Data Networking and Storage

Equity Research Department

Data Networking and Storage

q y p

March 2010

Jason N Ader CFAJason N. Ader, CFA617-235-7519jader@williamblair.com

William Blair & Company L L C intends to seek or expects to receive compensation for investment banking services from this company in the next 3 months Please consult theWilliam Blair & Company, L.L.C. intends to seek or expects to receive compensation for investment banking services from this company in the next 3 months. Please consult the last page of this report for all disclosures.

Company Snapshot – Data NetworkingCompany Snapshot Data NetworkingData Networking$ millions, except WB Distribution/per share data Rating* FY Revenue FY Pro Forma EPS Customers**

65% Data StoragegMkt Cap 18% IP Producs$3,455 17% Services

M / A 63% DomesticFYE 37% InternationalOct 71% OEM

29% Channel/Direct

$1,237 $1,467 $1,953 $2,120 $2,250

07A 08A 09A 10E 11E

$0.57 $0.67

$0.53 $0.55 $0.52

07A 08A 09A 10E 11E

$43 695 $1 56 $1 54 $1.68 Mkt Cap 54% US/Canada$142,447 20% EMEA

O / C 11% Emerging MktsFYE 11% APACJul 4% Japan

12.5% Tech DataMkt Cap 11 6% Avnet$650 $653

$807 $928

$1.69 $2.20 $2.52

$34,922 $39,540 $36,117 $39,502 $43,695

07A 08A 09A 10E 11E

$1.34 $1.56 $1.35 $1.54 $

07A 08A 09A 10E 11E

Mkt Cap 11.6% Avnet$4,410 31% Financial

M / A 21% TelcoFYE 12% TechnologySep 42% International

58% Domestic78.5% Products

Mkt Cap 21.5% Services

$526 $650 $653

07A 08A 09A 10E 11E

$1.44 $1.46 $ $2.20

07A 08A 09A 10E 11E

$3 572 $3 316 $3,928 $4,518 $1.18 $ $1 20 $1.44

$14,663 68% Service ProviderO / A 32% Enterprise

FYE 52% AmericasDec 30% EMEA

20% APAC

Mkt Cap 54% Distributor$2 253 31% Reseller

$930 $1,069 $967 $1,128 $1,264

$1.37 $1.50 $1.19 $1.26

$1.56

$2,836 $3,572 $3,316 $3,928

07A 08A 09A 10E 11E

$0.87 $

$0.92 $1.20

07A 08A 09A 10E 11E

$2,253 31% ResellerM / A 12% Serv. Provider

FYE 49% North AmericaDec 26% Europe

25% APAC/Other

Mkt Cap 62% Domestic$2,038 38% International

07A 08A 09A 10E 11E 07A 08A 09A 10E 11E

$333 $396 $481 $574

$0.64 $0.57 $0.68 $0.88

$1.19

2

O / A 6.5% DirectFYE 93.5% IndirectDec

$236 $333

07A 08A 09A 10E 11E 07A 08A 09A 10E 11E

Company Snapshot – Data StorageCompany Snapshot Data Storage

Data Storage$ millions, except WB Distribution/per share data Rating* FY Revenue FY Pro Forma EPS Customers**

Mkt Cap 47% Repeat Clients$509 73% Product

U / A 27% Support & Svcs$51$91

$125 $163

$207 $0.05 $0.28 $0.29 $0.40

07A 08A 09A 10E 11EU / A 27% Support & SvcsFYE 82% DomesticDec 18% International

76% EMC II DivisionMkt Cap 5% Content Mgmt$37,254 4% Security

O / C 14% VMw are

$51

07A 08A 09A 10E 11E($0.69)

07A 08A 09A 10E 11E

$13,230 $14,876 $14,026 $16,018 $17,754

$0.86 $1.01 $0.90 $1.12 $1.29

FYE 52% U.S.Dec 31% EMEA

17% ROW78% Product

Mkt Cap 22% Support & Svcs$505 27% International

M / A 73% DomesticFYE 41% Di t

$89 $114 $124

$155 $187

$0.06 $0.13

07A 08A 09A 10E 11E

07A 08A 09A 10E 11E 07A 08A 09A 10E 11E

FYE 41% DirectDec 59% Indirect

Mkt Cap 57% Americas$11,040 33% EMEA

O / A 10% AsiaPacFYE 30% Direct

07A 08A 09A 10E 11E ($0.37)($0.30)

($0.17)

$2,804 $3,303 $3,535 $3,850 $4,622

$1.11 $1.27

$1.09 $1.43 $1.70

%Apr 70% Indirect

** Represents William Blair & Co. estimate of current revenue breakdown by channel/customer. Based on available company data and William Blair & Company analysis.

