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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Gus who wrote (10374)	6/7/2000 5:49:00 AM
From: JDN	Respond to of 17183

Dear Gus: HUH?? (gg) If you wrote all of that I am very impressed. Not sure I understand it all but very impressive indeed. JDN

To: Gus who wrote (10374)	6/7/2000 8:00:00 AM
From: GVTucker	Read Replies (1) \| Respond to of 17183

Gus, RE: The NTAP CEO has some sort of grudge against EMC because he approached EMC in 1997 to propose an alliance interlocking NTAP's storage appliances targeting the low-end and the middle market with EMC's high-end offerings. He was rebuffed because EMC apparently had other plans (DG, Seagate/Fujitsu) but his constant references to EMC's arrogant behavior at that time seem to indicate some lingering bad blood which colors the PR. In your mind, where would this fall in the quality-of-information department? Is it fact? (i.e. do the two CEO's refer to this publicly?) Is it in the department of confirmed rumor? (i.e. Financial press reported on the discussions, analysts referred to them, but they were never publicly confirmed.) Is it industry scuttlebut? (One step above rumor) Or is it a rumor that was floating around then?

To: Gus who wrote (10374)	6/7/2000 8:22:00 AM
From: DownSouth	Read Replies (2) \| Respond to of 17183

Gus, PMJI, but I was sent over here to take a look at your post, so I have a few comments. The NTAP CEO has some sort of grudge against EMC because he approached EMC in 1997 to propose an alliance interlocking NTAP's storage appliances targeting the low-end and the middle market with EMC's high-end offerings. He was rebuffed because EMC apparently had other plans (DG, Seagate/Fujitsu) but his constant references to EMC's arrogant behavior at that time seem to indicate some lingering bad blood which colors the PR. I remember that string of incidents. NTAP's approaches to EMC were actually set up by several very large customers, particularly a Federal Government agency looking for the advantages of both systems. This agency wanted the advantages of NAS and the capacity of EMC. No one at NTAP really expected EMC to cooperate, but the customer thought they had the clout to make it happen. The customer even put the two systems together successfully, with the EMC system looking like a big SCSI drive to the NTAP front-end. I am quite certain that Dan W. does not hold a grudge against EMC for that or any other reason. I don't believe Dan's opinion of EMC is that it is arrogant. I believe he considers EMC to be naive when it comes to NAS. A thin server is a thin server is a thin server that will eventually be consolidated. No magical file system (WAFL) will change that pattern of usage in corporations. I know of no other "thin server" on the market except NTAP. All other servers use a general purpose OS and standard UNIX/Windows file systems. Nor do I know of any trend to consolidate thin servers. The trend that NTAP sees and is promoting is the consolidation of "fat servers". For example, much of NTAP's business is a result of customers deciding to stop growing the storage capacities of their NT servers and consolidate that capacity into much fewer NTAP filers, making the NT servers strictly app servers. The same is happening with Sun servers. RAID-4 a good choice for small block transfers, which are typical for transaction processing applications. Write performance is slow because the parity drive has to be written for each data write. NTAP's WAFL eliminates the problem of RAID 4's dedicated parity drive. Because of WAFL's inode management scheme (patented), the parity drive is not a bottleneck. Here is some reading for your edification. See section 5 in particular, which explains how WAFL overcomes the parity drive bottleneck: netapp.com I contend that NTAP's NAS is a discontinuous innovation. It is discontinuous not because it is NAS, but because the WAFL system and all of its inherent efficiencies and the software that NTAP has built around it offers quantum leaps in price/performance/reliability and total cost of ownership versus UNIX and Windows file systems. NTAP customers are literally replacing their UNIX and Windows file systems with WAFL, turning their UNIX and Windows servers into more efficient app servers. You point to CSCO as an example for EMC. CSCO is also a prime example for NTAP. CSCO has clearly dilineated the appropriate use of EMC and NTAP in its enterprise and is implementing both to its advantage. The evolution of the global communications backbone is important because corporations depend on it heavily to manage the flow of information. Keep in mind that these are among the most successful corporation of the world. Logistics is one key to that success -- the right information at the right time animating the right sequence of events that impact sales or costs. ATM, Fibre Channel and Gigabit Ethernet will have roles to fulfill in that kind of transition. Can't disagree with such a statement as this and believe that NTAP offers a distinct advantage in delivering data and collecting data at the most strategic points in a large enterprise. The darwinian processes that govern the competitive positioning of companies invariably get obscured by overly rigid and formulaic interpretations of popular titles like "The Gorilla Game" or "The Innovator's Dilemma," two well-thought out books that attempt to rationalize those darwinian processes. A complicating factor is that 1999 was a manic year for technology stocks that validated a lot of ideas, sound or not. Last year was the perfect example of how the market can be very inefficient in the short-term which in no way alters the conventional wisdom that it is very efficient in the long term. These insightful books were not written based on last year's market. They were written based on many years of observation in the market. Last year nor this year in no way invalidate the conclusions of Christensen's discontinuous innovation model nor of Moore's Gorilla Game. The performance of CSCO, INTC, MSFT, et al, do validate both Christensen and Moore's ideas over a very long period of time. These concepts are Darwinian. Seagate is the dominant enterprise vendor and provides EMC with about 90% of its high performance drives. EMC's current business plan can accomodate the quest for profitability by Seagate and the other disk drive suppliers. It remains to be seen if the server-centric vendors and the other independent storage vendors like NTAP and MTIC can do the same. The way these dynamics will play out against the backdrop of the larger competition between the server-centric IT model and the storage-centric IT model will probably determine the way that the growing number of storage networking companies -- more than 80 companies to be joined soon by McData -- will consolidate. SGT also supplies almost all of NTAP's drives. (NTAP does not manufacture any component for its filers. They are built of off-the-shelf components. Its the software that makes them into "filers".) I am sure that NTAP and EMC are both contributing to SGT's profitability and product direction. To go from there to extravagant formulations of discontinuous innovations, however, is hyperbole easily dispelled by the spectrum of the requirements of the installed base and the way that the Intelligent Network of the future is being developed. There is a spectrum of requirements which include the need for data centralization which EMC is suited for and distributed data at the edge, for which NTAP is suited. NTAP's discontinuous innovation is affecting enterprise infrastructure at the edge, causing consolidation of SUN and NT server platforms. It remains to be seen whether NTAP's technology will greatly affect EMC's domain. Both companies will do very well for years to come.