EMC response to today's news (from the Yahoo thread):
ubj: HP & EMC
Date: 99-05-04 08:25:01 EDT
From: Pearson_Polly@emc.com (Pearson, Polly)
There is an article in today's Wall Street Journal reporting that HP is
expected to form a storage agreement with Hitachi Data Systems. HP will
have a storage announcement on Wednesday, May 5 and this will likely be part
of the announcement. How will this effect EMC?
1. EMC is not changing its earnings or revenue outlook. Although
revenue from the HP base accounted for 13% of EMC's sales in Q199, HP
business to EMC that was unaided by EMC field reps was very small. EMC
knows where every EMC box is installed in the world and maintains direct
contact with the customers. In addition, we've been building our sales
operation in order to get more business directly and gain better direct
access to the marketplace. Our field force has increased by 50%, from
approximately 1000 in Q198 to 1500 in Q199.
2. EMC has account control in HP/EMC accounts. EMC generally helps to
sell the product to HP customers. EMC ships the product to the end customer
and then installs and services the product. (EMC's products "call home" to
EMC, regardless of whether HP sold it or EMC sold it.)
3. EMC feels we can continue to generate substantial revenue from the
HP customer base -- because we maintain direct contact with the HP
customers. We expect to continue with the track record of 10 - 20% of sales
into the HP base.
4. All EMC products that get shipped under the "reseller" agreement
with HP go out with EMC's name on the box (rather than HP's name.) EMC has
the brand recognition. Customers make the decision to buy EMC storage.
5. Regarding the HDS box, this is not new. EMC has been successfully
competing against it and customers have already made their choice -- note
EMC has the leading and growing marketshare in the Enterprise Storage space,
HDS' share has been declining. Further, the HDS solution lacks the full
software and service offerings for which EMC has become so well known.
6. Product-wise, this announcement does not change the competitive
landscape. (Remember when IBM announced it would resell the established STK
Iceberg? )
At this point, the reseller agreement with HP is still in place. EMC will
simply plan on taking more business directly. We have built the field force
substantially over the past year in order to execute such a plan. Over the
past year, EMC's SG&A has increased from 18.5% to 19.9%. At the same time
our gross margin has increased 520 basis points, from 48.0% to 53.2%. We
have the infrastructure in place to get the business directly if need be and
we have the most important ingredients for success in the sophisticated
market for high end storage:
The Product
The Distribution
The Service.
-- And Focus on Storage --
Please call if you have any questions or concerns. Thanks.
Polly Pearson, Director of IR
Mike Gallant, IR Manager
Seth Traub, IR Manager
508-435-1000, x77263
Poster:Trydown
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