* Investment stock rating: O = Outperform, M = Market Perform, U = Underperform, S = Suspended Rating; Company Profile: E = Established Growth, C = Core Growth, A = Aggressive Growth. We have not established price targets for the above companies.

07A 08A 09A 10E 11E 07A 08A 09A 10E 11E

3

Comparable ValuationsComparable Valuations

Data Networking and Storage 3 4 6 8 46 39 47 40Price P/E EV/Sales P/E EV/Sales P/FCF FCF Yield

($ i illi ) Ti k St k R ti 3/1/2010 M k t C N t C h CY10 CY10 CY11 CY11 CY10 CY10($ in millions) Ticker Stock Rating 3/1/2010 Market Cap Net Cash CY10 CY10 CY11 CY11 CY10 CY103PAR, Inc. PAR NC $9.40 583 108 85.0x 2.2x 33.6x 1.9x - -Blue Coat BCSI NC $29.65 1,203 65 19.3x 2.1x 16.2x 1.9x 39.5x 3%Brocade BRCD M / A $5.74 2,849 (662) 11.2x 1.6x 11.4x 1.5x 12.2x 8%Cisco CSCO O / C $24.60 144,205 24,444 15.6x 2.9x 14.0x 2.6x 15.6x 6%Compellent CML U / A $16.19 529 124 56.1x 2.5x 40.0x 2.0x 35.3x 3%Commvault CVLT NC $21 86 930 149 28 1x 2 6x 24 7x 2 4x 21 9x 5%Commvault CVLT NC $21.86 930 149 28.1x 2.6x 24.7x 2.4x 21.9x 5%EMC Corp. EMC O / C $17.75 37,338 6,287 15.9x 1.9x 13.8x 1.7x 12.4x 8%Emulex Corp. ELX NC $13.23 1,071 269 17.9x 1.8x 15.8x 1.7x 30.6x 3%F5 Networks FFIV M / A $58.25 4,679 633 25.4x 4.8x 22.4x 4.2x 20.5x 5%Hewlett-Packard HPQ NC $51.54 121,329 (1,790) 11.4x 1.0x 10.6x 1.0x 11.3x 9%IBM IBM NC $128.57 167,013 (11,853) 11.6x 1.8x 10.6x 1.7x 10.4x 10%Isilon ISLN M / A $7 75 528 79 138 4x 2 9x 60 1x 2 4x 175 9x 1%Isilon ISLN M / A $7.75 528 79 138.4x 2.9x 60.1x 2.4x 175.9x 1%Juniper JNPR O / A $28.53 15,374 2,451 23.9x 3.3x 19.8x 2.9x 20.8x 5%Netapp, Inc. NTAP O / A $31.46 11,336 2,076 18.9x 2.1x 17.1x 1.8x 13.5x 7%Oracle Corp. ORCL O / C $24.74 123,978 6,032 14.3x 3.7x 12.2x 3.3x 13.2x 8%Polycom PLCM M / A $26.77 2,322 455 21.3x 1.7x 17.1x 1.5x 29.4x 3%QLogic Corp. QLGC NC $18.55 2,113 349 16.2x 2.9x 15.5x 2.8x 12.5x 8%Riverbed RVBD O / A $28.65 2,181 326 32.4x 3.9x 24.0x 3.2x 27.9x 4%

Companies in bold represent stocks under Jason Ader coverage; Oracle is covered by William Blair analyst Laura Lederman (Street estimates used)

Riverbed RVBD O / A $28.65 2,181 326 32.4x 3.9x 24.0x 3.2x 27.9x 4%Symantec Corp. SYMC NC $16.68 13,448 767 10.9x 2.1x 9.9x 1.9x 9.6x 10%

