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

To: JRI who wrote (10288)	5/27/2000 9:13:00 AM
From: Fred Levine	Read Replies (1) \| Respond to of 17183

ay 26, 2000 Dow Jones Newswires EMC Falls After DLJ Raises Worries Over IBM Disk Drives By SCOTT EDEN NEW YORK -- EMC Corp. (EMC) shares slipped as much as 4% Friday after an analyst at Donaldson Lufkin & Jenrette, in a brief note to clients and the firm's sales force, said the storage maker could get stung by continued disk-drive production glitches at International Business Machines Corp. (IBM). "We believe that IBM's production problems on the 10,000 RPM drive are getting worse," DLJ analyst Kevin McCarthy wrote. "This will most likely affect EMC as the company uses the 10,000 RPM drive in the new Symmetrix 8000," a line of computer-storage systems that EMC introduced in late April. But EMC and other analysts following the company disputed DLJ's evaluation of the matter. The Hopkinton, Mass., company, among the biggest buyers of disk drives in the world, doesn't currently use IBM's high-end 10,000 RPM product at all. Rather, EMC's Symmetrix 8000 uses drives supplied only by Seagate Technology Inc. (SEG) and, in Japanese markets, by Fujitsu, said Mark Fredrickson, an EMC spokesman. Earlier this month, EMC said it dropped a commitment to buy $3 billion worth of IBM drives because the devices fell short of quality standards and because the company couldn't meet production deadlines. EMC does, however, have a contract to buy IBM's 10,000 RPM drives once they become available, "but only if they're able to meet our specifications," Fredrickson said. McCarthy said that although EMC "is working closely with Seagate to replace" IBM's drive in the new Symmetrix machines, "we do not know if they will be able to meet the strong order book." Fredrickson, however, said EMC is getting all of the supply it needs to easily cover demand. "Any suggestion that disk-drive supply will have any effect on our quarter is false," Fredrickson added. "This situation will not in any way affect our quarter or any of our business in the foreseeable future." He reiterated the company's top-line growth projection for 2000 of 25%. McCarthy wasn't immediately available to comment beyond his early-morning remarks. In the note McCarthy also said he believes "the shortfall in production will affect IBM's quarter." IBM spokesman Rob Wilson said there is no change in the company's plans for the device. "We remain on track for limited shipments in the second quarter and a ramp-up of production in the third quarter," Wilson said. Production woes left IBM's disk-drive sales in the first quarter $350 million below last year's level. The company had overall revenue in the first quarter of $19.35 billion. IBM Chief Executive Louis V. Gerstner said in his annual address to stock analysts earlier this month that the disk-drive manufacturing problem "cost us in the first quarter, and it's going to cost in this quarter." EMC stock recently traded at 108 9/16, down 1 15/16, or 1.8%, after falling as low as 105 1/2 earlier Friday. Midday volume reached 3.4 million, compared with average daily turnover of about 6 million. Shares of IBM, Armonk, N.Y., moved at 106 5/8, up 1/8, or 0.1%. They earlier fell to 104 9/16. Volume totaled 3.1 million shares, compared with the daily average of 7.9 million. -Scott Eden; Dow Jones Newswires; 201-938-5253 fred