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Veritas: The World Leader in Storage Management Software by Chris Connor OverviewVeritas {VRTS} leads the world in providing storage management software. The company's products manage corporate storage, protect networks from downtime, and ensure fast data recovery. A large percentage of Veritas' sales is generated by licensing and bundling its products with products made by computer giants such as Microsoft {MSFT}, Sun Microsystems {SUNW}, and Hewlett-Packard {HWP}. SAN PowerhouseVeritas is a major force in the Storage Area Network (SAN) industry. Although Veritas does not make SAN components, it is still well positioned in the industry with such key SAN applications as online storage management and LAN free backup. The pervasiveness of Veritas in the SAN industry is apparent with the company's long and impressive list of partners who participate in the SAN industry - ranging from pure SAN plays such as Brocade {BRCD}, Crossroads {CRDS}, Gadzoox {ZOOX} and Vixel {VIXL} to major computer makers such as Compaq {CPQ}, Dell {DELL}, Hewlett-Packard, and IBM {IBM}. The killer application for SANs is the backing up of data. Due to SAN's broadband capabilities, it takes backup traffic off a company's primary or non-storage network which enables a company to back up its data during business hours and free up bandwidth for non-storage applications. Veritas's LAN free back up products intelligently schedule back up jobs on SANs to optimize the use of shared tape drives. Veritas's Netbackup automates the backing up of data over multiple servers from a single management interface. Netbackup also brings all storage devices under the purview of that one management interface. Powerful Revenue GrowthAlthough Veritas has not generated steady earnings primarily due to merger-related charges, the company has displayed excellent revenue growth on both a year-to-year and quarter-to-quarter basis. On a sequential basis, Veritas has had 13 consecutive quarters of sequential revenue growth. Excluding the last two quarters, revenues have grown an average of about 15 percent a quarter. In the last two quarters, sequential growth has skyrocketed to 60 percent a quarter. Veritas' annual revenue has also been rapid and consistent. The company has grown its annual revenues for 12 consecutive quarters. Veritas' average annual revenue growth rate over the last 3 years (excluding the last two quarters) is an amazing 71 percent. However, annual revenue growth over the last two quarters has been even more impressive at 138 percent and 224 percent, respectively. The majority of the increased growth in the last two quarters came as a result of adding the revenues of recently acquired companies. RisksThe biggest risk for Veritas is intense competition on several fronts. Not only does Veritas have to contend with storage leader EMC {EMC} and rival storage management software maker Legato, but Veritas has to go up against titanic customers and partners such as Microsoft, IBM, Sun, and Hewlett-Packard. Investment SummaryDespite the sizable competition, Veritas should continue to dominate storage management software into the foreseeable future. In fact, some industry analysts think that Veritas is swiping market share from Legato, which has contributed, in part, to Legato's recent problems. Veritas also has a few partnerships that put it into some exciting growth markets like Linux, with its partnership with Redhat, {RHAT} and Network Attached Storage (NAS), with its recent Network Appliance {NTAP} partnership. In the short term, Veritas's stock may have some problems continuing its ascent due to its already sky-high valuation. The stock market has recognized Veritas' sales growth and leadership by pushing the stock to about a $40 billion market cap with an astonishing price-to-sales ratio of about 74. Over the long term, Veritas should represent the premier stock in storage software the way that EMC represents the premier stock in storage hardware. |
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