Byte and Switch: So if all NetApps strengths are in its software, why dont you just sell that? Why the hardware, which is just a generic server with a bit of tweaking?
Watson: The reason we sell the hardware is that way we can guarantee performance, as we can test and debug the software on the platform before it goes out. The end result is 99.9 percent data availability. Veritas has to support a hundred different platforms and operating systems, and they are at the mercy of the OS vendor. When Sun Microsystems Inc. (Nasdaq: SUNW) adds a new patch to Solaris, suddenly Veritas has to worry about whether its software will still work properly on that platform.
Byte and Switch: Many Wall Street analysts say NetApp needs to get the cost of its product down, in some cases by an order of magnitude. Wouldn't selling just software licenses help this?
Watson: Some of them dont correctly understand what we do. We are not a general-purpose operating system like Solaris. We have written a real-time microkernel with deliberately collapsed protocol stacks into one location in memory so there is no reading and rewriting. This is supported by the tweaking in the hardware. Yes, we make our money on software licenses these have very high margins which makes life difficult for newcomers.
Byte and Switch: Why did you introduce the NearStore product, which is a stripped-down version of the standard filer, but at a lower price point? [See NetApp's Backup Plan.] Wont this cannibalize your own revenues?
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