Mean 30.2x 2.5x 20.5x 2.2x 28.5x 6%Median 18.9x 2.2x 16.2x 1.9x 18.0x 6%

Sources: Thomson Financial, company reports and William Blair & Company, L.L.C. estimates

Investment Stock Rating: O=Outperform, M=Market Perform, U=Underperform, NR=Not Rated (the stock is not rated, but is covered), NC=Not Covered;

(Street estimates used)

4

Data Networking and StorageData Networking and StorageIndustry Analysis

Industry OverviewIndustry Overview

IT Industry in Transition

IT systems have become complex and difficult to manageMacro downturn has only magnified the problem

IT manager focus on consolidation, utilization and automationObjective is to drive lower IT costs and greater agility

Data center is focal pointEarly shift to cloud computing frameworks (“IT-as-a-service”)Virtualization is key enabling technologyVirtualization is key enabling technology

Industry consolidation acceleratingIndustry growth slowingIndustry growth slowingCustomer want to deal with fewer vendors

Infrastructure Tech Will Be Good Place To Be During The Transition

6

Infrastructure Tech Will Be Good Place To Be During The Transition

Historical View of ComputingHistorical View of Computing

Data Center 2.0 Data Center 3.0Data Center 1.0

Cl d C iCli t SMainframe Cloud ComputingClient – ServerDistributed Computing 

Software

Software

Virtualization

ServerVirtualization

Software

Server

NetworkVirtualization

Software

S ftVirtualization

Server

Network

Storage

Network

Storage

Network

StorageServer

Network

Storage

Virtualization

Software

Server

Network

Storage

Computing Stack – Integrated

Simplicity but Lack of Flexibility Flexibility and Cost Efficiency

CENTRALIZEDCENTRALIZED/VIRTUALIZED

MoreChoice but Complexity

DECENTRALIZED

Computing Stack – Integrated Computing Stack – DistributedComputing Stack  Integrated

Simplicity, but Lack of Flexibility  Flexibility and Cost EfficiencyMore Choice, but Complexity

Source: William Blair & Company, L.L.C.

Poor user interface and difficult to operate

Improved ease of use, but software residing at desktop needed to be managed

Web-based interface, no need to manage desktop-resident software

7

Four Major Vendor Camps Developing in Data Center Wars

Cloud Computing 101Cloud Computing 101

Resources (Server, Network, Storage) are pooled together to enable maximum flexibility and control

C C C

Failover

Apps Apps Apps Apps Apps Apps

Company #1

Company #2

Company #3Company #1

Virtualization / OS Virtualization / OS Cloud Providers

StN t kS StN t kSStorageNetworkServer

Private Cloud

StorageNetworkServer

Public Cloud

8

End Result Is Lower IT Costs

Sector Investment ThesisSector Investment Thesis

Investment wave expected in next 3-5 years to support data center transformation and initial move to cloud computing

Server virtualization drives storage/network infrastructure upgradesNetwork needs to be faster, more robust and more intelligent as data gets further away from usersfurther away from usersStorage needs to be networked and data efficiently protectedUnder-investments during the downturn (aging infrastructure)

D t ti d t k t ffi d bli 2Data creation and network traffic doubling every 2 yearsSecular growth driverUnderpins continued maintenance level of infrastructure spending

Ethernet will become converged network of choiceEconomics of Ethernet always win

Vendor consolidation will continueTrend toward stack integrationBut still room for best-of-breed players

9

IT Users Need to Spend Money Today to Save Money Tomorrow

Data Center EvolutionData Center Evolution

Virtualization = better hardware utilization, zero application downtime, simplified administrationVirtualized applications become mobile, not tied to physical assetsDrives network and storage spending

F E $1 S S Vi li i $2 3 B i S S

Source: NetApp, Inc.

10

For Every $1 Spent on Server Virtualization, $2-3 Being Spent on Storage

Return of The StackReturn of The Stack

More intelligence migrating to server layerVirtualization becoming the brains of the stack

Hardware utilization goes up when everything is virtualizedThreatens high margins of storage and network hardware over timeThreatens high margins of storage and network hardware over time

Cisco developed UCS in anticipation of this trend

HP, IBM, ORCL Server

VMW, MSFT Virtualization Intelligence

Intelligence

CSCO, HP, JNPR Network

Source: William Blair & Company, L.L.C.

