Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Mitch Vine who wrote (327)	7/14/1998 6:27:00 PM
From: Fortney Veeble	Respond to of 10934

Netapp is best described as selling "tin-wrapped software." (I am stealing this phrase from CEO Dan Warmenhoven, who used it in a stockholders' meeting two years ago.) You have heard of "shrink-wrapped" software - well, Netapp wraps their software in "tin" - i.e., the appliance. The beauty of their business is that they buy the hardware (most of it standardized) and just load their software into the purchased hardware. One reason this is a nice business model is that Netapp can grow very fast. Another is that increased sales leverage increased profits (the marginal cost of copying software is small, hence the gross margins are potentially large). The fact that Netapp has a very elegant software solution will allow them to outdistance competitors in the filer appliance market. (It's a great idea, and, IMO, a great stock.)

To: Mitch Vine who wrote (327)	7/14/1998 7:44:00 PM
From: DownSouth	Respond to of 10934

>Like some other successful companies (CSCO for example) they can sell hardware at high margins because of the proprietary software. I agree, but don't forget that they sell NetCache as a software-only package for NT and Unix platforms. The objective of selling hardware at high margins is becoming more problematic, however. As the scalability of NetApp appliances goes beyond 1TB and will go much higher as they put their clustered configurations together, the proportion of proprietary software to commodity disk drives gets real low. That makes the $/MB measurement a tough competitive issue.