartman sold off all the IBM-related activities and got rid of the manufacturing plant, leaving the company with 12 engineers in the 58.5 percent-held StoreAge subsidiary, which he believes is the company's best bet for the future.
And he's not the only one with such an optimistic view. Yehuda Zissapel, president of the RAD-Binat Group, one of Israel's most respected technology incubation houses, said the SAN area "is growing hand in hand with the need for server and memory; therefore, the need for solutions like StoreAge's is increasing exponentially."
The current lineup
Currently attracting attention in the field are such entries as Ancor Communications (ANCR: news, msgs), Brocade Communications Systems (BRCD: news, msgs), Emulex (EMLX: news, msgs), JNI (JNIC: news, msgs), Gadzoox Networks (ZOOX: news, msgs) and QLogic (QLGC: news, msgs), which was spun off out of Emulex (EMLX: news, msgs) and Vixel (VIXL: news, msgs). All are up 100 percent or more from their recent IPOs or from the beginning of the year.
Hartman pointed out that over the past few months consolidation and prices for companies in the SAN area have increased substantially. In July, IBM (IBM: news, msgs) purchased Mylex (MYLX: news, msgs) for $240 million. In September, Dell (DELL: news, msgs) purchased ConvergeNet Technologies for $340 million. Adaptec (ADPT: news, msgs) purchased DPT for $235 million in November. And, this month, Seagate (SEG: news, msgs) purchased XIOtech Corp. for $360 million.
"1999 was the year of the SAN infrastructure (backbone) buildup -- for companies like Brocade, which manufacture switches and other hardware," he said. "The year 2000 will be the year of the software applications, for companies like IIS."
Eliav Alalof is an Israel-based writer. |