EMC, HP, NTAP Storage

11

LT Threat to Storage and Network Margins From Value Shift

Secular Growth of Data and Network TrafficSecular Growth of Data and Network Traffic

50

Worldwide Digital Information GrowthWorldwide Network Traffic Growth

2530354045

ytes

/mon

th

2007-2012 CAGR: 46%5-Year CAGR: 42% 5-Year CAGR: 51%

es/ m

onth

05

101520

2006 2007 2008 2009 2010 2011 2012

Peta

byEx

abyt

e

2006 2007 2008 2009 2010 2011 2012Consumer Internet Consumer IPTV Business InternetBusiness IP WAN Mobility

•Source: Cisco’s Visual Networking Survey 2008 •Source: IDC, May 2009

Exabyte = 1 billion gigabytes

Both Roughly Doubling Every Two years

12

g y g y y

Data Networking Market

$57.8$60 2009 2013E CAGR

Data Networking Market

$40.3

$44.9$47.0

$39 2

$43.2

$48.2

$53.1

$40

$45 

$50 

$55 2009-2013E CAGREnterprise Networking: 10%

$36.0$39.2

$25 

$30 

$35 

$40 

n billion

s)

$10 

$15 

$20 

(i

$0 

$5 

2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013EEthernet Switches Application Switches RoutersWANO ti i ti St N t ki E t i V iWAN Optimization Storage Networking Enterprise VoiceSecurity Wireless Enterprise Video

•* Includes equipment sold to private and public sector, but not telecommunication service providers•Sources: Infonetics, Wainhouse Research, and William Blair & Company, L.L.C. estimates

E d 5 Y CAGR f 10% f S O ll

13

Expected 5-Year CAGR of 10% for Sector Overall

Data Storage MarketData Storage Market

$51.4$54.4$55 

2009 2013E CAGR

$36.6 $39.5

$43.2$44.9 $44.4 $45.6

$48.4$51.4

$40 

$45 

$50 2009-2013E CAGREnterprise Storage: 5%

$25 

$30 

$35 

n billion

s)

$10 

$15 

$20 (i

$0 

$5 

2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Sources: IDC and William Blair & Company, L.L.C. estimates

E d 5 Y CAGR f 5% f S O ll

Internal DAS NAS SAN Tape Automation SAN Infrastructure Storage Software

Expected 5-Year CAGR of 5% for Sector Overall

14

Cyclical Rebound UnderwayCyclical Rebound Underway

Expect snap-back in 2010 as IT spending recovers

12.0%10 7%12 0%

2007A 2008A 2009E 2010E 2011E 2012E 2013E

5.0%

8.7%10.7% 10.1%

8.5%9.5%

3.8% 2.8%

6.0% 6.2% 5.9%5.5%4.0% 4.4% 3.8%

2 0%4.0%6.0%8.0%

10.0%12.0%

-1.2%

-3.5%-1.5%

8 0%-6.0%-4.0%-2.0%0.0%2.0%

-15.2%18 0%

-16.0%-14.0%-12.0%-10.0%-8.0%

Networking Storage Servers

-17.5%-20.0%-18.0%

Sources: IDC and William Blair & Company, L.L.C. estimates

S d N ki E l C l Pl

15

Storage and Networking are Early Cycle Plays

Recent Results Bode WellRecent Results Bode Well

30%

40%

10%

20%

ue g

row

th)

‐10%

0%

(% y

/y re

venu

‐30%

‐20%

Jun/Jul Quarter Sep/Oct Quarter Dec/Jan QuarterPLCM JNPR EMC CSCO FFIVNTAP ISLN RVBD BRCD CML

16

Ethernet Convergence UnderwayEthernet Convergence Underway

Unified network fabric – reduces server, network, storage costsFibre Channel gives way to Ethernet-based networking over time

Before AfterUnified SwitchesLAN Switches SAN Switches

Unified NetworkLAN SAN

Source: Brocade and William Blair & Company, L.L.C.

