To: J Fieb who wrote (11543 ) 11/16/2000 1:50:44 PM From: jad Respond to EMC Corp. (EMC) 90 +1 3/16: A forward p/e of 87x is not scaring Bank of America Securities from initiating coverage of the king of storage infrastructure with a Strong Buy and a 12-month $120 price target. The analyst views EMC as a core holding for technology investors and believes storage is an essential component of Internet infrastructure. Also, Bank of America believes EMC is one of five pillars of technology, joining Microsoft, Intel, Cisco and Sun....EMC's two goals are: 1) while EMC dominates the storage area network (SAN) arena, they are looking to penetrate the network attached storage (NAS) space and 2) increase software to reach 20% of sales. Entering the NAS field is a cause for concern for investors of players in that space, particularly Network Appliance (NTAP), the NAS leader. EMC's management believes the company will be the leader in the NAS market in 2001. The company believes that the upcoming launch of its new mid-market appliance will go a long way towards achieving this goal. This mid-range NAS product, code-named Chameleon could be a drag on the shares of NTAP when unveiled. While EMC has a long way to go before outstaging NTAP in the NAS space, this launch will be a precursor of additional competition which would pressure margins. Network Appliance recently warned of slowing sequential growth rates. On the software front, EMC's recent purchase of CrosStor is the latest of several software acquisitions in its effort to boost software sales to 20%. The industry is realizing that software is one of the key features that separates a million-dollar EMC storage system from a few dozen $500 hard disks. EMC uses software to fend off increasing competition from IBM, Sun Microsystems and others. However, the CrosStor acquisition is a help to both of EMC's goal as its software is primarily used in the NAS market....EMC is unique in that it provides an end-to-end storage infrastructure portfolio consisting of storage systems (both SAN and NAS), software, networking and service and support. We believe the company has tremendous upside, but at such a high multiple, we would be wary of entering the stock at these levels. -- Robert J. Reid, Briefing.com
