May 01, 2004

Wall Street Transcript Interview

LeftHand Networks Inc.

(YAB605) TWST: Can we start with a brief historical overview

of LeftHand Networks?

Mr. Chambers: Let me start by saying that LeftHand Networks

is the leader in the IP SAN segment of the $50 billion storage

industry. This is an emerging market that is leveraging the Ethernet

to move storage onto the network for access by any database or application

server on the network. John Spiers and I started LeftHand

Networks back in 1999 with a vision of simplifying and standardizing

networked storage. We bootstrapped the company initially, completing

a software prototype by late 2000. In a very difficult funding

environment we closed our first round of venture funding in 2001 on

the strength of this technology. In fact, we were oversubscribed.

With $19 million in A-round funding, LeftHand officially launched

its solution, a scalable networked storage subsystem based on Left-

Hand SAN/iQ software technology. Market reception was more than

we could have hoped. There was — and is — a tremendous need for

this technology in the storage industry. Early success enabled us to

close on a second round of funding last year, a $20 million B-round

led by the Sprout Group, which was, again, oversubscribed. Today,

LeftHand Networks has nearly 500 systems running in production

environments with companies across a multitude of industries. We

have recently signed two major OEM software-licensing agreements

with well-known industry partners that will be embedding LeftHand

SAN/iQ software into their storage products.

TWST: Can you tell us about some of the products and

solutions that you supply?

Mr. Chambers: LeftHand Networks is a storage software

company with solutions that enable companies to build full-featured,

enterprise-class storage area networks (SANs) very quickly and easily.

You can think of our software as a kind of network storage operating

system, leveraging standard Ethernet technologies. By that I

mean that SAN/iQ provides all of the deployment, provisioning and

management capabilities you need to move storage away from captive

servers and on to a standard, Ethernet network, for access by any

network-attached server. SAN/iQ is a modular, portable software

platform that can be embedded into a server, router or disk subsys-

BILL CHAMBERS is Founder and President/CEO of LeftHand Networks Inc. Mr.

Chambers has more than 20 years of experience in high technology companies,

specializing in new product introductions and market creation and development.

During his career, Mr. Chambers has held key management positions in a number of

high technology startups and Fortune 500 companies. As Founder, President, and CEO

of LeftHand Networks, Mr. Chambers has led the company through two rounds of

private investment funding, development of the storage industry’s first IP-based

Storage Area Network (IP SAN) solution, successful and active partnerships with

Fortune 100 and emerging growth companies, and widespread acknowledgement of

the company as the industry leader in the rapidly growing IP SAN market. Prior to

LeftHand Networks, Mr. Chambers was President and CEO of GE Fanuc Asia Pacific, a joint venture between

General Electric, Inc., and Fanuc, Ltd., of Japan. He started his career with Texas Instruments in sales and sales

management roles. He holds a Bachelor of Science degree in Mechanical Engineering and a certificate of

completion from the Stanford University Executive Management Program.

C O M P A N Y I N T E R V I E W

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tem to enable centralized management of an infinitely scalable pool

of native or third-party storage resources. This technology leverages

the power of industry standards and commodity hardware to remove

much of the complexity associated with today’s storage subsystems.

TWST: Can you give us some background on your closest

competitors and the competitive advantage that you have

over them? What makes your company unique?

Mr. Chambers: The technology that makes our company

unique also makes it difficult to define direct competitors. Traditional

SAN solutions from companies like EMC and Hewlett-Packard use

proprietary technology known as Fibre Channel. It’s a very complex

technology that is used, much like ours, to move storage away from

servers and onto a shared network – in this case, a proprietary, Fibre

Channel-based storage area network or Fibre Channel SAN (FC SAN).

There are significant, fundamental differences between an

IP-based SAN and a Fibre Channel SAN, most of which will persist

over time. Chief among these are the related issues of expense and

complexity. Fibre Channel SANs require deployment and operation

of a separate, Fibre Channel network. Fibre Channel network components,

such as switches and routers, tend to be significantly more

expensive than their Ethernet counterparts. While prices are coming

down due to competitive pressure, the fact remains that Fibre Channel

will remain a separate network technology requiring specialized

equipment and expertise, as well as weeks to deploy.

LeftHand storage area networks represent a new generation

of storage capability focused on very high scalability and functionality,

delivered with breakthrough simplicity. By way of comparison,

LeftHand customers are typically up and running with our solution in

less than an hour. Another advantage of the LeftHand solution is that

because it leverages Ethernet technology, it eliminates the distance

limitations inherent in native Fibre Channel transport. In fairness,

Fibre Channel SANs tend to be very fast, and distance limitations are

being addressed with the emergence of Ethernet encapsulation/tunneling

standards such as IFCP and FCIP. Even so, with the emergence

of 10-gigabit Ethernet, and the pervasiveness of Ethernet

infrastructure and expertise, it is difficult to imagine how IP-based

SANs will not become the defacto standard for all but the most specialized

networked storage applications.

TWST: What do you see as some of the challenges facing

the company in the next several months?

Mr. Chambers: The key challenge that we face right now

is that we are still seen as an emerging growth company. Information

— corporate information — is key for any company, and so there is

always that concern about whether a newcomer, such as LeftHand

Networks, will be around for the long haul.

