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Technology Stocks : Son of SAN - Storage Networking Technologies -- Ignore unavailable to you. Want to Upgrade?

To: Gus who wrote (1873)	3/7/2000 8:58:00 AM
From: J Fieb	Read Replies (1) \| Respond to of 4808

GUS, Here is some analysis of the ZOOX move by SSB. In our view, SmartSAN is an emerging Fibre Channel router company which has been developing some interesting SAN management features; including software and SCSI, Fibre Channel (FC), ATM and Ethernet networking technologies (i.e. connecting and managing the SAN to the WAN to the LAN). SmartSAN started out developing a tape library connectivity solution that planned to enable LANless and Serverless backup had been expanding on that core technology. We see this as an excellent move for Gadzoox; however, many of SmartSAN's initiatives are in very early stages of development. We believe developing solid products from SmartSAN's base technologies will be the real challenge. In the end, we believe this move brings Gadzoox higher up in the pecking order of FC companies, but should not impact Brocade as the clear FC networking leader. (Note: last month, Brocade announced it is developing similar types of technologies "in house" with partners such as VERITAS and ONI-Optical Networks Inc.) . We maintain our belief that Gadzoox' s main risk is its successful migration to a fabric switch architecture in a timely manner (i.e. in calendar 1H00). We believe moving to a fabric architecture could prove more difficult than originally anticipated due to the complexity of the technology. We have noticed that valuation discussions of FC networking companies have moved away from multiples in favor of simply looking at market capitalizations. We believe ranking companies by market cap will lend insight to who "the market" favors. Therefore, below we have listed, in descending order, FC networking companies by market cap: Company: Tkr: Market Cap: ----------- ---- ------------- Brocade BRCD $16.0 billion Crossroads CRDS $3.8 Gadzoox ZOOX $1.8 Ancor ANCR $1.5 Vixel VIXL $0.7 We believe SmartSAN's "modular" technology complements Gadzoox Capellix switch very well; Capellix is a modular FC-Arbitrated Loop (FC-AL) switch. Modular products enable customers flexibility to plug and unplug blades as needs develop. For example, Gadzoox Capellix FC-AL switch is projected to offer a fabric upgrade through a blade. If customers decide they want a fabric switch instead of an FC-AL switch, they can open the switch, unplug the AL blade and plug in a fabric blade. Although we agree that modular architectures do have certain advantages, we continue to believe that tightly coupled systems tend to perform better. Also, the market has reacted very favorably to Brocade's software upgrade solution. In this instance customers only need enter a code to upgrade to fabric. This eliminates costly down time. The difference: one solution is a hardware upgrade and the other is a software upgrade. WHY DID SMARTSAN SELL IF THEY ARE SO SMART? ------------------------------------------- SmartSAN sold itself for the same reason SAN Ltd. (which developed FC to ATM routers) and Polaris Communications (which developed FC to S/390 connectivity) sold: 1)the market is too fragmented for small players to effectively reach end-users, and 2)the FC market has become too capital intensive for private, smaller companies to keep up with competitors' R&D budgets. In other words, we believe the consolidation of the FC networking industry is already underway... and why not with currencies such as Gadzoox's stock, which is trading at 21.1x forward revenues WHO HAS THE EDGE? ----------------- We believe that "getting to the market" will be the gating factor which will determine the success of emerging FC networking companies. In light of this, the companies who currently have the top OEMs and Systems Integrators signed up possess a large lead over competition. We believe leading companies in this area are (in order from most connected down): Brocade, Crossroads and Gadzoox (note: Ancor also has Sun on their side, which should not be discounted). Consequently, our ranking here mirrors the market cap ranking previously mentioned. ATM and Ethernet interconnectivity. We believe this transition is a must in order for Fibre Channel to ingrain itself as a technology that is here to stay. We expect: FC companies, aside from Brocade, will begin to partner closer with one another to 1)enable interconnectivity between technologies from various companies, which has been problematic, and 2)try to break Brocade's 85% FC switch market share. FC and Optical company partnerships, such as Brocade's partnership with ONI (Optical Networks Inc.), that will enable LAN (Local Area Network) and MAN (Metropolitan Area Network) to SAN connectivity. Note: we believe this interconnect concept is one of the reason's INRANGE has been getting so much fanfare lately (INRANGE is owned by SPX Corp.; INRANGE has also partnered with Ancor). An increased focus on software functionality to migrate each company's FC technologies ahead of competitors. The further development of "data mover" functionality. Data mover functions allow FC switches to offer greater involvement in the management of FC networks as a result of their ability to effectively route block-level data transfers. SSB-Once they started coverage of this industry they really have done an excellent job. Lots of insight. Get more- GO to multexinvestor.com and register for 2 month free SSB trial!