These days, it usually pays to check the investment wires just before going to speak in public. You just never can tell which industry segment has tanked.
I was preparing a presentation in the middle of February, when a quick glance at my regular stock tracking site revealed the most recent problems at Emulex, one of a number of companies selling gear designed for storage area networks. It seems the company missed industry projections and was seeing a number of customers pull back from projected orders, leading to the projection of weak results in the upcoming quarter as well. Emulexs shares lost almost half their value as a result, while fellow storage gear makers Brocade Communications Systems and QLogic also saw their stocks hammered.
Certainly weaker sales is a good excuse for downgrading stocks, but as usual, the Wall Street community is looking exclusively at the short term. Long term, both the notion of network-based storage and the idea of network-based applications just make too much sense not to work. What we have here is a failure to time the market.
Regardless of a softer economy, the die has been cast for businesses to move to a more electronic commerce-based model of doing business with customers, employees and suppliers. It will simply be more efficient and, in a global economy too important to remain competitive.
In an e-commerce world, there will simply be too many complex and diverse applications for businesses and the high-end consumer market to buy as software and then maintain, upgrade and hire trained, expensive staff to operate. Similarly, even as PC prices continue to fall, there is no reason to believe that businesses will want to store all the data generated by customer point-and-clicks or other electronic information on the servers they buy, maintain, expand, etc.
So the notion of creating network-based storage and applications is not just another aspect of the dashed dot-com phenomenon. Unlike selling pet supplies, toys or other commodities over the Internet, providing applications and storage makes economic sense in the long run.
The key thing now for companies that hope to be around for the long run is to avoid any short-term hype about prospects, keep growth projections realistic and do everything possible to be around when the market kicks in. This is nothing new for public network services. The landscape of telecommunications is littered with companies that hit the market ahead of their time in areas such as video-on-demand, fiber-in-the-loop and even broadband access. Timing is everything.