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

To: JDN who wrote (10828)	8/3/2000 11:32:19 AM
From: Tony Viola	Read Replies (1) \| Respond to of 17183

JDN, I agree with your advice about NTAP having two strong companies going after their market, a small nitpic if I may make a pain in the *** of myself. The word purely here: they now have two Goliaths focusing purely on their market (CPQ and EMC), makes it sound, maybe, like they're focusing completely on the NAS market. Not quite of course, as EMC has the SAN market and CPQ has computers from PCs to "million dollar Nasdaq quote banks" (Himalayas), besides storage. I looked at the specs for the CPQ Tasksmart NAS box. It's a combination of technologies from their industry leading Proliant servers (dual Pentium III, motherboard, etc.) and their Storageworks storage products (drives, controllers, DLT tape, etc.). So, you know they'll be able to build the new unit at very low cost, as component procurement, assembly, manufacturing and test for the new product will fit right in with the existing products. Tremendous economies of scale will take place here because of volume buying, etc. of parts that are essentially all used in existing products. EMC's advantage for their NAS products is probably in sales pull-through along with their industry leading SAN and related software products. Good call about the huge new pressure on NTAP. Tony

To: JDN who wrote (10828)	8/4/2000 6:24:05 PM
From: Gus	Read Replies (2) \| Respond to of 17183

Well put, JDN. Storage networking is on fire. One only has to look at the earnings reports of the fibre channel-based hub and switch market (BRCD, EMLX, QLGC, JNIC, FNSR, etc) to see that the torrid growth is being driven by companies like EMC, IBM, and Compaq -- the top 3 storage vendors -- who understood early on that SAN vs NAS was a false war and are now reaping the benefits of prescient R&D and product development. EMC is clearly in the lead with its hi-end SAN (ESN) posting 750% Y/Y growth at $400 million in 2Q00 revenues and its hi-end NAS (Celerra) posting 660% Y/Y growth at $100 million in 2Q00 revenues. Now, EMC is going after the middle-market in a big way. Clariion (mid-range SAN) grew 44% quarter to quarter as EMC added more Symmetrix features and drove more of Clariion sales through its direct sales force -- from 40% of sales in the 1Q2000 to 60% of sales in the 2Q2000. What was particularly impressive about this was that 43% of Clariion's second quarter sales came from products that were introduced only in the second quarter! In much the same way that Celerra feeds off the rich featureset of the ESN (Symmetrix), EMC's mid-range NAS solutions promises to work seamlessly with its hot Clariion line and should be a humdinger. This should allow EMC to dominate this market segment in typical fashion just as it is exploding from $1 billion (2000) to $7-$11 billion (2003) in revenues. Two interesting tidbits from the Emulex CC: 1) EMC, long a top 3 customer via Data General/Mcdata, recently qualified EMLX's dual channel HBA (host bus adapter), which is close to 2x more expensive than its regular HBAs. According to EMLX, these dual channel HBAs will go into the Celerra product line and they expect orders to pick up right away. "Easily 3,000 to 5,000 HBAs per quarter" was EMLX's conservative estimate. EMC also buys HBAs from other vendors. 2) The surges in Compaq's ordering patterns indicate that NT-based storage networking activity is just starting to pickup. Close to a million servers were sold in the June quarter with NT accounting for most of the units sold and UNIX accounting for a significant portion of the revenues because it still dominates the high-end. The mid-range storage networking market clearly involves hooking up all those UNIX and NT server-attached storage or 'islands of information.' Unix-based storage networking is expected to grow at 60% CAGR while NT-based storage networking is expected to grow at 100+% CAGR. Anyway, here's the latest report from SG Cowen further confirming EMC's long-planned move on the middle-market: EMC - Buy Bullish about free/infinite bandwidth at analyst day. EMC believes it is best-positioned to benefit from coming content-driven boom in storage; dramatic growth in "individual content" will drive growth for centralized storage, as opposed to storage at the edge, esp with fast optical pipes driving toward "free/infinite" bandwidth. Plans to take leadership position in burgeoning network-attached storage (NAS) via existing Celerra plus forthcoming mid-range NAS product, and mid-range systems mkt via extensions of CLARiiON. Mgt believes Y/Y growth will accelerate in H2; expect $12B rev for 2001. Mkt cap $187B. EMC $83 cnetinvestor.com