Cloud Computing And Data Sector Stock Reviews; A Market Analysis By Brigantine Advisors Senior Analyst
March 31, 2010 - The Wall Street Transcript has just published Data Hosting & Data Storage Report offering a timely review of the Data Storage sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
View Details of This Special Report
Recent Wall Street Transcript Special Reports.
Mark Kelleher is a Managing Director and Senior Analyst at Brigantine Advisors. He spent 15 years on Wall Street as a sell-side analyst before joining Brigantine Advisors, where he focuses on enterprise infrastructure. His past experience includes Senior Analyst roles at such firms as Tucker Anthony, First Albany and Canaccord Adams. In 1999 Mr. Kelleher was one of the first analysts to alert investors to the coming revolution in storage that included SANs and NAS architectures. Mr. Kelleher spent seven years as a Hardware Engineer, designing ASICs for Digital Equipment Corporation. He has an MBA from Boston University, and a B.S. in computer and systems engineering from Rensselaer Polytechnic Institute.
TWST: So with customers outsourcing more, in some ways the economic slowdown has been good for these companies. What does economic improvement bring for them?
Mr. Kelleher: I think the model has now been tested. You had this downturn and people kind of reached out for this model and explored it, and I think people are getting comfortable with it. I know the government is. The government now has these very secure buildings, and there's a big push with the administration to put everything out in the cloud. You now have these examples out there of things that work. I think that has happened in the commercial side as well. You have companies like Rackspace. Rackspace doesn't do colocation, but they do do cloud computing, and people who are using that are happy with that.
At the low end of the market, Amazon.com (AMZN) has their cloud computing facility. As you get more examples out there, as the recession kind of pushed people over the chasm - you talk about jumping the chasm, but I think the recession pushed people over that chasm - now they are over it and now you're in the widespread adoption phase. If you look at Terremark, for example, they have a March fiscal year ending March 2010. And for the full year, they should be up about 17% year-over-year. That's not bad, considering the past year that we've had.
TWST: As you mentioned, cloud computing is a hot topic for the industry. What's the broader impact of this for the industry? Do you consider any particular companies to be better positioned to capitalize on the opportunities cloud computing represents?
Mr. Kelleher: There are a number of different places that are interesting to look at. One is just the simple facilities of who is providing it. I keep coming back to Terremark because I'm very impressed with their facilities and a company like Terremark is well positioned to pick up that business. Equinix doesn't do managed services, it doesn't really do the higher-level cloud computing capabilities, but Equinix has made itself the on-ramp for the Internet, with all of the connectivity that they have within their facilities. So they are all well positioned. On the product side, it's companies that are designing platforms that are specifically aimed at a virtual environment.
VMware is well positioned on the server side, and companies like NetApp (NTAP) are extremely well positioned on the storage side. And you're starting to see them increasingly show up within data centers as the platform of choice for cloud computing. You can go in other directions, too. NetScout (NTCT), for example, is a company that does network diagnostic software and hardware to figure out what's going on across the wires. If you have a virtual environment, you have a lot more bandwidth going across between different points, and it becomes more important to know which virtual machine is affecting which virtual machine and really figuring out what's causing delays on the network. That's where something like NetScout can come in. There are different elements at play within the whole architecture.
TWST: Are there any other new technologies coming down the pipe that would impact these companies in terms of significant capital investments or competitive standing?
Mr. Kelleher: On the colocation and service providers side, it's primarily the investment in the facilities that requires the top capacity. On the other side, the R And D that has to be spent to get to a cloud computing level has been invested and now you're either there or you're not. I think companies like 3PAR and Compellent (CML) are there, but companies like Hewlett-Packard (HPQ) are behind. Hewlett-Packard, with their EVA product line in storage, is falling behind, in my opinion, in the virtual storage world, and they are beginning to lose market share. They put out their numbers last week and one of the only weak spots in their entire report was their storage group. Well, their loss is NetApp's gain. NetApp is growing 15% year-over-year.
That is faster than the storage market is growing, so they're taking market share and benefiting from the fact that they've already spent a good amount on R And D to get their products to the next level. So if the economy picks up - as a lot of people, including myself, believe that we are out of the woods - the IT world is anticipating, or I think has put off, upgrades to their technology for some time, and now you're in the mode where you're going to hit a refresh cycle. And when that refresh cycle hits, those dollars are going to go towards the most advanced virtual infrastructures that are out there. I think that's where some of these companies like NetApp are positioned strongly.
The remainder of this 32 page Data Hosting & Data Storage Report can be immediately viewed by purchasing online.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special Issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673