CNT Stokes Managed Services

Managed services are CNT's forte - and a double-edged sword

June 11, 2004

2 Min Read
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Computer Network Technology Corp. (CNT) (Nasdaq: CMNT) announced a big managed storage services contract today, and indirectly announced another of equal size.

The company has signed a three-year, $11.5 million deal with a "leading financial institution in the Western United States." (See CNT Wins Big Contract.) And in making the announcement, CEO Tom Hudson said in a prepared statement that "already in this quarter, we have another $10 million as well."

There is no word on customer identities, although a CNT spokesperson confirmed there are indeed two separate contracts involved and that they are with existing customers. CNT in the past has announced managed services agreements with Lockheed Martin Corp. (see Lockheed Martin Locks in CNT), Ohio Savings Bank (NYSE: IBM), and State Street Corp. Two quarters ago, the company also slipped in a mention of a $15 million contract with IBM Corp. (NYSE: IBM) during its earnings call, in a fashion similar to today's offhand revelation (see CNT Earnings Surprise).

While new work is always good news, CNT's emphasis on managed services is a double-edged sword. These contracts take longer to yield revenue than do outright product sales, and they were one reason why Hudson reduced guidance last quarter (see CNT Smacked for Its Tweak).

But in an increasingly competitive market, CNT is counting on its ability to sell services along with its own and third-party products. According to its latest quarterly SEC filing, CNT's "consulting fee revenues increased 64 percent in the first quarter of 2004 to $11.6 million from $7.1 million in the first quarter of 2003." And the firm says it's training its sales force to use consulting as a way to sell more products, and vice versa.CNT faces competition in services, too: A Byte and Switch Insider report last year cited CNT as one of nine competing storage consulting companies, including Datalink Corp. (Nasdaq: DTLK), Electronic Data Systems Corp. (NYSE: EDS), EMC Corp. (NYSE: EMC), GlassHouse Technologies Inc., Hewlett-Packard Co. (NYSE: HPQ), IBM, Storage Technology Corp. (StorageTek) (NYSE: STK), and Veritas Software Corp. (Nasdaq: VRTS). (See The Top SAN Consultants.)

Mary Jander, Site Editor, Byte and Switch

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