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To: puborectalis who wrote (51308)	5/11/2002 10:37:33 PM
From: Jacob Snyder	Respond to of 54805

storage commentary: Merrill Lynch 5/9/02 Gross margins are a reflection of competition. The leading players have been able to hold gross margins in the 55- 60% range. EMC has had the most difficulty because it built a business model that relied on limited competition. With HDS and now IBM getting better in the high-end SAN storage market, EMC had to reduce prices to compete. EMC is making its way through the transition to a new model, but it will take time. A gross margin in the mid-40s may be the best EMC can do. The trend from direct attached to networked continues. Each year the logic behind networked storage gains more converts— in 1999 only 10% of the storage dollars where spent on networked storage, in 2000 it was 20%, and in 2001 it was 30%. IDC is looking for 40% in 2002. The latest Aberdeen Group forecast has storage management growing 28% over the next four years, from $7.9 billion in 2001 to $21.3 billion in 2005. NetApp is able to keep its margins up because it is dominant in enterprise NAS. Some believe Microsoft’s SAK will cut into NetApp’s market, but we disagree. NAS for the enterprise (where NetApp is starting to hit) is different from low-end NAS. We know of joint development partners with Microsoft and Dell who have been working on the SAK for storage. Even they have not been able to deploy the SAK in their enterprise because of performance issues. Remember, NAS and SAN are both harder than they look.

To: puborectalis who wrote (51308)	5/11/2002 11:52:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 54805

I listened to that presentation by Steve Duplesie, of Enterprise Storage Group. He said: In storage, only software gets profits. The hardware is a commodity, prices rapidly going to a penny a megabyte, so disc storage is as cheap as tape for backup. EMC may be acquired by Dell. Dell, in his opinion, has the perfect channel to sell what EMC makes. NTAP has the most loyal customer base of any storage company (this guy used to work for EMC). Everyone is gunning for NTAP's turf. MSFT has decided to target storage software, has rapidly gobbled up the low-end storage market, and is very serious about making a move into the mid and upper end. (Lots of other stuff over my head.)