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

To: Allegoria who wrote (8816)	1/20/2000 10:42:00 AM
From: jad	Read Replies (1) \| Respond to of 17183

EMC: The Storage Juggernaut by Chris Connor EMC {EMC} dominates the world market for enterprise storage systems and software. The company's storage hardware primarily consists of RAID (redundant array of independent disks) memory storage and retrieval systems. RAID combines several hard disks into one storage unit to offer disk-fault tolerance and higher performance than a single hard disk. Currently, RAID represents the preferred method of mass storage for important data. Although EMC is starting to focus more intensely on storage software, storage hardware represents about 80 percent of EMC's total sales. Key Information Infrastructure Play Besides being able to provide infrastructure to any information intensive industry, EMC has developed, specifically, into a major beneficiary of e-commerce companies' overwhelming need for information infrastructure. In fact, three out of the five most visited e-commerce sites have used EMC products to build their information infrastructures. Enterprise storage systems provide information infrastructure for e-commerce companies because they allow customers to find information about products and to buy those products by enabling efficient billing. Enterprise storage makes billing more efficient because it improves response times from information requests and information availability is substantially increased. Moreover, enterprise storage enables companies to track customer activity information with billing record information from each customer. Billing record information makes billing more efficient and allows bill processing to be spread evenly over each month. Risks EMC's biggest risk may be its heated relationship with one of its biggest competitors, IBM {IBM}. On December 23, the Wall Street Journal announced that IBM had filed a lawsuit alleging that EMC had violated a patent agreement and had committed fraud. About nine months earlier, EMC and IBM entered into a patent cross-licensing agreement. This agreement dictates that IBM can license any EMC patents (even those that are acquired through the purchase of other companies) and vice versa. In addition, the agreement states that EMC must aid IBM with any patent dispute that IBM has with a company of which EMC acquires at least 25 percent. Problems arose when EMC acquired Data General in October. IBM believes that a prior patent dispute with Data General should have been dropped the moment that EMC's purchase of Data General was approved. Instead, IBM alleges that EMC committed fraud by moving ownership of ten patents (including those that Data General says IBM violated with IBM's AS/400 computers) to recently formed DG Patent Holdings LLC one day before the purchase of Data General by EMC was approved. DG Patent Holdings is co-owned by EMC and an unknown charitable foundation. IBM is fighting this case so vehemently because Data General's patent infringement claims could be worth up to $1 billion. No trial date has yet been set to settle this matter of EMC's alleged patent agreement and alleged fraudulent actions. Investment Summary EMC stands head and shoulders above its competitors as the largest and best-known storage company highlighted in this series. Investors who are unfamiliar with other leading storage companies like Network Appliance {NTAP} and Brocade {BRCD} probably know about EMC due to its immense size and soaring stock price. In the short term, EMC's stock could continue its ascent to new all-time highs if it beats earnings estimates again this quarter. The probability that EMC will beat earnings estimates this quarter is quite high since the company has been able to eclipse earnings estimates in each of its last five quarters. Over the long term, EMC should continue to garner a great deal of investors' attention as the storage industry propels itself into the spotlight after being largely considered a boring business by investors.