Servers StorageServers StorageServers

17

Long-term Negative for Fibre Channel Infrastructure Providers

Vendor Consolidation Should ContinueVendor Consolidation Should Continue

/

A li i

Services

Applications

Middleware

Database

OSoftw

are

k OS

Hypervisor

Server

Sopu

ting

Stac

Network

Har

dwar

eC

omp

Storage

H

Source: William Blair & Company, L.L.C. estimates

Stack Building Driving IT Industry Consolidation

Selected Acquisitions in Networking and StorageSelected Acquisitions in Networking and Storage

Acquirer Target Price Target Descriptionq g g p

Oracle Sun Microsystems

$6.4 billion Sun offers a range of scalable servers, data storage products and services, and a wide range of software products

EMC Data Domain $2.1 billion Data Domain's de-duplication storage systems optimize data protection and disaster recovery

LSI ONStor $25 million ONStor provides clustered NAS solutions for both primary and value-tier LSI ONStor $25 millionstorage

Dell EqualLogic $1.4 billion EqualLogic offers iSCSI SAN systems and management softwareHP LeftHand $360 million LeftHand provides iSCSI SAN systems and software

Diligent undisclosed Diligent develops in-line data de-duplication software that is integrated with server and storage infrastructures to help organizations significantly reduce the amount and cost of physical storage capacitythe amount and cost of physical storage capacity

XIV undisclosed XIV provides highly scalable, high performance block-based storage systems using off-the-shelf hardware components and low cost SATA drives

HDS Archivas Cluster

$120 million Archivas delivers object-based storage repository software for fixed content (pictures movies check images etc )

IBM

Cluster (pictures, movies, check images, etc.)Tandberg $3 billion Corporate videoconferencing leaderStarent $2.9 billion Wireless networking equipment

Ironport $830 million Messaging security appliances for enterprise spam filtering and spyware protection

Scansafe $183 million Software-as- a-service (SaaS) Web security solutions for large and small

Cisco

Scansafe $183 million ( ) y gbusinesses

F5 Acopia $210 million Provides intelligent file virtualization solutions

Brocade Foundry $3 billionOffers enterprise Ethernet networking equipment, as well as application switching, security, network management and services products

Sources: Company Web sites

19

p y

Network DiagramNetwork Diagram

Enterprise DatacenterBranch Office

IP PBXMobile Clients

WAN OptimizationAppliance (D/C)

FC / FCoESwitch

Core Switch

Secure Router

Remote Clients WANCore Routers

StorageWeb/Application

Intrusion Detection

Secure-VPNWAN Optimization

Appliance

Wireless AP

R/B Switch

Corporate Firewall

Edge Router

Application DeliveryController

StorageWeb/Application Servers

Wiring Closet Switches

LAN 1 LAN 1 Corporate LAN clients:

IP PhoneDesktop PC

g

Enterprise Datacenter #2

LAN 1 LAN 1LANLAN

Corporate LAN clients:PC’s / Phones / WLAN / VideoVideo

Conferencing

Branch Office #2

•Source: William Blair & Company, L.L.C.

IPO Activity (2009-2010) – Networking and Storage

Deals completed

IPO Activity (2009 2010) Networking and Storage

Deals on file or expected to be filed near termDeals on file or expected to be filed near-term

21

Private Companies to WatchPrivate Companies to Watch

Networking

Storage

22

SummarySummary

Networking and storage experiencing near-term demand upswing

Secular drivers underpin long-term industry growth

Industry consolidation and convergence acceleratingIndustry consolidation and convergence accelerating

Brightening prospects for well-positioned privates

23

Appendix: Market Statistics

Appendix: Routers & Switches Market Size and ShareAppendix: Routers & Switches Market Size and Share

Enterprise Router Market Enterprise Ethernet Switch Market

$15.9 $17.1 $17.8

$14.2 $15.5

$17.9 $19.9

$21.8

$15 0

$20.0

$25.0

s)

2009-2013 CAGREthernet Switches: 11%$4.3 $4.3 $4.3

$3.1 $3.4

$3.8 $4.2

$4.6

$3 0

$3.5

$4.0

$4.5

$5.0

s)

