That said, some of the largest companies in the sector continue to struggle. Most notably, Brocade -- which came in dead last in the ranking -- shows weakness in a number of key areas. For example, it has the most highly leveraged balance sheet of any of the companies we looked at. It also currently has the worst cost structure of the group.
On the other hand, while QLogic has the best overall rating, June's Byte and Switch Insider also finds that the company is very richly valued. It has the highest relative valuation of any of its peers -- with a price-to-sales ratio 40 percent higher than the next closest company (see table, below). A price-to-earnings ratio is meaningless for companies with below-breakeven earnings, so the valuation for this comparison is based on current market capitalization divided by revenues generated over the past four quarters (called trailing twelve-month, or TTM, revenue).
Table 1: Price-to-Sales Ratio, Top 10 Public Storage Networking Companies
|Company||TTM Revenue||Market Capitalization*||Price-to-Sales Ratio|
|Adaptec||$408.1 million||$891 million||2.18|
|Brocade||$558.2 million||$1.723 billion||3.09|
|EMC||$5.52 billion||$24.057 billion||4.36|
|Emulex||$296.7 million||$2.018 billion||6.80|
|Legato||$280.3 million||$973.5 million||3.47|
|McData||$366.9 million||$1.527 billion||4.16|
|NetApp||$892.1 million||$5.911 billion||6.63|
|QLogic||$444 million||$4.788 billion||10.78|
|StorageTek||$2.06 billion||$2.9 billion||1.41|
|Veritas||$1.53 billion||$11.722 billion||7.66|
|* Reflects closing prices as of June 6, 2003.|
Source: Byte and Switch Insider
The full 21-page report, researched by financial analyst Christopher Bulkey, includes these other highlights:
- NetApp beats EMC with a higher relative chart position, as some key concerns cloud EMC's outlook over the next few quarters.
- McData shines, having greatly improved its results in recent quarters, but it's unclear yet whether this company is in full turnaround.
- Emulex fares well on the rankings -- ending up in fourth place -- though it has one of the higher opex-to-revenues ratios of the group and cash flow is in the middle of the pack.
Todd Spangler, US Editor, Byte and Switch