EMC offers new
networked storage, sees
vast market
Monday March 1, 9:29 pm Eastern
Time
By Eric Auchard
NEW YORK, March 1 (Reuters) - EMC Corp. (NYSE:EMC - news), the No. 1 supplier of
corporate data storage, on Monday introduced new networked storage systems that extend its
capacity to store an entire company's data to remote offices and department work groups.
At a news conference, the Hopkinton, Mass. company set forth its strategy for taking a major chunk
of a market it said could have up to $50 billion in sales by 2002.
Michael Ruettgers, EMC's president and chief executive, estimated the new products could help
expand the potential markets the company targets to as much as $50 billion in 2002, up from the
$35 billion market it expects to address by 2001.
While the company declined to comment directly on how that would translate into specific revenues
for the company, Ruettgers said the new products would propel ''EMC quickly along the road to
our goal of $10 billion in revenue in 2001.''
Analysts who attended the event said that -- assuming EMC keeps its current 35 percent share of
the decentralized storage market -- it would mean much higher revenue growth beyond what EMC
previously guided investors to expect.
''I'm convinced we're at the beginning of a multiyear explosion of enterprise storage,'' Ruettgers said
in announcing EMC storage systems that can give employees a company-wide view of all the
information stored on company networks.
EMC is seeking to extend its dominance over the mainframe, high-volume storage market -- where it
has a 60 percent share -- and capture a growing share of the burgeoning market for data stored on
department networks or remote office computers.
This emerging market for centrally networked data storage on computers running Microsoft's
(Nasdaq:MSFT - news) Windows NT is expected to account for at least 44 percent of all
corporate storage sold in 2002, according to a forecast by market research firm IDC.
The information storage market is seeing explosive growth fueled by Internet use and the advent of
low-cost, high-speed systems that link centralized data centers to a company's far-flung operations.
On Monday, EMC introduced new Fibre Channel network storage and switching equipment that
allows multiple storage systems to be connected together. Such systems give a company an
enterprise-wide view of all the data stored on its computers, eliminating islands of isolated data
trapped in departments.
EMC customers -- drawn largely from the world's top 1,000 companies -- can use network storage
to speed their ability to respond to customer requests, while relieving internal data network
bottlenecks that frustrate employee computer users.
It boasts of having a two-to-four-year lead in software technology that allows its products to be
used to store data on every major computer system now available, while rival storage systems run
mainly on just one or two systems. Analysts agree.
EMC's refrigerator-sized units are packed with scores of hard disks it buys from disk drive makers
like Seagate. Knitted together with its software, its latest products can store up to 9 terabytes, or
trillion bytes of data.
Analysts at the meeting said EMC's estimate of its target market signaled the company could capture
up to $16 billion to $17 billion in revenues in 2002, assuming it maintains its current 35 percent share
of this fast-growing market.
Laura Conigliaro, Goldman Sachs's computer analyst, said by estimating a potential market of $50
billion in three years, EMC may be hinting that its goal of $10 billion in revenues two years from now
may be too low.
She said the larger market estimate suggests EMC's growth rate could reach 45 percent per year
over the next four years, which she calculated would amount to $16 billion to $17 billion in 2002.
''That's a disconnect,'' she said after the announcement.
Other Wall Street analysts agreed EMC was conservative, if not cagey, about its outlook for the
next several years.
But in management's view, the company was only being prudent. In response to an audience
question, an executive said EMC's forecast was for markets that are unlikely to take off for three
years or so, making growth hard to predict.
Ruettgers duly repeated the company's long-standing commitment that ''in 1999, we plan once again
to grow top and bottom line by greater than 30 percent.'' He stood his ground against analysts who
badgered him to project higher growth.
Still, EMC has a history of setting conservative forecasts that it then blows past when reporting
actual numbers. In 1998, annual revenues grew 35 percent year-over-year to $3.9 billion, while
earnings grew 47 percent compared with the 1997 year.
Asked how EMC can boost its forecast for the market to $50 billion in 2002, while retaining existing
forecasts for revenue growth and market share, a spokesman left open the possibility that it would
revise its financial outlook upward over time.
''If we do as well as we have in the past, then those are conservative numbers,'' EMC spokesman
Mark Fredrickson said.
EMC shares closed down $2.62 at $99.75, off an all-time high of $109.81 but up from a year-ago
low of $34.56 before EMC began a steady march upward as its rapid growth and market
dominance, attracted a wide institutional investor following.
Analysts said the stock was hurt by concerns over the emergence of competition in the networked
storage market, including a commitment Monday by disk drive maker Quantum Corp.
(Nasdaq:QNTM - news) to boost its networked storage offerings. |
