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Inktomi Corporation (INKT) Message Board

  • soma_2000 soma_2000 Oct 5, 2000 12:20 PM Flag

    CFLO pullback

    CacheFlow (CFLO) 106 3/4 -15: As more big name
    tech companies scare the market with earnings and
    revenue warnings, investors are increasingly worrying
    about such recurring themes as a slowing PC market,
    dotcom customer spending cuts and exposure the Euro.
    CFLO shares have plummeted almost 30% in the past five
    days, and the selling has accelerated today. Bear
    Stearns issued a note this morning that said Network
    Appliance (NTAP), which is one of CFLO's main competitors
    in caching appliances, is engaged in some steep
    discounting in an effort to win new business. You'll recall
    that in August, CFLO pronounced themselves the market
    leader in caching appliances. That market share came at
    the expense of NTAP, as they reported a 44%
    sequential decline in caching appliances in their last
    quarter. NTAP is still dominant in the storage space, but
    quite a bit of excitement over their prospects was
    related to their caching business, so the company is
    aggressively trying to recapture that lost market share
    through discounting. The efforts by NTAP could and
    probably will result in some margin squeeze at CFLO as
    they will probably feel the need to compete with NTAP
    on price in order to surrender the least amount of
    market share in a price war. The other cautionary
    message in the Bear Stearns note is a familiar one, CFLO
    does have Euro exposure, and they still have another
    month left in their quarter. Based on past results, we
    estimate that CFLO derives 17-23% of their sales from
    Europe. Prior to this week, the shares have had an
    incredible run, having doubled since the end of June, so it
    is not too surprising to see such a sharp pullback.
    However, the long-term picture remains favorable for CFLO
    and their position in the rapidly expanding caching
    market. - Matt Gould, Briefing.com

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