One of the things that we are excited about right now is that

market acceptance and demand have accelerated LeftHand’s move

into the second phase of our go-to-market strategy, that is, licensing

our software technology to third-party storage providers. We just announced

such a partnership with Crossroads Systems. LeftHand has

also signed a license agreement with a Fortune-100 player that we

are not able to announce at this time. Suffice it to say that these two

agreements, when made public, should go a long way in easing potential

customer concerns about LeftHand’s long-term viability.

TWST: Are you looking at any possible acquisitions in

the future?

Mr. Chambers: Yes, we are. And it won’t be the first time. Earlier

in our history, we acquired a small company called North Fork Networks,

which enabled us to accelerate our product development roadmap

by about 18 months. We currently have our eye on a couple of interesting

technology acquisitions that could similarly broaden our capabilities, as

well as enable the reach of our solutions into larger enterprises.

TWST: Could I have your take on some of the key issues

or trends that are affecting the storage space at the moment?

Mr. Chambers: Probably the biggest one is the relentless

march of data generation and storage; everything is becoming digitized

or digital, and there is just an ever-growing need for more and

more storage capacity. The challenge that most companies face as a

result — the crux of it — is complexity. Most of the storage architectures

that people have deployed today were fundamentally designed

back in the 1970s. These systems were never envisioned to do

the things that we are asking them to do today. One unintended consequence

of this mismatch is that deployment and management of

these systems is extremely complex and time consuming. The problem

facing IT managers today is that there has been no easy way to

manage storage growth without adding additional storage administrators.

This is one of the key issues that our technology addresses.

It significantly reduces complexity and simplifies the deployment,

provisioning, and management of enterprise and department-level

data storage solutions.

“There is a tremendous opportunity in the storage arena that continues to

unfold as we move forward. Demand for storage is growing. Complexity

is extremely high. Companies such as LeftHand Networks will be changing

the storage landscape significantly over the next two-to-four years.”

C O M P A N Y I N T E R V I E W ——————— L E F T H A N D N E T W O R K S I N C .

TWST: How important is the international market to

LeftHand Networks’ bottomline?

Mr. Chambers: It is actually very important and we will be

moving into both Europe and Asia this year. The largest segment of

the market today is in North America, followed closely by Europe

and then Asia Pacific. Through our OEM strategic partnerships, we

will be moving into both international arenas later this year.

TWST: Where do you see the company heading in the next

two to four years? What is the strategic direction of the company?

Mr. Chambers: LeftHand Networks has always focused

on building a successful, standalone public entity. If you look at the

storage industry, especially some of the public companies that are in

this space today, there is a tremendous need and opportunity for storage-

focused innovation. As such, LeftHand will be focusing on taking

this company through the IPO process within the next

two-to-four years. With the growth we have experienced over the

past several quarters, we are confident that we are on the right trajectory

to make this happen.

TWST: Would you give us some background on yourself

and other key personnel?

Mr. Chambers: My background includes an engineering

degree and a career built around sales, marketing and business leadership

in the technology space. My first position out of engineering

school was with Texas Instruments. LeftHand Networks is number

four for me, as far as startup ventures. Before LeftHand, I had a systems

company that I sold to General Electric. As part of that acquisition,

I moved to Asia to be CEO of one of GE’s technology business

units, with responsibilities spanning all of Asia, from India to China,

Japan, down to Australia and New Zealand.

The rest of our management team is equally experienced.

David Bangs, our Vice President of Sales, previously managed sales

for Quantum’s network storage business. Tom Major, our Vice President

of Marketing, is a 20-year veteran in both software and storage

systems. Tom started his career at Hewlett-Packard, winding up his

career at HP as a senior manager with HP OpenView. Tom joined

LeftHand Networks from Storage Technology Corporation where he

was the General Manager of their disk-based business. Karl Chen,

Vice President of Business Development, came to LeftHand from a

long and successful career with technology companies like Compaq,

Dell, HP and others. John Spiers, LeftHand’s co-founder and CTO,

has spent more than 20 years in the disk drive and storage industry.

John started his career designing and building the industry’s first

Winchester disk drive. More recently John was in charge of network

storage systems at Maxtor. Clearly a strong management team.

TWST: Is LeftHand Networks doing anything at the

moment to get the message out to the rest of Corporate America?

Mr. Chambers: We are doing quite a bit. We have focused

our message on the folks who worry most about storage infrastructure

in the enterprise — the IT folks. We use a number of vehicles to

reach this market. We attend the leading industry conferences, and in

fact, had a number of our customers present at Storage Networking

World. We have won numerous awards at these shows both for technology

leadership and, perhaps more important, application of our

technology to real-world issues. We also participate in educational

seminars with our channel partners, as well as direct mail, e-mail and

Internet advertising. Our Website provides a tremendous amount of

information to current and potential users, and we’re also very fortunate

to get good coverage from the press and analyst community.

TWST: Is there anything you’d like to add?

Mr. Chambers: I think I would suggest to your readers

who aren’t quite as familiar with the storage industry to take a few

minutes to do some research on this space. There is a tremendous opportunity

in the storage arena that continues to unfold as we move

forward. Demand for storage is growing. Complexity is extremely

high. Companies such as LeftHand Networks will be changing the

storage landscape significantly over the next two-to-four years. It’s

going to be a very exciting time in the industry.

TWST: Thank you.

BILL CHAMBERS

Founder and President/CEO

LeftHand Networks Inc.

1688 Conestoga

Boulder, CO 80301

(303) 449-4100

(303) 442-0965 – FAX

www.lefthandnetworks.com

e-mail: info@lefthandnetworks.com

© 2004 The Wall Street Transcript, 67 Wall Street, NYC 10005

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