EMC How high can it go? Message Board

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Technology Stocks : EMC How high can it go?

EMC 29.05

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Sep 15 5:00 PM EST

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To: FiloF who wrote (7381)	8/9/1999 4:12:00 PM
From: Mehitabel	Read Replies (1) of 17183

Filo-- report by Milunovich of Merrill Lynch on the acquisition, treats it as positive long term. Courtesy of the Yahoo EMC board >>Steve Milunovich- Strategic Positive EDT 9-Aug-99 Merrill Lynch (Investor Support) AMCALL EMC DGN RESEARCH SUMMARIES Intra Day Special Call Investor SupportEmc Corp (Emc, $56 3/4, B-1-1-9) 99e $1.07 00e $1.40 o EMC announced it is acquiring Data General (DGN; 6-6; $17 3/8) for $1.1 bill. o We view this as a strategically smart acquisition. Financially it is less clear although company expects deal to be accretive in 2000. Weakness in EMC's shares may be attributable to uncertainty about accretion. o DGN management wanted pooling in order to allow shareholders to participate in litigation with IBM and DGN management does not want pieces of company sold. o We believe EMC management would have preferred puchase accounting. o Given that the transaction is a pooling EMC cannot sell Avion server group for 2 years which we view as a negative. Avion is expected to be run separately but revenue in this business could suffer. o We could justify deal clearly on Clariion business as EMC is paying 2.5x revenue of Clariion which is in line with similar transactions. o EMC indicated that users were asking for a midrange product and EMC indicates that midrange should add 40% to EMC's available market so it will now be $50 bill vs previous estimates of mid $30bill. o In our view there is an important defensive element to acquisition as we believe EMC is trying to keep Clariion away from competitors o We continue to like EMC shares as this is a long term strategic positive for EMC. One issue in the short term is the server business and whether EMC can maintain 30% revenue growth with drag from server business.(S. Milunovich)<<

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