2009-2013 CAGRRouters: 10%

$5.0

$10.0

$15.0

(in b

illio

ns

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

(in b

illio

ns

H iAdtran

Alcatel‐ Juniper

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Enterprise Router Market Share, 3Q09 Ethernet Switch Market Share, 3Q09

Juniper7%

3Com/H3C4%

Huawei2%

1%

Other10%

Brocade

D‐Link2%

Alcatel‐Lucent2%

1%

Other12%

Cisco76%

Cisco67%

3Com/H3C4%

Nortel3%

2%

HP ProCurve7%

25Sources: Infonetics and William Blair and Company L.L.C.

Appendix: WAN Op & ADC Market Size and ShareAppendix: WAN Op. & ADC Market Size and Share

WAN Optimization Market Application Delivery Controller Market

$1.0 $0.9

$1.2

$1.3 $1.4 $1.5

$1.0

$1.2

$1.4

$1.6

s)

2009-2013 CAGRWAN Optimization: 12%

$0.9

$1.1 $1.1

$0.9$1.0

$1.1 $1.2

$1.3

$1.0

$1.2

$1.4

$1.6

s)

2009-2013 CAGRApplication Switches: 10%2009-2013 CAGRApplication Switches: 10%

$0.5

$0.8

$0.2

$0.4

$0.6

$0.8

(in b

illio

n $0.9 $0.9

$0.2

$0.4

$0.6

$0.8

(in b

illio

n

d

WAN Optimization Market Share, 3Q09 ADC Market Share, 3Q09

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

F5

Radware9%

Brocade5%

Other7%

Blue Coat29%

Citrix3%

Juniper1%

Other14%

40%

Cisco25%

Citrix14%

Riverbed29%

Cisco24%

26Sources: Infonetics and William Blair and Company L.L.C.

Appendix: Security & Wireless Market Size and ShareAppendix: Security & Wireless Market Size and Share

Network Security Market Wireless LAN Market

$4.3

$5.1 $5.4

$4.9 $5.5 $5.6 $5.7 $5.8

$5.0

$6.0

$7.0

s)

2009-2013 CAGRNetwork Security: 4%

1.5

1.81.9

1.81.9

2.1 2.1 2.1

1 5

2.0

2.5

s)

2009-2013 CAGRWireless LAN: 3%

$1.0

$2.0

$3.0

$4.0

(in b

illio

n

0.5

1.0

1.5

(in b

illio

n

Network Security Market Share, 3Q09 Wireless LAN Market Share, 3Q09

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

0.02006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Fortinet5%

Other30%

D‐Link

HP Procurve3%

Other21%

Cisco35%

Juniper13%

Check Point11%

McAfee/Secured Computing

6%

Cisco53%

Aruba9%Motorola

Trapeze5%

4%

9%5%

27Note: Includes Enterprise and Service ProvidersSources: Infonetics and William Blair and Company L.L.C.

Appendix: Telephony & Video Market Size and ShareAppendix: Telephony & Video Market Size and Share

Enterprise Telephony Market Enterprise Video Market

$9.1 $9.7 $9.8

$7.7 $8.1

$8.7 $9.7

$11.0

$8.0

$10.0

$12.0

s)

2009-2013 CAGREnterprise Voice: 9%

$3.2

$3.8

$4.8

$3 0

$3.5

$4.0

$4.5

$5.0

s)

2009-2013 CAGRVideo Conferencing: 23%

$2.0

$4.0

$6.0

(in b

illio

n

$1.1

$1.5$1.8

$2.1

$2.5

$.5

$1.0

$1.5

$2.0

$2.5

$3.0

(in b

illio

n

Telephony Market Share, 3Q09 Enterprise Video Market Share, 2Q09

$0.0 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

$.02006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Tandberg

Other25%

Cisco20%

NEC

Other20%

38%

Polycom29%

Cisco8%

Avaya17%

Alcatel‐Lucent13%

Siemens12%

Nortel9%

NEC9%

28Sources: Infonetics, Wainhouse and William Blair and Company L.L.C.

