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

To: brownu88 who wrote (10236)	5/18/2000 12:10:00 AM
From: adsorb	Read Replies (1) \| Respond to of 17183

IBM's loss of EMC's disk-drive business is Seagate's gain By Bolaji Ojo Electronic Buyers' News (05/15/00, 8:55 p.m. EDT) EMC Corp. said it expects to increase the number of disk drives it buys from Seagate Technology Inc., following the inability of IBM Corp. to meet the OEM's demand for next-generation enterprise storage devices. A spokesman for EMC said in an interview earlier today that the company and IBM have agreed to terminate portions of an agreement that calls for EMC to purchase $3 billion worth of disk drives from IBM over a period of five years. EMC will continue to purchase IBM disk drives but without the "financial targets" of the prior agreement, the spokesman said. Seagate, Scotts Valley, Calif., is already the biggest supplier of storage devices to Hopkinton, Mass.-based EMC. That relationship is likely to deepen in the months ahead, EMC said, because of IBM's inability to keep up with the crucial transition to 10,000-rpm drives. "We continue to evaluate the best technology around -- that's what our customers expect -- unfortunately, IBM has had problems, which the company has widely acknowledged," said the EMC spokesman. "We will continue to buy disk drives from IBM but we are looking at other sources, including Seagate, which is already EMC's largest supplier." Some other disk drive suppliers are likely to benefit from IBM's woes, which tamped down the company's hardware revenue in the first quarter. EMC also buys disk drives from Fujitsu Ltd. and may have to turn to other suppliers to fill some of the void created by IBM. In March 1999, EMC agreed to purchase up to $3 billion worth of disk drives from IBM. Since then, however, the two companies have been locked in litigation involving Data General Corp., which has been acquired by EMC, and other lawsuits involving patent infringement allegations. The agreement annulling the financial targets of the March 1999 contract is part of a larger out of court settlement of those lawsuits, EMC said on Friday. IBM also agreed to pay an undisclosed amount to EMC as part of the settlement. EMC said in a statement on Friday that the two companies had agreed to dismiss all "outstanding litigation ...with no findings or admissions of liability." They also agreed to refrain from patent infringement lawsuits for five years. EMC had revenue of $6.7 billion in 1999, more than 85%, or $5.75 billion, of which was derived from its storage operations. While Seagate said EMC is one of its most important customers, the company declined to disclose the percentage of its revenue generated through sales to EMC. A Seagate spokesman hinted that the company expects sales to EMC to increase and that the two companies are discussing opportunities created by the rupture of EMC's agreement with IBM. "They [EMC] are a very strategic and important customer of Seagate," a spokesman for the disk-drive manufacturer said. "The majority of EMC products carry Seagate drives, and that is very indicative of our products strength and acceptance in the marketplace." During a conference call in April to discuss its first quarter results with analysts, IBM admitted that its hardware division sales dropped partly because of problems in the hard disk-drive unit. "We are working to resolve our problems in the 10,000-rpm server drive market, but we have lost precious time in a market that has little patience," the company said. IBM couldn't immediately be reached for comment.