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

To: Greg Hull who wrote (17438)	2/7/2000 2:02:00 PM
From: Greg Hull	Respond to of 54805

RE: Fibre Channel Opportunities This was posted on a Yahoo board without a link. I assume it is a recent article but cannot confirm. JNI supplies host bus adapters for Fibre Channel applications. These boards plug into a computer and connect the computer to the (FC) network. As Buck pointed out, they are very similar to Ethernet NICs. JNI's main competitors are Emulex and Q-Logic. I have highlighted a couple GG relevant points. Greg JNI: Highest Expected Growth of any Storage Stock by Chris Connor Overview JNI Corp {JNIC} provides complete fibre channel solutions to the SAN market, but it is a leading provider in its core technology of host bus adapters. The company sells its products to an impressive customer list that includes EMC {EMC}, LSI Logic {LSI}, Amazon.com {AMZN}, and GTE {GTE}. Besides SANs, the company's products have been used in a wide variety of applications such as digital graphics, video networks, and video editing for the broadcast and entertainment industries. Furthermore, the company's high speed data processing applications have been used in the Internet Service Provider (ISP) industry. Outstanding Operating Results Not only is JNI growing its revenues rapidly, but it is also profitable. For the 9 months ended 9/30/99, revenues skyrocketed nearly 274 percent to $25.8 million from $6.9 million during the same period a year earlier. Moreover, the company reported net income of $2.2 million versus a loss of $169,000 over the same time period in the prior year. JNI has also generated blistering sequential revenue growth over the last two years. In fact, the lowest sequential growth that the company has generated is a very strong 21 percent. For the last two quarters, the company has grown its revenues 34 percent and 27 percent, respectively. Risks Taiwan Semiconductor manufactures an important component of JNIC's products. Recently, Taiwan Semiconductor's operations were hampered by an earthquake. JNI does not believe that it will be hurt significantly by this problem with Taiwan Semiconductor, but JNI could experience a supplier problem in the future as it continues to grow rapidly. In addition, a large percentage of JNI's products are designed for Sun's {SUNW} high-end servers with SBUS interfaces. According to JNI's S-1, "Sun has announced its intention to discontinue production of servers with the SBUS interface, and therefore, sales of ... products designed for the SBUS interface will diminish over time." Investment Summary JNI certainly appears to pack quite a punch as an investment with its torrid growth and its ability to attain profitability. Currently, most pure SAN plays have trouble turning a profit because SAN is still an emerging industry. Most pure-play SAN companies are more focused on product development, gaining original equipment manufacturer customers, and growing overall revenues than profits at this point in their life cycles. In the short term, JNI's stock could see significant upside due to its stellar operating results as it garners attention on Wall Street. Since the stock has been traded just a little over two months, it does not yet have a large following on Wall Street. Over the long term, the two analysts who cover this stock feel that JNI will grow faster over the next five years than the likes of Brocade {BRCD}, Gadzoox {ZOOX}, Crossroads {CRDS}, and Ancor {ANCR}. Analysts project that Brocade will grow earnings 42.5 percent per year over the next five years, Gadzoox 50 percent, Crossroads 40 percent, and Ancor 45 percent - while JNI is projected to grow earnings 52 percent per year over the next five years.