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

To: Terry Berg who wrote (873)	4/17/1999 9:46:00 AM
From: Mohan Marette	Read Replies (1) \| Respond to of 10934

NETWORK APPLIANCE INC. Storage Devices Enjoy Growing Acceptance Terry, Thanks for brining up that IBD article,I am taking the liberty to paste it here for all to see in case someone missed it.The quote by the company official given at the end of the article is quite enouraging,looks like there is no way in hell they are going to miss the quarter,pheeeeew (what a relief). ====================== [Courtesy:IBD-New America Section] Date: 4/19/99 Author: Alan R. Elliott Woven deep into Silicon Valley lore is the success story of Cisco Systems Inc. Cisco's sales reached $8.5 billion in 1998, up from just $28 million in 1989. The moral of the tale is simple: Speed up computer networks by using a dedicated routing appliance. Now another specialty device maker, Network Appliance Inc., is adopting a similar theme. ''We are doing for data storage what Cisco did for data communications,'' said CEO Daniel Warmenhoven. ''But we got there from different directions.'' Cisco, Warmenhoven says, saw its product as a communications accelerator. Although Network Appliance's devices also speed up network performance, they are used primarily as a means of managing distributed data. What the two approaches share is a common market strategy. When Cisco got its start, three basic things happened. First, the company defined a new market. Second, it came to be declared the leader in that market. And third, Cisco's routers replaced the traditional, general-purpose alternative. Network Appliance has already nailed the first two of those goals, says David Hitz, co-founder and director of systems architecture. The next step is to make network-attached storage the standard for storage and retrieval of network information. ''We certainly see ourselves on a several-year mission in accomplishing that goal,'' Hitz said. Network Appliance's NetApp filers and NetCache devices both use disk- drive hardware for storage. The NetApp filers take over basic storage and retrieval functions normally handled by Unix and Windows NT servers. NetCache products take the concept a step further. Remotely located from central servers, Web caches store frequently requested files or Web pages. User requests only go as far as the cache and need not travel all the way to the server to retrieve the files. Over short distances, using NetCache reduces network traffic and lessens the servers' workloads. When the distance spans continents, savings in online costs and user time can be significant. Network Appliance's products cost from $30,000 to $500,000. An average sale is about $100,000. The company now is building its direct and indirect sales channels and pushing into international markets. In its Jan. 29 third quarter, the company derived 20% of its sales from distributor agreements, up from a traditional 10%. The remaining 80% came from direct sales. In the last two years, Network Appliance also has shifted its European sales from 100% distributor deals to 50% direct sales. It's now making distribution arrangements in both Asia and South America. The U.S. accounts for about 60% of sales, Europe 25% and Asia 5%. Network Appliance recently signed its first two reseller deals with original equipment manufacturers, one with Fujitsu Ltd. and the other with Dell Computer Corp. ''We were waiting to see a big OEM deal like this,'' said analyst Steven Milunovich of Merrill Lynch & Co. ''They are a small company, and you want to see them get some leverage.'' Both Dell and Fujitsu will sell Network Appliance's products under their own names. Dell will sell Network Appliance filers under its Power Edge product line. The deals could contribute combined sales of $5 million in fiscal 1999 ending April 30, $25 million in fiscal 2000 and more than $125 million in fiscal 2001, Milunovich says. In its fiscal third quarter, Network Appliance earned 12 cents a share, up 50% from a year before. Sales rose 72% to $75.6 million. Analysts expect earnings to rise 55% to 45 cents a share in fiscal 1999 and 44% to 65 cents in fiscal 2001. The company raised more than $140 million in a 2.5 million-share offering completed this month. It trades as NTAP near 58. The Dell and Fujitsu deals are important not only because of the increased sales. Dell is committing significant resources to training its sales personnel in the more technical field of network storage devices. This commitment, Hitz says, provides a barometer for how well network- attached storage is understood in mainstream markets. ''All of this says to us that this idea is becoming accepted wisdom,'' Hitz said. But the market is not without its risks. Storage Technology Corp., a mainframe storage solutions company, missed earnings estimates last week. And an industry report recently suggested that spending on storage equipment by mainframe and legacy systems operators will slow before 2000. But neither scenario, Warmenhoven says, has any bearing on Network Appliance's corner of the market. He points to the company's recent public offering as a clue to its strength. ''The last thing I would want to do is have a stock offering to raise money and then miss a quarter,'' Warmenhoven said. --------------------------------------------------------------------------------