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

To: Uncle Frank who wrote (9492)	11/13/2001 12:38:19 PM
From: William	Respond to of 10934

Let's Roll!

To: Uncle Frank who wrote (9492)	11/13/2001 1:18:00 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 10934

Thanks for the PM. I understand what they're saying, but still can't make up my mind what to do. I realize, after mulling it over for the last few days, that what I'm trying to do is squeeze some profits out of the short-term volatility. This is hard to do for anyone, and my track record on ST options is not very good. I've made money this year on them (other stocks, not NTAP), but I've taken large losses in other years. In contrast, my track record with buying and holding longest-term options (2+ years out) has been excellent. I should just keep doing what's worked in the past, and quit trying to do something that I'm not good at. Or at least, only do it with a small amount of money. The problem with selling covered calls against NTAP (or QCOM) is that, when sentiment changes, the stock can make a huge move, very quickly. Which risks losing the position, just as it takes off. The whole point of taking a long position is to capture those huge upmoves, which I'm fairly certain will happen sometime, but have little idea of exactly when. In late September, I would have heaped ridicule on the idea that NTAP could be almost back to 20 by year-end. I would have come up with a list of TA and FA reasons why it couldn't happen. Probability, <5%. Yet here we are. I can see two realistic scenarios ST: 1. NTAP stalls right here, just below the 200DSMA, and goes a lot lower, likely retesting the 50DSMA, and (small but not-zero probability) returning to 6. I say "small", because I don't see that level of panic selling returning (absent another WTC), and management has given us reason for hope that wasn't there to support the stock in late September. 2. this vault upward goes on, busting through the strong resistance just above. We are in a breakout, supported by a re-assessment of the fundamentals of the company by investors. Plus, this is rapidly becoming a momentum stock, with money flowing into it from investors who don't pay any attention to the fundamentals. Every up day makes tax-loss selling less likely, in a self-reinforcing cycle. One more limit sell order hit today, my last lot of EMC stock at 16. Still holding all my EMC LEAPs (04C20). Nothing left to sell that is underwater, so I'm done for the year. Since I still can't make up my mind what to do, I'm still sitting on my hands. I should just quit watching, go skiing and work on my carpentry projects.

To: Uncle Frank who wrote (9492)	11/13/2001 1:27:24 PM
From: Cooters	Read Replies (2) \| Respond to of 10934

From SSB today, SUMMARY * NetApp reporting after the close today (11/13). Although our est. has been lowered to $184.4mm for the Q (Street at $192.2mm), we believe the market is expecting greater than $200mm which would make it up qoq. Our EPS est. is $0.00, in line with the Street. * GMs will be a big focus. With NetApp at 56.1% last Q (61.9% a yr ago) and EMC at 30.0% in the Sept Q, the pressure could be on. Although the market shrugged off QLogic's recent GM decline (from 62.7% to 60.1% qoq), we think the it would take a NetApp GM decline more seriously. We est. it will be down about 100 bps qoq. * Another expectation is that guidance will be up qoq. We don't anticipate the company getting too aggressive here. Maybe up 5-10% qoq. * Also, CEO on CNBC's Market Wrap at about 4:15pm ET, before the EPS call. INVESTMENT THESIS We expect NetApp stock will continue to be under pressure due to 1) its exposure to dot-com and telco spending; 2) its decelerating growth; 3) increased competition in the space; and 4) increased pricing and margin pressure. We believe the stock will continue to be under pressure until investors can see a solid quarter of increasing Filer unit shipments and domestic growth. We expect to see NetApp have softness across product segments, including filers, caching and software. Although we are seeing NetApp competing in enterprise accounts more often recently, the business spigot just hasn t been turned on and many of NetApp s larger, more promising deals just aren t closing. Although NetApp has stabilized its balance sheet by ratcheting down DSOs slightly (75 to 70 days qoq) and increasing cash a bit ($557.8 million to $568.6 million qoq), the negative points were that inventory levels continued to increase ($22.5 million to $23.8 million qoq) while revenues continued to decline. We believe that the lack of significant balance sheet improvement, combined with the potential for margin erosion (driven by weak economic conditions and competitive pressures), will continue to hold the stock back from proving that it has finally lifted off the bottom. Also, we expect competition for NetApp to get tougher, not easier, in the near term. While we are not concerned about other NAS offerings per se, we view NetApp as a mid-range storage company (not just a NAS company). Therefore, as it enters the enterprise more aggressively to supplement deteriorating Internet and Telco spending, it is going to more squarely compete head-to-head with EMC, Hitachi and IBM. This could bring about greater pricing pressure for NetApp going forward, resulting in further margin erosion and pressure on the stock. Management agreed that margins were more likely to go moderately down than up in the near term. Management stated they would not lose business based on price. COMPANY DESCRIPTION In 1992, Network Appliance helped originate the Network Attach Storage (NAS). Although Network Appliance may not have been the sole inventor of the NAS concept, it has been one of the marquee NAS companies. Network Appliance also offers a family of Web-caching products, but a large majority of its revenues are currently derived from its family of file servers for NAS. Network Appliance s strategy is to remove the Input/Output (I/O) burden of file accessing from application servers with a separate dedicated file storage appliance that connects directly onto the Local Area Network (LAN). Network Appliance s NAS products, which it calls Filers, are essentially a high-speed front end to large numbers of disk drives. Today, these Filers can hold as much as 12 terabytes (one terabyte is equal to 1,000 gigabytes) of information. NetApp Filers feature built-in RAID, clustered failover and redundant components for increased reliability.