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

To: DownSouth who wrote (25039)	5/19/2000 1:07:00 PM
From: DownSouth	Read Replies (1) \| Respond to of 54805

Notes on NTAP CC. Press release was read. This cc note was taken beginning with ?Business Review?: Q4 Bookings exceeded revenue. Strong business activity with expanding sales force. NA= 68%; EUR = 21% Far East = 11%. NetCache sales growth 50% sequentially. Annualized growth rate accelerated over each of 4 quarters. GM up 1/2%. SGA up due to added sales capacity and infrastructure. R/D expenses 10.5% on target. Op Inc = 36.1M = 18% of revenue. Tax rate = 35.5%. Expected 1% fall in FY 2001. Net Income = 12.2% of revenue. Earning = $.07. DSO = 50 days, down from 60 days Inv turn = 15.7 turns. Rev up 100%$ yoy; gm up; investment levels up in sales and r&d; balance sheet strong. DW: Revenue up 32% on sequential basis. Geographic distribution pretty even q of q. 500 new accounts in North America, up 50% from q3.= 40% of total bookings. Indirect business = 23%. OEM = 4% Dual protocol configs up.= over 40%. Windows only = 15% Database = 18% (from 14%)= continued momentum in DB market. Clustered = 23%. Even low to high end mix. e-commerce steady at 40% Netcache up 50% q o q = 8% Software revenues = steady at 15% New storage management software delivered. New sales team for enterprise sector. Revenue growth 80%, 90%, 100%, 120% each quarter sequentally. Year over year: Internet = 40% from 20% Database from 6% to 18% Software 7% to 15% Cache up 140% So core business and new growth segments all healthy # 4 in Fortunes list of 100 fastest growing companies. Questions Driving demand= increasing demand for storage, particularly internet. DB market just started. Sales focus on oil and gas and other verticals. Windows consolidation driving new business, too. Competitors and win ratios not changed. History of new entrants over last 5 years, like SUN and EMC have all failed. ?I am not concerned.? Biggest customers = Intervue, Yahoo, discovery.com, telecom italia, earthlink, uunet. Business with Startup companies less that 4% of total revenues.. Expanding in B2B area. Internet business as percent of sales = 40% That 40% breaks down as follows: ISPs= 22% Enterprises= 8% Portals = 10% ASPs, SSPs, etc. = 25% Why is NAS disruptive? Hope that other vendors persist that NAS is not disruptive. We feel NAS fits model of disruptive technology=simplicity, performance, scalability. Using TCP/IP is unique approach. NAS not a threat to server side, such as e-mail and DB. Core driving this business is applications servers running data intensive apps. Customers say they need to share data at a good price point. 40% of IT dollars going to storage. Improving user experience while reducing cost. Mendoza sys that market is accepting NTAP products very quickly. RE Capacity levels. This is an emotional issue, but is not an issue. This is not an ?single box? solution. Deployment of multiple volumes on multiple filers is practical. Capacity of single box is not important. Manageable chunks on multiple filers is preferred method to scale. We can scale to 20-30TB for a single application. When 6TB?: But we are going to 3TB and beyond this year. Field upgrade to 3TB; New systems up to 6TB Current limit in DB market? Large objects are best environment for NTAP in DB solution. Small data hits perform as well as RAID controller. But in DB environment NTAP makes operations of all apps simpler. 100% growth next Q? Q1 would be easiest to meet 100% but it gets more difficult next quarters. Primary obstacle in growth is hiring of sales force and resellers. Hiring much easier. Hiring from competitors. No recruiters being used. Energy sector team in place with immediate results using industry experts. Major wins in Q4, such as Conoco. Other industry focuses being put in place. NetCach appliances with filers is becoming very compelling. Customers see that NTAP can provide more capabilities at lower total cost of ownership. 90% of systems have FC configured. Plans to integrate more switching capabilities between processors and disks. Biggest problem is managing growth of company. Focused on what markets we need to for success 3 years in the future. Inventory turns result of more outsourcing of manufacturing and adding of inventory for parts and eval equipment. DSO results because the products work and customers pay their bills. Collections are outstanding. Sales force providing the right solution to the customers. Changes in mix in ?01 will not be dramatic. Storage content will go up. New high end and low end systems coming. Netcache relative sales will be about the same. Big focus on DB solutions, but all pieces of business are growing so fast that no single segment will standout. Any increase on corporate caching? Revenue driven by telco/ISP sector like BT for DSL and TeleWest. Lots of corporate activity, but results from telco/ISP. Expect low end cache appliance to be successful at the edge in corporate environments. Why is gross margin at historic high? Benefitting from getting bigger and have better negotiating leverage with suppliers. Staying on top of magnetic media technology. More comfortable with margins going forward. Did not have to take disk drive pricing actions in Q4, so margins stayed strong. Looking for new technologies in ?content delivery? scenario. Operating margin forecast? Expanding operating margins is not a goal yet. Must continue to grow and change infrastructure. More interested in putting the money back in the business. Must pursue new initiatives like energy, new market segments, new products. Clustered failover configs= 23%. Satisfied with OEM arrangements. AMDAHL starting to produce nicely. (Dell not even mentioned.) No new OEM?s anticipated. Shadow boxing with paper tigers, when it comes to competitive offerings. SUNW Netra was NetApp killer. EMC hasn?t slowed us down yet. I don?t see anything on the horizon. There is more to this solution that pre-packaging solutions and calling it an appliance. Acutely focused on any new entrant as competition, but believe that they are underestimating what it takes to develop and deliver a complete solution. Describe what apps comprise ?the enterprise?? Enterpise is apps such as SnapManager for Exchange, DB, Windows server consolidation. Avg Sales Price (ASP). Range is $20K to $500K. Every year costs come down «, so we try to move our pricing model accordingly, doubling price/performance every year. 36GB drives predominate configs. 72GB coming this year. Sweet spot depends on app, but for DB is less than 1TB. Yahoo has over 40TB installed for mail, but sweet spot per system is 1TB. Working closely with Yahoo and MindSpring. Put up 4TB in 2 hours recently. Scaling means more than making them bigger; it is also making them smaller. Would like to have at $10K filer this year with about .25TB. Avg Sale Price is still $80K. Is NAS market growing faster than analysts say or are you gaining share? Last good data March 99 showing 60% NAS growth per annum. NTAP had 45%. Now 60% market share, but no forecast for NAS market growth. DW believes that NAS market is growing about 75%-80% and NTAP gaining share. On low end of business, any comments on competition? IS there a low end. If people don?t have much data, then they don?t have a problem to solve. Low end is branch office and distributed environments. Multiple units per order. Address centralized management issue? Pressure is on for central management techniques. One of Engineering?s top priorities. ?Appliance Watch? in conjunction with HP OPENVIEW is one step. Filer View allows for remote management of multiple filers. Expect your own management product? NTAP must provide app to run under Tivoli, Openview, CA-Unicenter environments. Expect involvement with tape backup more directly? No desire to be in the tape business. Want to continue to partner with wide array of manufacturers and software like VRTS and LGTO. SAN based backup announcement typical of our structure going forward. Our goal is to be able support the customer?s standards and support the decisions that they have already made wrt backup strategies.

