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To: J Fieb who wrote (3202)	5/1/2001 11:11:21 AM
From: J Fieb	Read Replies (1) \| Respond to of 4808

Anjother take... Hitachi Shares Jump After Upbeat Earnings By Edmund Klamann TOKYO (Reuters) - Shares in Hitachi Ltd surged on Tuesday to a nine-month high, rewarded for the Japanese electronics sector's most upbeat earnings surprise so far in this year's earnings season after it beat profit forecasts. A key driver behind the company's strong results, which defied a string of earnings disappointments from high-tech manufacturers worldwide, was profit growth in its data storage systems that helped offset the damage from a recent downturn in demand for semiconductors and electronic components. Hitachi, Japan's largest electronics manufacturer, reported 342.3 billion yen ($2.77 billion) in consolidated operating profit for the year to March 31, on sales of 8.4 trillion yen. Despite its reputation for conservative earnings forecasts, the company had been widely expected to fall about 10 to 15 percent short of its 2000/01 operating profit target of 335 billion yen, after a sudden slump in demand for high-tech goods and components during the second half. Hitachi was one of the few big Japanese electronics makers not to cut profit targets this spring that had been set in headier times last autumn. The market seemed not to care much that Hitachi missed its net profit target, posting a 104 billion yen figure instead of the 125 billion yen it projected, nor that it expected an 18 percent drop in operating profit in the current business year to 280 billion yen due to continued weakness in chips and devices. Hitachi's shares, the most actively traded on the Tokyo Stock Exchange on Tuesday, surged to 1,355 yen, their highest in more than nine months, before retracing modestly to close 11.7 percent higher at 1,338. Hitachi's results were announced after the end of trade on Friday and the markets were closed on Monday for part of this week's series of Golden Week holidays. Growth In Storage The market appeared to be focusing on the strong results and prospects for Hitachi's new data storage products, which have won praise from industry analysts and racked up strong sales in recent months despite a slowdown at rivals such as industry leader EMC Corp Demand for data storage systems has shown relative resilience amid the technology sector's recent downturn, given their ability to boost efficiency and cut costs for corporations with vast volumes of data to store. Hitachi said its computer division, which includes storage systems, scored 33.9 billion yen in operating profits in 2000/01, far above the target of 6.0 billion yen, while a more than doubling of that to 71.0 billion yen was forecast for 2001/02. This, Hitachi said, would help offset an 88.0 billion yen drop in operating profit in 2001/02 from its semiconductor and electronic device division, which is forecast to be one billion yen in the red this year on an operating basis. Analysts wrote glowingly about Hitachi's prospects in storage systems, with Merrill Lynch citing them as a key reason for raising its long-term rating on Hitachi to ``buy'' from ''accumulate.'' ``Storage product profits are beginning to exceed management's target, suggesting that Hitachi's efforts in this area are gradually beginning to pay off,'' Merrill Lynch analyst Hitoshi Shin wrote in a note to clients. Hitachi and U.S. data management software vendor Veritas Software Corp in February announced a sales and service alliance, beefing up what analysts said was a weak spot in the Japanese company's offerings. Hitachi's pleasant earnings surprise marked a sharp turnaround from just two years ago when it reported a net loss of 337 billion yen, its biggest ever, due largely to restructuring costs in its semiconductor operations. The company, which makes a wide range of products from washing machines to nuclear power plants, has reported progress in several areas, including reduced exposure to the volatile DRAM chip business and higher profitability at its electric power and industrial systems division.

To: J Fieb who wrote (3202)	5/31/2001 3:04:40 PM
From: J Fieb	Read Replies (2) \| Respond to of 4808

HDS, tells it's story to Forbes. Wonder what management software outfit they will buy? Thursday May 31, 2:30 pm Eastern Time Forbes.com The Fastest-Growing Storage Company By Lisa DiCarlo In October 2000, Forbes ran a cover story on storage leader EMC , a story that laid out all the competitive pressures the company faces. But it made no mention of a company that has emerged as the biggest threat to EMC's high-end storage business: Hitachi Data Systems . "That won't happen again," says Dave Roberson, chief operating officer at HDS. ADVERTISEMENT The oversight isn't surprising, considering how fast fortunes are lost in the technology business and the fact that HDS had only recently materialized as a real player. HDS, the American wholly owned subsidiary of Japan's Hitachi , has made inroads very quickly and with almost no marketing or advertising hoopla. According to HDS, its market share of high-end storage revenue is about 20% today. And Roberson says HDS' overall business will grow 50% a year, twice the industry rate. At $1.6 billion in sales, HDS is a fraction of the size of EMC , which had $8.8 billion in fiscal 2000, but some believe HDS is putting price pressure on the entire high-end storage segment. In fact, Morgan Stanley said margin squeeze driven by HDS is its "biggest concern" about the sector. Merrill Lynch says HDS is the fastest-growing storage company--first-quarter revenue growth hit 145% in year-over-year terms--and is experiencing "clear share gains versus EMC and everyone else." HDS has been in the storage business for years, but didn't turn on the juice until about a year ago, when it exited its bread-and-butter mainframe business to focus exclusively on storage. The strategy is to price its high-end systems below EMC and IBM . Roberson says its products are up to 50% cheaper than EMC's in certain configurations. HDS also has the benefit of leveraging existing customer relationships, to which it sold mainframes. "The reason HDS was successful [in mainframes] is because IBM's customer base was tired of getting overcharged and...Hitachi forced price concessions," says John Webster, an analyst at Illuminata. "Fast-forward to storage. EMC dominates that market, but their customers arguably pay the highest prices." EMC says it doesn't believe it's seeing any more price pressure than any other time in the past and notes the price per megabyte declines about 30% a year. Still, there's no denying EMC's profit growth has slowed considerably. For the first quarter 2001, EMC's sales were up 37% year over year, but net profit growth slowed to 20%, compared with 50% for the year-ago quarter. Spokesperson Dana Buchbinder says that's due to the growth of its services business, which carries lower margins. "Our success has to some degree been at [EMC's] expense," COO Roberson says. Customers and analysts say HDS products are just as good as those from EMC, and, in fact, customers can use competition as a lever to get lower prices. "We want to be able to drive economics to a point where, if there are competing technologies, we can drive prices down," says Kurt Cohen, vice president of hosting and co-location services at Qwest Communications , which is also an EMC customer. HDS doesn't have to shoulder the cost burden of research and development, relying mainly on its deep-pocketed parent company for development. Morgan Stanley believes HDS has at least a one-year technological head start on competitors. Indeed, Qwest says Hitachi has some compelling features in disaster recovery, including a feature that mirrors all of the data sitting in one data center to another center. As solid as HDS is at the high end of the storage market, it is missing some key pieces, the biggest of which is homegrown storage management software. HDS and its parent company are currently negotiating to buy such a company, Roberson says. EMC also has a huge advantage in terms of its 5,000-strong direct sales force, which dwarfs HDS. The latter is looking to bolster its go-to-market efforts by doubling the size of its sales force to 1,000 and looking for other server companies to sell its storage products along with their servers. They already have such an arrangement with Hewlett-Packard . But both expansion efforts are not without risk. Doubling the sales force increases expenses and could dilute profits. And navigating profit-sharing arrangements between vendors can be a slippery slope. HDS' product line is only now being flushed out. The high-end Lightning and midrange Thunder products were augmented this week with network-attached storage products, where barriers to entry are lower and more than at least a dozen competitors loom. Still, there's little doubt that as HDS fills out its product line and makes software acquisitions, it will boost its share of the storage market. History shows that no company holds onto its lead forever. Related Links at Forbes.com