Thanks a lot for a comprehensive and well thought reply.
Software, for example, accounted for nearly 50% of EMC's gross margin in its MRQ despite accounting for only 25% of storage sales. Nobody, I repeat, nobody else in storage has this kind of margin leverage
I will keep this in mind.
The better question is how long can its rivals withstand the competition before they have to regroup again
This regrouping may create confusion in the market for IT purchase managers and likely push them to delay their purchase decisions. I had seen similar confusion between ATM and Ethernet in networking market during 1994-1996 which delayed network deployments considerably. As you already now Ethernet eventually won.
Sure, EMC is competing against deep-pocketed competitors like IBM, Sun, HWP, Compaq, Dell and Hitachi which can theoretically afford to absorb those losses indefinitely
IBM has been doing financial engineering for years and has been quite successful even now in post bubble era. But that too will change, eventually. Hitachi can keep feeding the other competitive sharks and hurt an honest and innovative company like EMC.
You won't find storage guys defecting to server start-ups because there are no server start-ups.
Execellent. Barriers to entry at its best.
So I presume that prominent startups like Nishan Networks, Confluent Networks and others are addressing the SAN market.
SERVER-STORAGE COMPARISON
I am not seeing data for Year 2001, YEAR 2002. Is that because those years really don't matter since real growth will kick in late 2002.
By the way, book value analysis tends to seriously undervalue software businesses. Practically meaningless in valuing growth cyclicals like EMC.
But just in case if E were to disappear(assumption) the only way to value a company is by using tangible book value or P/S ratio.
Case in point is Nortel Networks.
There were value fund managers like Thornburg buying it in mid 20s.
MSDW initially was giving NT a trough valuation of $ 8-10.
But then 2 months later started giving a trough valuation of $ 3-5, another fifty percent haircut. I understand it is not a good idea to compare NT and its market, both debt-ridden, with EMC and its fortune 500 companies market, both cash rich to some extant. But I brought this up, just to put things in perspective.
Is it true that SAN and Server-Storage markets are two distinct separate markets and will stay so and grow at a rapid rate in future just like the LAN market and the WAN market in networking.
Regards,
marginnayan |
