Gus, RE: In early March, EMC indicated that they reined in its orders at Emulex because they were still working through some HBA inventory so you already have a concrete idea of how fast they respond to inventory build-ups.
If EMC reacted so quickly in early March, why was inventory higher at month end in the face of declining sales?
Hey, I'm not saying that EMC is going to all of a sudden write off a CSCO-like $2.5 billion for the quarter end 30 June. What I am saying is that fact is that EMC was starting to let inventories get high last quarter. EMC is a company that is built for growth. When the opposite occurs, many growth companies have difficulty adjusting, to their detriment.
Last year's 1Q, EMC also built up inventory in the face of a 1 quarter sequential decline in revenues, in expectation of higher revenue the rest of the year, a correct decision. This year, EMC built inventory in the face of a decline of revenue in the 1Q, but will apparently not have higher revenue, at least in the near term. It will be interesting to see the balance sheet for the quarter end 30 June. |
