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

To: Steve who wrote (7260)	7/28/1999 12:28:00 AM
From: brian z	Read Replies (1) \| Respond to of 17183

Why EMC is Safe from IBM's Shark Storage System July 28, 1999 Chris Bulkey Late to market, and lacking some comparable performance features, IBM (NYSE: IBM) unveiled its much anticipated enterprise storage system (ESS) code named Shark. While sporting some impressive features, we believe that the competitive threat to EMC Corp. (NYSE: EMC) will be minimal. The initial IBM version lacks a critical performance application -- Fibre Channel connectivity, which essentially is the future of intelligent enterprise storage. Giving Shark a Fibre Channel feature will require a separate connection box, which will increase cost and lower performance. Adding the connection is also not a viable long-term solution. EMC's Symmetrix, on the other hand, does allow direct (native) connection. Another area in which Shark falls short is the software required to run the storage functions. Shark has host resident software, which does not run on the storage system itself, and pales in comparison to the value added by EMC's software functionality. Increasing software sales has been an area in which EMC has invested heavily over the past few years. The payoff has been dramatic. The company is on track to generate $700 million in software sales -- more than double 1998 levels. While IBM intends to have a more complete Fibre Channel and software functionality by late 2000, EMC will likely be into a new product cycle by then, which again will leave IBM behind the curve. In addition, IBM has a somewhat spotty record for storage execution, which will likely delay a complete offering until sometime in 2001. EMC is confident that IBM will have difficulty in delivering on its promise. In terms of convenience and ease of storage, Shark again lags EMC's Symmetrix product. IBM's management notes that Shark can store can up to 11 terabytes (TB) of data, which on the surface appears to surpass Symmetrix. This claim is misleading because Shark requires extra cabinets to provide such capacity, which takes up more floor space. If EMC's product were to command the same floor space, it would be able to store up to 19 TB of data. Over the near-term Shark presents little challenge to EMC, and will likely be a product cycle behind EMC by the time it has full functionality. IBM is a great company, but storage represents only about 10% of revenue. The company's future growth lies more in its e-commerce and services business. Over the long-term, IBM remains EMC's biggest threat, but don't forget about EMC's tremendous software and services growth, which further enhances the company's market leading position. Some analysts believe that the market for data storage is big enough to support two key vendors. Deutsche Bank Alex Brown analyst Philip Rueppel believes that market growth will provide room for both EMC and IBM to compete. Bottom Line: EMC remains the premier enterprise storage system provider with the best products. It will continue to appeal to mission-critical users of data traffic like Internet service providers and large corporations.

To: Steve who wrote (7260)	7/29/1999 11:13:00 PM
From: Jack Gibson	Respond to of 17183

Steve: Have been out of touch for a couple of days. I am not familiar with Mylex. Obviously, it must possess either some good people or some good patents that IBM feels would add to their ability to take on EMC with their new Shark product. I have just finished reading all of the posts for the past two days, and I feel that the IBM "challenge" has been addressed by this thread quite adequately, especially the posts by Bill Fischofer. In my opinion, it was only a question of time before a major player decided to get after EMC's huge market share of the high end storage business. The other guys are just now waking up to what Ruettgers saw at least as far back as two or three years. But even he has been surprised at what the internet has done to the "intelligent storage" business. The demand for QUALITY and RELIABLE (just ask e-bay)storage management systems has simply exploded beyond anyone's wildest dreams. This business has several years to run at this pace, and EMC is in the cat bird seat. How long can they keep that seat? Who knows for sure? I don't, but I like EMC's position. I like the odds. Good trading, Jack Gibson