My comments on CC:
This is the most "down" CC I've heard, this quarter, or last quarter. Quite a contrast, especially, to the latest ones I've listened to, from AMAT, NTAP, TXN. I'm very long EMC, but this CC makes me think I made a mistake, and the problems are company-specific rather than industry or macro problems.
Sales still falling. Software, which is where they were moving the company to (I guess hardware is now going to be a loss-leader), was "weak" (their words).
EMC gross margins at 37%, quite a contrast to NTAP's 62%.
Turning over their low-end manufacturing to Dell, sounds like they have no hope of high margins on those boxes, ever (ugly thought: EMC selling commodity boxes full of commodity components). That's a game where pricing pressure is permanent, there is a continuous trade-off between margins and market share, and the lowest-cost producer wins. EMC has never played that game before, hasn't had to. Today, it's in the low-end; tomorrow.....?
With breakeven at 1.55B-1.50B/Q, and sales now at 1.3B, full-year 2002 EPS is going to be just about exactly zero. At best. When can they return to year-2000 levels of profitability? Not in 2003, no chance. Best case, 2004. Worst case......never. Sorry, that's the way it looks to me, and remember, I'm very long this stock. |
