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

To: J Fieb who wrote (4345)	1/25/2002 5:07:48 AM
From: Gus	Read Replies (3) \| Respond to of 4808

Here ya' go. MCDTA Margin Analysis GAAP vs Pro Forma (PF) 1Q01 to 4Q01 + 1Q02 Guidance GUIDANCE 1Q01 2Q01 3Q01 4Q01 1Q02 Sales $83M $81M $86M $94M $85-95M Gross Margin (GAAP) 45.1% 41.9% 26.3% 36.7% - Gross Margin (PF) 45.7% 42.6% 43.2% 43.6% 44-46% Oper. Margin (GAAP) 8.8% 2.0% -28.7% -23.8% - Oper. Margin (PF) 11.4% 4.7% 1.3% 2.4% - PF Charges $2.2M $2.2M $26.0M $14.2M - $29.5M SANavigator cash acquistion closed in 3Q2001. McDATA Operating Model (Pro Forma) FY2000 to FY2001 + FY2002 Guidance GUIDANCE 2000 2001 2002 Sales ($) $249M $344M $383-$420M Sales (%) 100% 100% 100% Gross Margin 52.7% 43.9% 48%-49% SG&A 16.7% 24.8% 27%-28% R&D 15.2% 14.3% 15%-16% Oper. Margin 20.8% 4.8% - PF Charges $ 8.4M $ 44.6% - McDATA Customer Mix 1Q2001 to 4Q2001 1Q01 2Q01 3Q01 4Q01 FY01 EMC 68% 68% 68% 60% 68% IBM* 14% 16% 14% 22% 17% Others* 14% 13% 16% 16% 15% % of Sales excluding ESCON Service Fee. * EMC (~$220M), IBM ($56M), Others ($50M), ESCON ($18M). McDATA Product Mix 1Q2001 to 4Q2001 1Q01 2Q01 3Q01 4Q01 Total Directors/ Switches $ 75M $ 72M $ 76M $ 77M $ 300M Software/Svcs. 4M 5M 6M 13M 28M Service Fee (ESCON) 4M 4M 5M 4M 17M Total $ 83M $ 81M $ 87M $ 94M $ 344M McDATA Product Introductions FY2002 2Q2002 - 2Gbps Directors (64-port) - 2Gbps Switches (9-, 16-, 32-port) - SANavigator 3.0 3Q2002 - 128+ 2Gbps Directors BRCD vs MCDTA Last 8 Quarters MCDTA BRCD 8 $ 47M $ 43M 7 56M 62M 6 67M 92M 5 78M 132M 4 83M 165M 3 81M 115M 2 86M 116M MRQ 94M 117M Notes: 1) 9% sequential revenue growth powered by 15% sequential growth in director sales and 117% growth in software and professional services off a small base. 2) After posting 38% Y/Y revenue growth in 2001, MCDTA is currently guiding to 11%-22% annual revenue growth in 2002 and 14% Gross Margin improvement from 1Q02 (44%-46%) to 4Q02 (50%). Obvious upsides from continued momentum of surprisingly higher-margin FICON HW/SW and SANavigator, which is expected to contribute 10% of annual revenues in 2002. Expanded outsourcing relationship with SCI also starts to come online in 1H02. Obvious downsides from flat sales and runaway costs. Impact of high-cost components that have resulted in two successive inventory write-downs expected to wind down in next two quarters alleviating pressure on Gross Margins. 3) SANavigator 3.0 is integrated with E/OS (device-level) and EFCM (fabric-level). Every director shipped so far went out with E/OS and EFCM so SANavigator 3.0 is the key upgrade that is expected to power SANavigator's $10M sales contribution this year, which is on top of McDATA's current software revenue run rate of around $9M to $11M a quarter. 4) Typical 20-30-50 linearity during 4Q01. No widespread pricing pressures. 5) Renegotiation time for EMC and MCDTA under their 5-year OEM agreement. 6) CPQ qualified MCDTA as one of its switch OEMs for 2Gbps. MCDTA booked some CPQ revenue in 4Q01 but based on CPQ's product intro schedule, revenues will really start coming in late 1Q02 or early 2Q02. CPQ accounted for 30% of BRCD's revenues last fiscal year. 7) Observation: ex-Qwest execs at MCDTA appear ready to rally customer support in standardizing SANs. Up to this point, BRCD has resisted standardization at every possible turn. MCDTA already has 9 of the top 10 US telcos in its corner. These telcos still have to solve the riddle of how to make Data, which accounts for 80% of network traffic, account for 80% of revenues instead of the current situation in which Data accounts for 80% of network traffic but ONLY 80% of revenues. Standardized SANs is a step in the right direction, IMO. Note that 8 or 9 people now control the major network procurement decisions in the USA. Interesting year ahead.