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

To: pirate_200 who wrote (12087)	2/9/2001 2:21:45 AM
From: Gus	Read Replies (3) \| Respond to of 17183

Setting aside the first stone cast, did you even bother to check the balance sheet? Perchance you're color-blind, these are well-known accounting red flags worthy of further investigation and a vigorous reexamination of your most cherished assumptions about NTAP and its competitive positioning. I'll address your other points individually and as time permits. I gotta tell you dude, I'm sorely tempted not to even attempt to disabuse you of your most glaring misconceptions. SALES Sales Q2Q Y/Y 4Q2000 $200.0 32% 120% 1Q2001 231.2 16% 124% 2Q2001 260.8 13% 109% 3Q2001 288.4 11% 91% ACCOUNT RECEIVABLES AR AR/Sales Q2Q Y/Y DSO 4Q2009 $108.9 54% 9% 91% 49 1Q2001 138.2 60% 27% 101% 54 2Q2001 161.9 62% 17% 106% 56 3Q2001 222.6 77% 37% 123% 69 boards.fool.com AR - Account Receivables DSO - Days Sales Outstanding Thanks to FoolishErik at Fool.com

To: pirate_200 who wrote (12087)	2/9/2001 3:56:43 AM
From: Gus	Read Replies (3) \| Respond to of 17183

BTW: the reason EMC was down today is that there is a rumor out there that they had the exact same problem this January, a soft start due to the budget freeze/release process. Wait a minute. Before you drag EMC into this, keep in mind that about 80% of EMC's revenues (MRQ: $2.6B) come from existing customers with no single customer accounting for more than 1% of revenues, no single top 10 customer in one quarter becoming a top 10 customer in the succeeding quarter, and no single vertical accounting for more than 10% of revenues. As a result, EMC's order flow tend to be more predictable than the rest of the storage industry especially since enterprise storage prices generally go down at least 30% a year and customers have learned to program their buys throughout their budget year to take advantage of these steady price declines. You can actually track this through the work-in-process component of the inventory item in the 10Q. Generally, EMC takes the customers orders and either fills it from Finished Goods or by assembling it. EMC's final assembly and testing process typically takes 21 to 25 days. You can take a virtual tour of the Franklin manufacturing facility and see for yourself part of the reason EMC's boxes command a premium. emc.com Consequently, because of the highly recurring nature of its revenue streams and its final assembly and testing process, the work in process item roughly approximates the future revenues that are booked as soon as shipped in line with EMC's revenue recognition policy (see tailend). EMC ended the last quarter with $1.025B in inventory. We won't know until the 10K the percentage of work-in-proces (WIP) inventory that was subsequently booked as revenues during the first few weeks of January so let's examine the last 5 quarters especially since EMC is developing a new sales channel for Clariion. Inventory Raw Work in Finished Total Materials Process Goods Inventory (WIP) (TI) 4Q1999 $ 38.2 $379.7 $201.0 $ 619M 1Q2000 68.8 435.4 174.3 678M 2Q2000 55.4 493.1 209.4 758M 3Q2000 49.7 619.6 199.3 869M 4Q2000 ? ? ? 1,025M Derivations WIP As a Percentage Succeeding Of Succeding Quarter's Quarter's WIP/ Storage Hardware Storage Hardware TI WIP Revenues Revenues 4Q1999 61% $379.7 $1,267M (1Q00) 30% 1Q2000 64% 435.4 1,516M (2Q00) 27% 2Q2000 65% 493.1 1,647M (3Q00) 30% 3Q2000 71% 619.6 1,816M (4Q00) 34% 4Q2000 65%* 666.2** 2,221M++ (1Q01) 30%+ * 61+64+65+71=261; 261/4=65% ** 65% x $1,025M = $666.2M + 30+27+30+34=121; 121/4=30% ++ 666.2M/30%=$2,221M Let me reiterate that despite increasing sales, EMC's Finished Goods inventory has hovered around $200M at the end of each of the last 5 quarters excluding 4Q2000 so it's fair to use Work-in-Process as one gauge of how the quarter is going. Since WIP as of the end of 4Q2000 was probably booked as revenues during the first few weeks of January and since the amount ($666.2M) suggest another record revenue quarter ($2.2B in storage hardware revenues alone) this rumor about a bad January is probably false. Besides, even if true, there are still two more months to go so why the concern this early? My guess is that shortsellers are again using the grapevine to amplify jitters in a market still recovering from the Cisco miss. In particular, how well the sober dispatches from Compaq and Sun about a slow January as well as the rampaging price actions of IBM and Dell provide useful backdrop to these rumors. Gus EMC's Revenue Recognition Policy (from 1999 10K) The Company generally recognizes revenue from product sales upon shipment provided that no significant post-delivery obligations remain and collection of the resulting receivable is reasonably assured. When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled. The Company accrues for warranty costs, sales returns, and other allowances at the time of shipment based on its experience.....

To: pirate_200 who wrote (12087)	2/9/2001 11:43:00 AM
From: Gus	Respond to of 17183

You are obviously very attached to your stock. That's probably why you just keep on lurching from one emotional argument to another, raring for a fight, itching for a chance to show your fiercely independent spin of the undigested company line. .....Gus, is this your material or from EMC marketing? .....apparently this argument isn't yours either, why not also be fair and bring up the reply: .....I'm asking you to tell the truth and not misrepresent information which you are clearly doing. .....Well, when you go back to however you are talking to, ask them this simple question .....You are taking this personally and all I am asking for is an honest, balanced argument. Why don't you take a break? I'm still trying to figure out if crossing *"a calendar year boundry budgeting cycle"* creates any tear in the fabric of the time-space continuum.