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To: im a survivor who wrote (4141)	10/12/2001 1:22:47 PM
From: im a survivor	Read Replies (1) \| Respond to of 13815

J.P. Morgan Securities Inc. - Equity Research Systems and Semiconductors Research Note October 9, 2001 WILLIAM A. LEWIS, PH.D. (415) 371-4046 william.lewis@jpmorgan.com Kerry Rice (415) 371-4046 kerry.rice@jpmorgan.com Network Appliance (NTAP) Rating: BUY Focus List: NTAP Is Our Top Enterprise Storage Pick with a $15 Price Target • We believe that Network Appliance will outperform its storage networking and enterprise hardware peers in the near-term and are adding it to our Focus List. • While we expect IT spending to remain reluctant for the remainder of this year and well into 2002, most industry analysis, customer surveys, and channel checks point to networked storage increasing its share of spending over the next few years. • NTAP’s low-cost products fit well in the new IT spending environment. Projects must now often yield a return-on-investment (ROI) in 12-18 months instead of the previous 3 years. Network-attached storage (NAS) has low upfront costs and doesn’t require rearchitecting the client-server environment. • Despite the sudden drop in IT spending this year, NTAP has maintained 56% gross margins each of the past two quarters, highlighting its superior operating model. • As the NAS market swells, we expect the leader, Network Appliance, to extend its lead through its singular focus and its superior technology, reliability, and cost. • Penetration of new vertical markets (Energy, Finance, Healthcare, Manufacturing) will enable faster growth than its competitors that are already broadly diversified. • Our FQ2-02 estimates are $190M/$0.00, our CY-01 estimates are $811.2M/$0.03, and our CY-02 estimates are $862.5M/$0.08. We forecast a 40% long term growth rate. Our price target is $15, based on a multiple of 6x our CY-02 revenue estimate. FY Ends Apr Current Price $9.42 52-Week Range $6-153 Market Cap(M) $3,294.2 Shares Out(M) 349.7 Book Value $2.34 Net Cash/Share $1.05 3-Year EPS Growth 40% CY02 P/E-to-Growth 2.95x 2001 A 2002 E 2003 E Q1 EPS $0.09 $0.01 $--- Q2 EPS 0.10 0.00 --- Q3 EPS 0.11 0.00 --- Q4 EPS 0.02 0.01 --- FY EPS 0.32 0.02 0.09 FY REVS(M) 1,006 785.4 883.3 CY EPS 0.03E 0.08 --- CY P/E 314x 118x ---