Appendix: Storage Systems Market Snapshot

Market SizeCY09E ($B)

Expected5-Year CAGR

YoY GrowthCY09E

YoY GrowthCY10E

Top 3 Vendors2008A

Appendix: Storage Systems Market Snapshot

Internal 6.9 2% -16% -1.4%

Direct Attached (DAS) 4.1 -7% -4% -10%( )

Storage Area NetworkFC SAN** 10.5 4% 4% 3%

EMC (26%)HP (16%)IBM (15%)

Storage Area Network Dell (34%)Storage Area NetworkIP (iSCSI) SAN 1.9 24% 37% 26%

( )EMC (16%)NetApp (15%)

Storage Area NetworkMainframe

(ESCON/FICON)0.7 -4% -9% 0%

Network Attached (NAS) 3.6 6% 4% 3%EMC (39%)NetApp (27%)IBM (6.2%)

Total Storage Systems 28.3 4% -2% 1%HP (20%)EMC (16%)IBM (16%)

Tape Automation 1.4 -5% -9% -11%SUN (24%)IBM (24%)Quantum (22%)

SAN I f t t ** 2 5 6% 11% 3%Brocade (72%)Ci (23%)SAN Infrastructure** 2.5 6% -11% 3% Cisco (23%)QLogic (5%)

29Sources: IDC and William Blair and Company L.L.C.

Appendix: Storage Systems Market Size and ShareAppendix: Storage Systems Market Size and Share

$35 0 Non-Networked Networked2009-2013 CAGR

Networked Vs. Non-Networked (DAS+Internal) Storage Systems Market

$12 6$14.1 $15.8 $16 7 $17 6 $18.9 $20.4 $22.0

$20.0

$25.0

$30.0

$35.0

ons)

Non-Networked : -1%Networked: 7%

$12.5 $12.7 $13.5 $12.5 $11.0 $10.5 $10.6 $10.7 $10.7

$11.1 $12.6 $16.7 $17.6

$5.0

$10.0

$15.0

$

(in b

illio

$0.0 2005A 2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Top Networked Storage Vendor Market Share, 2008A

Top 10 Storage System Vendors' Market Share, 2008A

EMC34%

Dell

Sun3% Other

15%HP/LeftHand20%Fujitsu

2%

NEC1%

Fujitsu Siemens

1%Other15%

Market Share, 2008AMarket Share, 2008A

34%

Hitachi (HDS)13%NetApp

IBM10%

HP10%

3%

EMC16%

IBMDell/EqL%S Mi

Hitachi (HDS)

6%

NetApp6%

2%

13%NetApp12%

30Sources: IDC and William Blair and Company L.L.C. Note: Market Share adjusted for OEM revenues

16%11%Sun Micro6%

Appendix: Storage Software Market SnapshotAppendix: Storage Software Market Snapshot

Market SizeCY09E ($B)

Expected5 Y CAGR

YoY GrowthCY09E

YoY GrowthCY10E

Top 3 Vendors2008ACY09E ($B) 5-Year CAGR CY09E CY10E 2008A

Data Protection & Recovery 4 5% 3% 5%Symantec (33%)IBM (13%)EMC (12%)

Storage Replication 2.5 9% -4% 5%EMC (35%)NetApp (28%)IBM (10%)

Archiving 1.6 21% 22% 21%IBM (24%)Symantec (14%)A t (10%)Autonomy (10%)

Storage Resource Management(SRM) 1.2 7% 2% 5%

EMC (37%)CA (17%)IBM (17%)

Storage Device Management EMC (65%)Storage Device Management(SDM) 1.2 4% 2% 3%

( )HP (11%)Hitachi (8%)

Other Software* 2.3 4% 10% 4%

EMC (24%)

•Other software includes file systems software and infrastructure software (e.g., virtualization and volume management)•Sources: IDC and William Blair and Company L.L.C.

