Network Engines (NEI)

[blueskywaves]

An update on the Security Suites VS Security Appliances tug of war from Briefing.com. This is good for NENG's budding security appliance biz.

07:39 ET CHKP Check Point Sftwr cut to Underperform at CSFB

CSFB downgrades to Underperform from Neutral based on valuation as well as their belief that the co will continue to lose share to CSCO and NSCN as the mkt continues to migrate towards an appliance form factor; raises CHKP target to $17 from $16.

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QLGC, BRCD, MCDTA and ELX are downgraded due to valuation, but channel checks are very positive. This is good for TidalWire. QLGC, BRCD, MCDTA and ELX all have normalized gross margins above 50% and are very aggressive with their marketing dollars.

Storage Prices Might Have Outrun Growth
By Bill Snyder
Staff Reporter
06/09/2003 05:18 PM EDT

Saying that soaring valuations of enterprise data storage companies are ahead of growth potential, Punk Ziegel on Monday downgraded Emulex, Brocade, McData and QLogic.

Other analysts have similar concerns about QLogic, which also has been downgraded recently by Goldman Sachs and A.G. Edwards.......

.....Despite his downgrades, Punk Ziegel analyst Steve Berg said he believes there is still room for growth in the host bus adapter and switch markets. "I'm not concerned about commoditization until the end of 2005," he said........

........Similarly, A.G. Edwards analyst Shebly Seyrafi wrote:"We are downgrading shares of QLogic from buy/aggressive to hold/aggressive based on valuation. QLogic is a solid company, having, in our opinion, executed superbly during the slowdown and having gained meaningful share in the FC HBA market over the past few years. In addition, our distribution channel checks for both Emulex and QLogic are strongly positive in the current CQ2 quarter.

http://www.thestreet.com/_yahoo/tech/billsnyder/10092389.html


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NENG's original server appliance biz rose from $6.0M in FY99 to $43.1M in FY00 as the dotcoms furiously built out their IT infrastructures, but the market quickly fizzled out as the dotcoms imploded. NENG tried to segue into the corporate market on the back of the 1999 IBM licensing agreement -- which generated $4.7M in licensing fees in FY00 and $0.7M in FY01 -- but conservative corporate customers didn't want to manage racks of pizza box-sized servers from a unknown vendor. Consequently, NENG quickly lost traction and hit rock bottom in the June 2001 and September 2001 quarters when they thoroughly restructured the company.

Fortuitously, EMC acquired FilePool in March or April 2001
and was already in the process of revamping their old EOS platform (1996) for the fixed content market with FilePool software and their patented RAIN (redundant array of independent nodes) architecture. NENG was able to win the initial contract for Centera nodes when EMC sent out its RFPs (request for proposals). This was a major, major achievement for a tiny company on the ropes like NENG because EMC has the toughest qualification cycles in IT. Below is a description of the multi-billion dollar interoperability endurance course that NENG probably had to pass, in part or in whole:

In our EMC E-Labs, we replicate customer environments — using 2,600 terabytes of storage across nearly five acres of floor space. To date we've tested: nearly 400 server types from 21 different vendors, 40 operating systems (plus upgrade releases, patches, earlier versions, etc.), 81 third-party storage software products (including Veritas, BMC, and CA), 145 network connectivity elements and 1,200 other devices, ranging from HBAs and drivers to switches and tape subsystems

http://www.emc.com/horizontal/interoperability/index.jsp

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Below are several reference articles that shed light on NENG's technical advantages and how it fits into EMC's RAIN architecture.

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Optimize your storage for fixed content
by: Ed Palmer
Issue: May 2003

.......EMC's Centera is an example of an OO storage system specifically designed for fixed-content applications. Centera is a network-attached device, but it isn't NAS. EMC refers to Centera as content-addressed storage or CAS (see "Pros and cons of content addressed storage").

Centera's hardware architecture is based upon a redundant array of independent nodes (RAIN) architecture consisting of storage and access nodes. Each node is comprised of a 1GHz Pentium III processor, four 250GB ATA disks and three 10/100 BaseT network connections. The access nodes provide an interface to the client applications, while the storage nodes store application information in object form. Additionally, the nodes may be deployed in a clustered configuration for availability and performance.

Centera's entry point is an 8-node configuration configured for either 2.9TB of usable capacity (mirrored protection) or 4.3TB of parity protected capacity. Each Centera cabinet can contain up to 32 nodes, and 16 cabinets can be configured as a single cluster. Centera can also be managed as a domain, which scales up to seven clusters, holding more than a petabyte of storage.

http://storagemagazine.techtarget.com/strgFeature/1,291266,sid35_gci900477_idx2,00.html

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Network Engines revs hopes on new Sierra server
By Stephen Shankland
Staff Writer, CNET News.com
February 27, 2001, 6:05 PM PT


...........But the company has high hopes for Sierra, which Network Engines said has big improvements for those stacking up servers in data centers. The new system is designed to match the company's marketing shift from early adopters buying the latest thing to more conservative corporate clients.

The Sierra features a novel "heat pipe" that transfers heat from the chips to cooling fins. Because each fin is cooled by three fans, the failure of one fan won't cripple the system.

The cooling system allows the use of two Pentium III CPUs running at 1GHz, said marketing director Rick Friedman. It is also designed to accommodate faster Pentiums of the current generation and upcoming Intel models code-named Tualatin, he said.

"I think Network Engines has done a really good job of identifying the needs of the data center, in particular the need to remove heat from the rack-dense server," IDC's Humphreys said. The heat pipe technology is "unique," he added.

Another Sierra feature is the "CM bus," a system that lets administrators control the servers remotely. With it, administrators can restart servers, monitor their performance, and even wipe the hard disk and reinstall software.

And using supporting chips from ServerWorks, Sierra has two 64-bit, 66MHz PCI slots--the fastest speeds available.

http://news.com.com/2100-1001-253273.html

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IBM licenses skinny server designs
By Stephen Shankland
Staff Writer, CNET News.com
September 1, 1999, 4:45 AM PT

IBM has licensed the hardware and software of Network Engines' skinny servers, the companies announced yesterday.

The servers, each only 1.75-inches thick, can be stacked very densely to support high-powered Web sites. Those sites typically use lots of small, inexpensive servers to cope with the burden imposed by the huge numbers of Web surfers who can inundate a site.....

http://news.com.com/2100-1001-230520.html?tag=rn