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

To: Katherine Derbyshire who wrote (2842)	3/24/2000 12:12:00 PM
From: buck	Read Replies (2) \| Respond to of 10934

"The Innovator's Dilemma?" Not yet. It's on order as I type. My bible, of late anyway, is Geoffrey Moore's Gorilla Game. I'm not good enough to quote chapter and verse, but I believe EMC to be a gorilla and I believe NTAP to be a gorilla, as well. I hold them both tightly. An excellent example of a gorilla moving downmarket is Cisco taking the switch business away from Synoptics/Bay, via acquisition of a third company. Another is MSFT practically bankrupting NSCP with Internet Explorer. Those two examples are IMHO. Is it really smart business to thwart the visionary customers? That depends. My personal experience informs me that true customer end-user visionaries are about 2 in 100. If I were a sales guy at EMC, I would take that other 98 any day. If I were an marketer at EMC, I would go to school on what the visionaries are doing on the fringe, and instruct the engineers on what the customer wants. I expect that has happened, as evidenced by the NetZero announcement from EMC and NetZero. But that's just one customer. I would like to see them do it 2 or 3 or 400 more times before I concede that they've actually cracked the code. The emerging need you are referring to is probably about 12 months old, in my experience. There's still tons of time to figure out how it's going to work. I would worry about "low-end" systems being able to handle larger and larger amounts of data, thereby squeezing the "high-end" market. I'm not making my point about management clearly enough. Bigger hard drives in PCs, in RAIDs, in NTAP filers, in EMC Symmetrix, in IBM Sharks, and so on, only means (IMHO) that the management problem for an enterprise is growing exponentially. The management policies (vbg) I used to use on my 4GB hard drive have gone out the window since I added a 10GB drive to my home PC. Extrapolate that to even a smallish company, and you can see the headaches that a system administrator has while trying to implement policies that protect that precious data. Going up to Global 2000 size companies, I would be unable to sleep nights if I were a CIO. The thought of 10, 20, 36GB drives in every user's PC, and all of the vital company data that exists on them, without ANY storage policies being enforced, should scare the heck out of anyone who gives it some thought. That is just one of the reasons for the exploding demand for storage, managed storage, that we are seeing. Both of the companies we're discussing offer an excellent platform to manage exploding storage requirements. That is why I'm so goofy about both of them (and invested in both.) They are each built to do a different job, and each complements the other quite well. Hence, my position that they are synergistic and that the NAS v. SAN argument is fallacious. Neither one is better than the other...it's like comparing a hammer to a screwdriver, and saying one is better than the other. A good CIO will have both in his toolbox. As a wrap-up, I'll add that, IMVVVVVHO, the winner of the fight (if there is one) will be the one who has the most effective management tools for the data under their control. Storing bits is easy...taking care of it isn't. buck

To: Katherine Derbyshire who wrote (2842)	3/24/2000 12:17:00 PM
From: Gus	Respond to of 10934

Have you read "The Innovator's Dilemma?" I'm only partway into it, but one of the observations seems to be that it is much easier for an "upstart" technology to move upmarket than for the established technology to move downmarket I'm curious why there seems to be an eagerness to pit NTAP against EMC when there are structural changes occuring in the disk drive business which affects NTAP more than anybody else. Disk drives are the building blocks of the RAID arrays of NTAP, Dell, HWP, SUNW, CPQ, IBM and EMC. The disk drive industry is now just coming out of the worst downturn in its history and given the level of competition that remains, everybody is now looking at the prospect of 10-20% gross margins and 5-10% net margins which practically dictate a move upstream. Western Digital connex.com Quantum snapserver.com Maxtor maxattach.com Seagate xiotech.com SEG and IBM lead the industry with about $6.3-6.4 billion in disk drive revenues. IBM invented the tape library market and is still a major player. SEG and Quantum also have significant tape drive and library businesses to go with their NAS/SAN products. SEG owns 30% of Veritas, the storage management vendor, and is the primary disk drive supplier of EMC which is using Clarion (Data General) to address the middle market. The low-end of the market is a natural place for SEG, the dominant high-end drive vendor, to go after higher margins. The problem has always been how the move to the RAID array business will affect the disk drive industry's relationship with its major customers -- Dell, Compaq, HWP and to a certain extent, IBM -- but I think the lousy economics of the disk drive business, which has benefited the box makers in terms of cheaper drives, will ultimately allow the drive makers to co-exist with the box makers in a booming market long enough for the drive makers to carve out substantial businesses out of the low-end array market with the more intrepid ones like SEG and Quantum, which have substantial library businesses, able to go further upstream in search of higher margins. That changes the dynamics of NTAP's business more than anybody else's because, at a $32 billion market cap, or more than the entire disk drive supply chain combined, a lot of growth is already factored into the stock. So, the observation is still valid that its easier for an upstart technology to move upmarket only in this case, it is the manufacturers of the disk drives that are moving upmarket. The comparison to EMC may be premature. This article in INSIGHT, an industry publication, provides additional context. The Low-profit trap in Hard Disk Drives, and How to Get out of it idema.org