Total Storage Software 12.8 8 4% 7% Symantec (18%)IBM (13%)

31

Appendix: Storage Software Market SnapshotStorage Software Market

Appendix: Storage Software Market Snapshot

$9.9$11.2

$12.3 $12.8$13.7

$14.8$16.0

$17.5

$10 0$12.0$14.0$16.0$18.0$20.0

ons)

2009-2013 CAGRSoftware: 8%

$0.0$2.0$4.0$6.0$8.0

$10.0

(in b

illio

2006A 2007A 2008A 2009E 2010E 2011E 2012E 2013E

Top 10 Storage Software Vendors' Market Share, 2008A

EMC24%

Hitachi

Iron Mountain

2%

CommVault1% Other

21%

Symantec18%

IBM13%

NetApp8%HP

4%

CA4%

Sun Micro3%

Hitachi (HDS)

2%

32

13%

Sources: IDC and William Blair and Company L.L.C.

Team BiosTeam Bios

Jason Ader, CFA, is a senior equity analyst focusing on data networking technology.

Dmitry Netis joined William Blair & Company in August 2008 as a research

Jason joined William Blair & Company in September 2008 after serving as a managing director at Thomas Weisel Partners, LLC for more than eight years and as a research

l t t H C W i i ht & C f th

associate focusing on the data networking sector. Before joining William Blair, he was a research associate at Thomas Weisel Partners, LLC covering communications

i t d i d t tanalyst at H.C. Wainwright & Co. for three years.

equipment and semiconductor components.

Before joining the financial services industry, he worked for three years as an information officer at the Embassy of Israel in Washington D C here he as a

Before joining the financial services industry, he worked for over a decade in the high-tech industry, holding prod ct management marketing and engineering roles atof Israel in Washington, D.C., where he was a

speechwriter and project manager for U.S.-Israel bilateral programs. Jason holds a B.A. in comparative religion from Duke University and an M.A. in international relations from the Fletcher School at Tufts University.

product management, marketing, and engineering roles at Conexant Systems (former Globespan) and IBM. Dmitry holds a B.S. in electrical engineering with distinction from the University of Rochester, an M.B.A. from Rensselaer’s Lally School of Management, and a master’s degree in o c Sc oo s U v s y.

Phone: (617) 235-7519Email: jader@williamblair com

y Sc oo o g , d s s d gelectrical engineering from Cornell University.

Phone: (212) 237-2714Email: dnetis@williamblair comEmail: jader@williamblair.com Email: dnetis@williamblair.com

33

DisclosuresDisclosuresAdditional information is available upon request.

The prices of the common stock of other public companies mentioned in this report follow (prices as of 01/26/10)

Brocade Comm. Systems $7.45

Additional information is available upon request.

The prices of the common stock of other public companies mentioned in this report follow (prices as of 02/22/10)

Brocade Comm Systems $6 96Compellent Tech. $22.60Cisco Systems $22.90EMC Corp. $17.61F5 Networks $52.39Isilon Systems $7.00Juniper Networks $24.86NetApp $30.91Polycom $24.17Riverbed Tech $23 48

Brocade Comm. Systems $6.96Compellent Tech. $15.57Cisco Systems $24.30EMC Corp. $17.71F5 Networks $54.90Isilon Systems $7.42Juniper Networks $27.21NetApp $30.64Polycom $25.98

$26Riverbed Tech. $23.48

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

Current Ratings Distribution (as of 01/31/10)Coverage Universe Percent Inv. Banking Relationships* PercentOutperform (Buy) 66% Outperform (Buy) 5% Market Perform (Hold) 34% Market Perform (Hold) 1%

Riverbed Tech. $26.77

William Blair & Company, L.L.C. is a market maker in the security of this company and may have a long or short position.

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

Jason Ader attests that 1) all of the views expressed in this research report accurately reflect his personal views about any and all of the securities and companies covered by this report, and 2) no part of his compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed by him in this report.

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Underperform (Sell) 0% Underperform (Sell) 0%

assessment of expected performance is a function of near term company fundamentals, industry outlook, confidence in earnings estimates, valuation, and other factors. Outperform (O) stock expected to outperform the broader market over the next 12 months; Market Perform (M) – stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) – stock expected to underperform the broader market over the next 12 months; Not Rated (NR) – the stock is currently not rated.

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The ratings and company profile assessments reflect the opinion of the individual analyst and are subject to change at any timeThe ratings and company profile assessments reflect the opinion of the individual analyst and are subject to change at any time.

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34

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