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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Tony Viola who wrote (7222)	7/26/1999 8:05:00 AM
From: John Carragher	Read Replies (1) \| Respond to of 17183

July 26, 1999 IBM Is Expected to Unveil High-End Storage System By ALEC KLEIN Staff Reporter of THE WALL STREET JOURNAL International Business Machines Corp. Monday is expected to introduce a high-end data-storage system, re-entering a business it abandoned three years ago in the face of stiff competition from EMC Corp. The new product, code-named Shark and developed at a cost believed to run in the hundreds of millions of dollars, will be Big Blue's flagship entry in the high-end disk-storage market, a huge and fast-growing field that is being driven by the exponential growth of e-commerce on the Internet. IBM, of Armonk, N.Y., was once the top player in the high-end storage field, but lost its lead to smaller competitors who discovered a way of providing huge storage capacity by lashing together drawers full of cheap personal-computer hard drives. For the past three years, IBM has resold large storage systems made by Storage Technology Corp. EMC Is Top Ranked In 1998, EMC was ranked No. 1 in the high-end storage-systems market with a 35% world-wide share in dollars, according to industry estimates. At No. 2, IBM has 22% of the market. Ron Kilpatrick, general manager of IBM's storage-systems division, said the new system is IBM's most "significant" product announcement this year. He vowed IBM's offering "will be very competitive with EMC's product line across the board," and added, "we intend to be the leader." If it is successful, the storage system could generate about $600 million to $700 million in revenue next year, estimates Laura Conigliaro, an analyst at Goldman Sachs & Co. The new system is targeting a $13 billion to $15 billion world-wide market for external disk-storage systems, Ms. Conigliaro said. The product, which IBM calls the enterprise storage server, is expected to be unveiled Monday at the Waldorf-Astoria Hotel in New York. IBM expects it to hit the market in September. The company said it will continue to sell products made for it by Storage Technology, known as StorageTek, at least until their agreement expires at the end of 2000. For StorageTek, Louisville, Colo., the impending loss of IBM is a major blow. Big Blue is its biggest customer, accounting for about 15% of its revenue. StorageTek has been grappling with missed financial targets and delayed storage-device shipments because of manufacturing glitches. "We tried to persuade them we have a superior product," said Roger Archibald, general manager of StorageTek's enterprise-disk business group. "What IBM is asking their customer base to do is to step backward to an older storage architecture," he added. System Could Pose Threat The new system could also pose a threat to EMC, Hopkinton, Mass., which in recent years has been one of the fastest-growing hardware makers and sports a market value of about $60 billion. But EMC maintains it holds a technological edge. IBM's product "does not appear to be, even in hardware terms, on par with ours," EMC spokesman Mark Fredrickson said. "And in software terms, we know it's not even close, from all the reports we've heard." Still, he called IBM a "formidable" adversary and said EMC intends to keep close tabs on its rival. IBM touts the storage system as a new box containing new technology that can transfer data faster than its competitors' models and IBM's other offerings. IBM claims the system can store more information than anyone else -- from 420 gigabytes to 11 terabytes, or more than the printed collection of the U.S. Library of Congress. Its list price ranges from 44 cents to 51 cents a megabyte. IBM's new product connects to several computer-server platforms, including IBM's S/390 mainframe and AS/400 midrange server, as well as computers using the Unix and Windows NT operating systems. The product is based on its Versatile Storage Server, introduced last year and code-named Tarpon, which connects to the same platforms as the Shark, except for the S/390 mainframe.