Corporate Family Benefits Storage Vendor

Storage vendor MTI Technology Corp. [Nasdaq:MTIC] in Anaheim, Calif., can tell you how nice it is to have a nurturing family. The small company, one of a nest of mutually supportive start-ups created by former Novell Inc. chief Ray Noorda, has seen its stock price skyrocket from a one-time low of $3 per share to almost $35 last Friday.

Although its billion-dollar market cap is still tiny compared with competitor EMC Corp.'s [NYSE:EMC] $111.6 billion value, the company is profitable and has had positive earnings surprises for the past four quarters, according to Boston-based First Call/Thomson Financial.

MTI's products have demonstrated the high performance, fast transaction response and high reliability required by Internet-based companies, said Brion Tanous, an analyst at First Security Van Kasper in Los Angeles. As a result, Tanous said, MTI is attracting successful Internet-based customers, such as online ad services vendor Doubleclick Inc. "Doubleclick is growing by leaps and bounds, and MTI is providing their storage," he said.

MTI is also getting business from another Noorda start-up, an application service provider business called Center 7.

As the vendor of storage for Center 7, MTI will benefit from the application service provider marketplace, whose hunger for storage is driven by its business of hosting applications and data for user companies that don't want to manage information technology themselves, according to Lisa Rudley, an analyst at New York-based Sidoti & Co.

"We believe that Center 7 will become one of MTI's biggest customers as it continues to grow its [application service provider] clients," wrote Rudley in her November report.

Aside from the profitability of its high-end RAID systems, MTI may also benefit from its 20% equity stake in another Noorda-led company, Linux vendor Caldera Systems Inc., analysts said.

Tanous said MTI's stake in Caldera, which is expected to soon enter the optimistic market for Linux stocks, "is the icing on the cake."

If Caldera goes public and its price goes up, MTI's value will rise by anywhere from $7 to $21 per share, Rudley wrote in her report. The firm will become richer as Caldera does, she said.

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