To: DownSouth who wrote (25039)	5/19/2000 2:21:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Excuse me for getting involved in something I know nothing about, but I'm confused by all the talk about SAN not yet having crossed the chasm. I thought general consensus of the thread is that NTAP is the leader in the middle of a tornado. Did I do too much glancing and too little reading of all those messages? --Mike Buckley

To: DownSouth who wrote (25039)	5/19/2000 3:03:00 PM
From: Doren	Read Replies (1) \| Respond to of 54805

don't know if this will add information but I know of a fairly well moneyed start up with industry veterans who just purchased a system from EMC that uses fiber to interconnect

To: DownSouth who wrote (25039)	5/21/2000 8:27:00 PM
From: buck	Read Replies (2) \| Respond to of 54805

In addition, the storage networking architecture is designed to leverage the existing investment organizations have made in networking and storage equipment, personnel, application software, systems and storage management tools, and security. Within eighteen months, the bandwidth of this architecture is expected to increase by a factor of 10 with the advent of 10Gb Ethernet. DownSouth, I have a few problems with this statement from a technical viewpoint. It needs to be challenged, to some degree, IMHO. First and foremost, NTAP in particular and NAS in general do nothing to leverage existing investments in storage equipment, application software, and storage management tools. Those three things are built around a 20+y.o. standard protocol called SCSI that defines how "small computer systems interface" to external devices, like disk drives and tape drives. This SCSI protocol runs natively over fibre channel, but not natively over ethernet and IP. Porting existing applications particularly will be an arduous task. It has been attempted before and failed before in plenty of laboratories. Some have been successful, but customers look at it and say "why?" There is nothing to be gained from it. No efficiencies, certainly, and very definitely a degradation in performance. The 10GbE standard is due in 2002, by the standards guy's own admission. If you are running a going and growing concern, do you want to delay purchases of FAR speedier equipment based on the promises of a standards body? Can you afford to wait for 2002? Many can't and won't...that is why fibre channel, despite all of the typical squabbling by vendors over standards, will succeed in the next two to three years, and I believe longer than that. To be clear, I have said over and over that the two technologies, NAS and SAN, go hand in hand. Each one complements the other. Ethernet is a networking technology designed for passing huge numbers of small messages back and forth between VERY smart devices. Fibre Channel is an I/O technology designed for high-volume data movement between smart hosts and dumb devices. One day soon, all of this will collapse into InfiniBand, and the distinctions will be essentially meaningless to the average Gorilla investor. buck

To: DownSouth who wrote (25039)	5/24/2000 7:23:00 AM
From: Heeren Pathak	Read Replies (1) \| Respond to of 54805

DownSouth, Gigabit ethernet is a threat to FC for the very reasons that FC has not crossed the chasm. That is, an ill-defined FC standard has resulted in non-interoperable solutions from the FC switch vendors. Here is an example of the ill winds blowing for FC: I have to agree with you that FC will be challenged and may be in trouble. I really doubt any real Gorillas will emerge here, but there will probably be some interesting simians that end up making a lot of noise. The biggest argument for FC is that it lets you go faster than Ethernet. If you go back in time, there have been a number of "breakthrough" technologies that were going to allow LANs to go past the limitations of Ethernet. A simple list of these are: Token Ring, FDDI, ATM, etc. In all these cases, someone was able to come up with a newer version of Ethernet that boosted the speed limit. We have seen Ethernet go from 1 Mbs to 10 Mbs to 100 Mbs to 1 Gbs to now 10Gbs. This rate boost has been fast enough to keep up with the types of applications needed in a LAN environment. Even in a SANs environment, at using Gigabit Ethernet will put the bottleneck in the disk drives and I/O system of the computers. Not the network. I personally am very reluctant to invest in any non-Ethernet based technology. The Ethernet vs. the world story in networking seems to parallel the CISC vs. RISC argument in microprocessors. In the end, CISC won out because technology matured fast enough to keep ahead of real world applications. Remember, the software is ALWAYS behind the hardware by at least a year or so. Heeren