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To: riposte who wrote (10057)	4/21/2002 3:42:39 PM
From: Uncle Frank	Respond to of 10934

Thanks for the summary, Steve. >> Storage is an area that EVERYONE has identified as being critical to the future of Information Technology. The big question is, has the demand for storage actually declined, or have companies just been delaying purchases while filling existing storage capacity to the brim? If it's the latter, wouldn't you expect to see an explosion of orders once the macro-economic recovery has been confirmed? >> Due to the above two points, ALL players will be under incredible pricing pressure. I think they have been for some time, witness EMC's steep decline in margins. But while ntap's top line has been affected, they have been able to maintain margins, and, I fell they may have even grown share in a declining total available market. If they don't have a strong technical edge, why would this be the case? >> I'm NOT saying they're doomed or anything like that - just that they're not going to be the "gorilla" (in your parlance) that some folks thought they might be. Most Gorilla Gamers have classified the storage sector as a "Royalty Game", and pegged both EMC and NTAP as Kings, not Gorillas. That means we haven't assumed that either of them has an iron grip on their respective sectors, and the situation is even more unstable due the convergence phenomenon. >> I'd suggest that, ESPECIALLY in technology, "due diligence" is an action that must be constantly exercised, not performed and put in a file folder... You're preaching to the choir, Steve. That's the reason the ltb&h gang is here. The unfortunate part is that we seem to have most of our resident propeller heads during the downturn, and the focus has largely been on trading related issues. uf

To: riposte who wrote (10057)	4/21/2002 3:55:30 PM
From: Elroy	Respond to of 10934

Well, it seems to me your two points are wrong. 1. IT spending has not screamed to a virtual halt. IBM did $18 billion in Q1 and was profitable. CSCO will do about $5 billion and be profitable. SUNW just reported about $3 billion at about break even. Halt means zero. Quarterly IT spending is comfortable BILLIONS of dollars. I think your point is that current revenue rates are below the rates of the last year or two. That is certainly true, but well run companies can make money on $50 million in sales or $50 billion, as long as they have their cost structure appropriately aligned. 2. Just because every other company is targeting the leader in NAS doesn't mean NTAP will experience price pressure. If NTAP's technology is good enough and they can make a better product than the many new entrants, customers will pay for it (as they did CSCO gear when everyone was going after networking in the mid-1990's). On the other hand if there is nothing really special about NTAP's products, then commoditization and price pressures will set it (like in PC's in the late '1990's).Depends on how much of a technological lead NTAP really has. Elroy

To: riposte who wrote (10057)	4/23/2002 4:50:51 AM
From: Jacob Snyder	Read Replies (1) \| Respond to of 10934

Looks to me, like your first and second points are mutually exclusive. That is, you can see the future as one or the other, but not both, because they can't exist together. Let's say the venture capitalists and the big tech companies had looked at storage, and collectively said, "not much growth here, and it'll probably become a commodity, so even if we get sales growth, it won't translate into earnings growth". That's your point #1, right? If that's what they saw, would they be targetting storage? Of course not. Ask yourself, why are so many companies targetting storage? The only possible answer is, they see it as a growth market. They see the $ spent on storage, and specifically the method of storage that NTAP has pioneered, as growing. In the foreseable future. And they don't see it as a commodity business. How many CEOs are saying, "we're going to have a big push to enter such-and-such a market, because we're targetting low-margin businesses, and we're sure this market will have, over the long-term, constant pricing pressure and overcapacity."?? Now, maybe they are all wrong. After all, we've seen a lot of smart people decide that there was a market for satellite phones, and spend a few billions in other people's money, finding out there was no market. Mistakes happen. But when everyone wants into a market, that's usually a good signal that it's a good market to be in, for investors.