|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
JULY 28, 2003
By Olga Kharif Network Appliance's Early Advantage It's first out of the gate with a device combining two powerful data-storage capabilities, ahead of even giant competitor EMC Network Appliance's success has always been linked to making one type of data storage: so-called network-attached storage, or NAS. The market for these devices, which enable file sharing between PCs, has jumped from peanuts at the company's inception in 1992 to $1.54 billion last year, according to tech consultancy IDC. And as the market has grown, Network Appliance has thrived. It had $892 million in sales in 2003, and its key products are in the fastest-growing part of storage. The NAS market has proven a good place to be in the economic downturn. While NetApp's (NTAP ) sales dipped a while ago, they've grown steadily for the past six quarters. In the three-month period ended in April, revenues increased 18%, to $241.6 million, vs. the year-ago quarter. NetApp's income rose 219%, to $24.8 million. Last year, it even regained some of the market share it lost previously to storage heavyweight EMC (EMC ). In the first quarter of 2003, NetApp held the leading 37.3% share of the NAS market, vs. 32.8% in the year-ago quarter, according to IDC. That's why NetApp's recent move to diversify surprised analysts and investors. Since last fall, NetApp has introduced several products outside of NAS, an area that accounts for just 7.3% of the storage-hardware market. So far, NetApp's move has paid off, and many analysts say the company has the potential to become a jack-of-all-trades storage vendor like rival EMC. BUYING ON DIPS. Such a move would allow NetApp to grow much faster than the overall market, says Mark Kelleher, an analyst with First Albany. "Is there room in the market for another independent-storage vendor?" asks Phil Goodwin, an analyst with IT consultancy Meta Group. "I believe there is." If NetApp can fill that niche, and quite a few analysts think it's highly possible, investors might want to consider buying on any dips in NetApp's steep stock price. Its shares and those of other companies in this sector are expensive because the group is expected to benefit from a revival in corporate demand sooner than other sectors of technology. NetApp's stock has been falling in recent weeks -- down from a 52-week high of $19.84, nearly double its price in January, to around $17.50 as of July 25. Analysts blame the decline on its rich valuation -- still trading at nearly 50 times projected 2004 earnings. While some analysts say any further slide could represent a buying opportunity, Shebly Seyrafi of A.G. Edwards, who is bullish on NetApp's prospects, says more conservative investors might want to wait for a much bigger drop before rushing in. "GET AN SUV." NetApp seems to be in the right place at the right time. It's on the cutting edge of a move toward new converged products. Customers who now buy NAS devices to manage smaller files also buy storage area network, or SAN, boxes for handling bulky applications, such as those used in large data centers. But by 2005, as corporations strive to lower costs and simplify networks, many will buy only one device, combining both NAS and SAN capabilities, says Goodwin. "Before, they had to decide between a pickup truck and a car," he says. "Now they can get an SUV." Last October, NetApp introduced the industry's first such combo device, the FAS900 series, which NetApp says was the most successful product launch in its history. FAS900 was NetApp's first serious attack on the new SAN market -- and could help the company gain 2% to 4% market share in the next few years, estimates Brion Tanous, an analyst with Merriman Curhan Ford. Not even SAN leader EMC yet offers such a combined product. "That's not what our customers want," insists Chuck Hollis, EMC's vice-president for platforms marketing. Other technological shifts could aid NetApp's foray into the SAN market. While several methods can be used to connect a storage box to a computer network, NetApp has historically favored Ethernet, long an underdog. But Ethernet architecture is undergoing drastic transformation, which could make it the most economical and preferred technology for SAN users. Two new technologies expected for 2004 are 10 gigabit Ethernet, which essentially allows data retrieval at 10 gigabits per second, vs. 1 gigabit today, and iSCSI (pronounced eye skazzy), a standard that will make Ethernet even more powerful in terms of the retrieval speed.
  | | |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
