Chris, Excellent. Thank you. I found this, too, although I sure you already have seen it. It was on the Fool as justification for NTAP's nomination to the Rules Breakers portfolio:
1. The top dog and first-mover in an important, emerging industry...
The top dog in the fast emerging network storage and cache storage. Network Appliance has pioneered the concept of storage appliances, which is taking share from the "traditional" computer/data storage companies. The company has been the representation for the emerging appliance marketplace, which is destined to evolve into a new computer hardware category. The explosive growth of data creates a tremendous need for more and faster access to data should create an opportunity in the storage marketplace. So far, NTAP has carved out a unique niche in the data storage arena. One day, the "appliance" category will vastly changed the computer industry, but right now, it has already impacted as an efficient means of storage for the Internet.
NTAP mainly competes in NAS (Network Attached Storage) which will compete for Storage Subsystem dollars in the NT and Unix segments. Management estimated that the market it competes in directly is approximately $1 billion and growing 60-70% annually.
NAS is advantageous over traditional storage architectures. NAS can connect multiple clients and servers via the network, which allows corporations to leverage data. The value of the information increases as its accessibility increases. Connecting data to the network eliminates bottleneck. Using NAS, corporations are able to separate storage purchases from the server purchasing decision. Filers allow corporations to scale storage capacity and server processing capacity independent of each other, as the needs of the company
grow. With NAS, corporations centralize storage and consolidate servers, which brings about tremendous cost reductions.
Now the juicy details about the increasing need for data storage. IDC estimates that Unix and NT- based terabytes will increase on average 71.8% and 127.5%, respectively, over the next 3 years. IDC also estimated that NT based enterprise storage revenue to grow from $6.1 billion in 1998 to $13.4 billion in
2001. NTAP's high exposure to both NT and UNIX storage markets will allow the company to be smack in the middle of the sweet spot of enterprise storage growth.
NTAP also competes in network cache devices (only 5% of total revenue vs. 50% for INKT). Cache devices allow ISPs and Web sites to speed Web serving. (Hmmm, an internet opportunity?) Our good friend INKT is the first mover in this area and its hype has also benefited NTAP. Although INKT had little head start, revenues from cache devices are comparable. Currently, NTAP has a 20% marketshare of the small $100 million market, which could grow toaround $2billion by 2002. The company estimates that in head-to-head competition with INKT, it is winning half of its US deals and 80% of those internationally. INKT was first to the market, but the NTAP claims that the tide has turned since July. This is NOT a zero sum game. ISP and large companies can and will use multiple vendors on a trial basis over the next couple years. Cache storage is a very hot market and very visible on the street.
2. Sustainable advantage gained through business momentum, patents, visionary leadership, and/or inept competition...
Industry leader in technology. Much of NTAP success so far is based on its proprietary software. Its software provides simultaneous, high speed access to multiple data formats - including NFS for Unix, CIFS for Windows, and HTTP for the web. Basically, its software allows the customer to efficiently and easily store and retrieve a massive amount of data over several different platforms.
3. Excellent past share appreciation, measured by a relative strength of 90 or higher...
Network Appliance price change in past 12 months: 191.0%.
Difference from the average for the Data Storage Devices group: 91.40%
Percentage of all stocks that Network Appliance outperformed: 99%
4. Good management and smart backing...
Senior management team with excellent vision. The president and CEO, Daniel Warmenhoven 's past experience includes being president, CEO and chairman of Network Equipment Technologies, and stints at HWP and IBM. Jeffrey Allen, VP of finance and operations and CFO, worked at HWP and was senior VP of operations at Bay Networks, and was also controller for SynOptics. Don Valentine, the chairman of the board, founded Sequoia Capital to invest in startup and early-stage technology companies and has financed more than 300 companies including Apple Computer, Cisco Systems, Oracle, and LSI Logic. Today Valentine serves on the boards of Cisco, Sierra Semiconductor, Elantec, and C-Cube Microsystems.
Partners include Dell, Cisco, Microsoft, Oracle, CheckPoint and Fujitsu
5. The greater the consumer brand, the better...
Well, I guess consumers could care less, but NTAP stores their email on Yahoo. Among NTAP customers are a large number of top tier corporations including Bear Stearns, Yahoo, Siemens, Lockheed, Cisco, Motorola and Texas Instruments.
6. A significant constituent of the financial media is recently on record for calling it overvalued.
Yes, all things net is overvalued. ITS A TULIP CRAZE!! And NTAP piggy backing dell from 40 to 85(now split adjusted 44 7/8) is way OVERBOUGHT! |
