EMC How high can it go? Message Board

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Technology Stocks : EMC How high can it go?

EMC 29.05

0.0%

Sep 15 5:00 PM EST

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To: JDN who wrote (10486)	6/20/2000 4:23:00 PM
From: Gus	Read Replies (2) of 17183

I haven't looked into the details of this proposed spinoff as to me its not that big a deal (ie the McData stock we will get wont be material in relation to our EMC holdings IMHO-but again that is without studying it) Don't be too sure about that, JDN. Take a look at the market capitalization of the following companies. siliconinvestor.com Take note of the caps of BRCD ($17.4B) and ANCR ($914M). Both are in the FC switch business and are getting into the director switch business. Mcdata is the dominant ESCON/FICON (90+% market share) director switch and FC-based (99%) director switch vendor. It is coming out with its own FC switch soon. As you know, FC director switches are high-performance combinations of FC switches that allow more servers to connect to the SANs. BRCD posted $62M in sales in the last quarter. ANCR posted $6.2M in sales in the last quarter. MCDT posted $47M in sales in the last quarter. Like BRCD and ANCR, MCDT was unprofitable in the previous 3 years during the pre-Y2K validation phase of the FC switch market. MCDT posted cumulative losses of $6.7 million for the last 3 years, although, it posted revenues of $47M and net income of $5.3M in the last quarter ALONE reflecting the start of a powerful product cycle that dovetails with the powerful post-Y2K corporate upgrade cycle involving SANs. Comparing PSRs (based on annualized last quarter's sales) BRCD - 68.8 x $252M in annualized sales - $17.4B ANCR - 36.5 x $ 25M in annualized sales* $913M MCDT - ???? x $188M in annualized sales $????? [*ANCR is merging with QLGC.] Assuming MCDT finds a PSR level between ANCR and BRCD: At a PSR of 40x sales = $7.5B At a PSR of 50x sales = $9.4B At a PSR of 60X sales = $11.3B Again, the best component designs tend to flow from the best system designs. Mcdata clearly benefits from its dominance of the ESCON-based director switch market and its invaluable access to the EMC-IBM-Hitachi customer base, which not surprisingly have the most complex computing environments. As such, it wouldn't be surprising to see Mcdata command a premium in the market.

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