Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: J Fieb who wrote (3667)	7/19/2001 1:14:31 PM
From: J Fieb	Read Replies (1) \| Respond to of 4808

MCDT selling software in Switzerland.... McDATA's E/OS Gives Kuoni Seamless SAN Reach By Jennifer MacAdam McDATA(R) Corp., a provider of open storage networking solutions, announced it has deployed its distributed SAN technology for global travel corporation Kuoni, headquartered in Zurich, Switzerland. McDATA said its Enterprise Operating System (E/OS)(TM) is at the core of the open storage area network (SAN) solution that enables Kuoni, one of the world's largest travel operators, to extend the reach of its SAN across multiple physical locations while managing it from a centralized location. McDATA's E/OS reportedly allows Kuoni to smoothly consolidate its two SAN locations without disruption, keeping all necessary data -- including customer information, bookings, flight schedules and travel documents -- fully accessible to Kuoni's 400 travel agencies world-wide. "McDATA's software technology provides us with the highest possible flexibility," said Sergio Caduff, director of IT operations at Kuoni. "Our business is our data. McDATA's software allows us to manage our SAN from multiple data centers, while allowing business operations to run flawlessly and continuously." July 19, 2001

To: J Fieb who wrote (3667)	7/19/2001 5:19:28 PM
From: pprobinson	Respond to of 4808

J.Fieb-From the Mcdata conference call. Positives: -SAN demand still relatively strong. Despite the macro environment, directors sold well and 32 port switch sales were surprisingly strong with sales of the fabric offerings doubling from 5 to 10 million Q over Q. -Mcdata could have sold more switches (and revenue would have been higher) but for some component shortages-a problem that they are in the process of solving now by consolidating manufacturing (perhaps all with LSI?). -interoperability was a big plus with customers, with some willing to mix and match their Brocade switches with Mcdata's 32port and 16port. McDonald cited several examples of customers actually ripping out their Brocade stuff and starting over with Mcdata's. Some of Mcdata's 32 port and 16port switches are being sold in environments where no Mcdata director resides (ie, in Brocade's ballpark) -growth in port count up 15% q over q. -a new software rollout over the next few weeks -current OEM agreements include price renegotiation sessions once per year. Mcdonald didn't seem especially concerned about this. Basically he said that we "always want to raise 'em, and they (Emc) always wants to lower them." -not seeing too much from Inrange in the US- they're mostly in Europe. McDonald feels that Mcdata is taking market share from Inrange. -2gig testing in Q3, customer testing in Q4, with rollout in Q1 of 02, although customers may not be ready to spend the extra bucks for the extra speed. -many more positives on the press release that you posted. Negatives -the macro environment. EMC's stating that their Q3 will be much like Q2 is reflected by Mcdata lowering their Q3 forecast to be much like this quarter (3 to 5 cents/shr.) -margin compression from 45 to 43% was caused by new product rollout and component shortages (not pricing pressure from EMC). This will take two quarters to stabilize and reverse. By year end expect margins to be 45%. IMHO: A good quarter given the tough environment. Better quarters are in store as the reseller agreements gain traction. Lower energy prices alone will allow customers to spend more on IT (natural gas prices tripled last year, making it expensive to heat the building, run the assembly line,etc.-that won't happen this year). Greenspan's rate cuts will help. Mcdata should be able to resist pricing pressures from Emc for the time being. At this point, who can Emc turn to for their directors? If Brocade's SW12000 ever tests out then perhaps that will cause some pricing pressure, but that's assuming that the SW12000 is a competitive product (no hot code load, right? Perhaps Gus can enlighten us here).

To: J Fieb who wrote (3667)	7/19/2001 5:39:16 PM
From: Gus	Read Replies (1) \| Respond to of 4808

Quick takes on McData: 1) Fabric switches went from $7.5M, or 10% of product revenue in 1Q2001 to around $16.7M, or 23% of product revenue in 2Q2001. By the end of the year, I think MCDTA will start exhibiting the same type of revenue linearity within a quarter -- x+2x+4x -- that Brocade experienced when it was posting sequential growth rates of 40% or more. Right now I think that most of their fabric switches are sold into their director customer base while their 90 or so resellers/system integrators gather momentum with small and mid-sized SANS (10 switches, <100 servers). 2) Aside from impacting margins, the rapid introduction of 4 new products in the last 4 quarters apparently strained MCDTA management and resources. That probably explains the new hires -- COO, CFO, VP-Manufacturing, VP-Marketing. Manufacturing glitches are still being worked out. 3) 2Gbps sked -- 3Q01 internal testing, 4Q01 customer testing, 1Q02 early ship, 2Q02 GA. MCDTA currently sees greater demand for 1 Gbps deployments than 2 Gbps deployments at this point probably because storage consolidation can be more easily justified. This matches the EMC datapoint that the transition to 2 Gbps will probably take 18 months. Remember that there is a logjam for new product intros from the OEMs around the end of the year. With QLGC, VIXL and ZOOX already shipping 2 Gbps switches, this bears watching. Rapid 2 Gbps ramp possibly gated by SFF availability from the likes of FNSR. 4) Software/Services has gone from $2.9M in 4Q00 to $3.7M in 1Q01 to $4.8M in 2Q01. More deferred software revenues coming online during 2H01 along with new software products. 5) Biggest deal in the quarter was probably the US financial institution that added 56 64-port directors to an existing SAN with 90 32-port directors -- 5,000-6,000 port SAN. At $350,000 a pop, those 56 directors were easily worth $19.6M to MCDTA. 6) MCDTA highlighted its penetration of one of Brocade's reference account: the 320-switch Commerzbank SAN. It sold 16 64-port directors, 12 32-port switches and 10 9-port switches -- or almost 1,500 ports -- to that account. 7) BA win: 12 64-port directors, 22 32-port directors, 4 32-port switches, and 8 9-port switches. This is a 1,600 SAN that is expected to eventually grow to around 3,000 to 4,000 ports. For reference, 64-port directors go for around $350k a pop. 32-port directors go for around $150k each. 32-port switches go for around $57k each, 16-port switches go for around $27k and 9-port switches go for around $5k each. This type of deployment parallels the use of more expensive Symmetrix-type storage devices at the core and less expensive Clariion-type storage devices at the edges. Note squeeze on 16-port switches by 32-port fabric switches. Rackmounted servers proliferating at the department/workgroup levels will probably require more ports, less ISLs. 8) MCDTA Guidance is for 23%-29% revenue growth in 3Q2001, or $82M to $86M and 35%-45% revenue growth for FY2001, or $336M-$361M. This means that FY2001 guidance has gone from 40% at the start of the year to 80% to 50%-60% to 40%-50% to the current 35%-45%.