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

To: Road Walker who wrote (12797)	7/5/2001 6:35:54 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 17183

OK, so is this the bottom for EMC? This really resolves into the question: Is this the bottom for EMC's customers? This is the crucial question. Annualize EPS of 0.05, and you get a PE of 30/(0.05 X 4) = 150. Pricey. Very pricey. The only way it isn't pricey, is if those results are trough conditions, and we get a rapid snapback in IT spending (and EMC earnings). Will it happen? Everyone is making optimistic noises about 1Q02, but no one knows, and it is essentially unknowable. I bought some at 37, a lot more at 28, and have limit orders to double up at 22. It'll be interesting to see if we take out the April lows. NTAP did, but EMC hasn't (so far). Have investors already written off 2001, and further bad news about current conditions (and the next 2 quarters) will be ignored? I guess we'll find out tomorrow morning.

To: Road Walker who wrote (12797)	7/5/2001 6:48:44 PM
From: t2	Read Replies (1) \| Respond to of 17183

``We generated a significant amount of revenue over the course of the final days of the quarter,'' continued Teuber. ``We are in the process of closing the books and, therefore, the information presented in this announcement is preliminary. We wanted to make sure we communicated as quickly as possible, but we will not be in a position to comment further until we announce full second-quarter results on July 18.'' OK..how do we interpret this? It seems to me they leaving some upside room to their numbers. Maybe the revenue numbers goes higher but not the EPS (speculating). If they were to report numbers that were better than in their preannouncement, it would obviously create a credibility issue. I guess they want to beat the estimates, one way or another.<g> The second question is...does it mean business was picking up at the end of the quarter more than they expected? For those reasons, I am going to try to buy in at the lows of morning ....for a trade of course.<g>

To: Road Walker who wrote (12797)	7/6/2001 5:26:26 AM
From: Gus	Read Replies (1) \| Respond to of 17183

Ouch! Preliminary revenue estimate of $2B implies a 7% Y/Y decline and the following sequential growth/decline rates: Revenue Sequential Growth/Decline 1Q2000 $1.823B - 2.8% 2Q2000 $2.146B +17.7% 3Q2000 $2.283B + 6.4% 4Q2000 2.621B +14.8% 1Q2001 2.345B -11.0% 2Q2001 ~2.000B -15.0% The sharp sequential decline in gross margin is eye-catching and thought-provoking. Gross Operating Net Revenue Margin Margin Margin 1Q2000 $1.823B 56.6% 23.1% 18.2% 2Q2000 $2.146B 57.9% 25.3% 20.0% 3Q2000 $2.283B 57.7% 27.3% 20.1% 4Q2000 $2.621B 59.2% 27.2% 21.5% 1Q2001 $2.345B 55.1% 20.3% 17.0% 2Q2001 ~$2.000B ~45.0% - ~4.5%-6.7% Assuming weighted average shares (diluted) of 2.241B, the preliminary EPS range of $0.04 to $0.06 translates to a net income range of $90M to $134M which, in turn, translates into a net margin range of 4.5% to 6.7%. Gross Margin less SG&A and R&D equals Operating Margin so it looks like SG&A will be pared back further while R&D will be preserved. Most recently, EMC pared 4% across the board while sparing sales and engineering. As a result, EMC rolled back its employment rolls to start of the year numbers. Further reductions may occur in a similar manner in 6 month rollbacks. Those numbers are the clearest sign yet that EMC is continuing to escalate the battle against rivals that are presumably bleeding even more badly because they don't have the margin buffer that EMC has in its higher-margin software business which is offset somewhat by the lower-margin service business. To illustrate, these are A.G. Edwards' estimates of 1Q2001 storage revenues (hardware, software, services). The last column - 2000 Storage Software Market Share -- is an overlay from the April 2001 Gartner report on Storage Management Software that shows the stark disparity in competitive positioning. 2000 1Q2001 Storage Storage YoY Relative Software Company Revenue Growth Mkt.Share Mkt. Share EMC $2.264B 36.9% 36.0% 25.5% Compaq 1.105B 3.6% 17.6% 2.7% HP 680M 8.5% 10.8% 1.7% Sun 608M (5.0%) 9.7% NM IBM 590M 38.8% 9.4% 16.1% HDS 485M 145.0% 7.7% NM Dell 365M 46.0% 5.8% NM NTAP 200M 8.7% 3.2% 3.0% Total Major $6.297B 24.8% 100.0% -49.0% hds.com Top 10 Storage Management Software Vendors 2000 2000 1999 1999 Company Revenue Market Share Revenue Market Share EMC $1.341B 25.5% $ 803M 19.6% VERITAS $ 855M 16.3% $ 505M 12.3% IBM $ 844M 16.1% $ 724M 17.7% CA $ 613M 11.7% $ 799M 19.5% BMCS $ 224M 4.3% $ 229M 5.6% NTAP $ 156M 3.0% $ 53M 1.3% STK $ 144M 2.7% $ 113M 2.8% Compaq $ 143M 2.7% $ 45M 1.1% LGTO $ 142M 2.7% $ 172M 4.2% HWP $ 87M 1.7% $ 68M 1.7% Others $ 703M 13.4% $ 578M 14.1% Total $5.251B 100.0% $4,088B 100.0% Source: Gartner Dataquest. Rankings are based on new license sites. dmreview.com The closest parallel to EMC's situation lies perhaps in the wireless handset business where Nokia continues to succeed in sacrificing operating margin in order to increase its market share from around 30% to 40% while the global wireless industry undergoes a severe inventory correction against the backdrop of a slowing global economy. Already, the other top 10 players have been forced to radically change their business plans just to stop the bleeding. Noteworthy is the lackluster demand for the stocks of everybody in wireless despite the way Nokia telegraphed its intention to swap short-term profitability for long-term advantage. Put another way, if EMC ever aims for break-even for a quarter or two in a year or 18-month period increasingly considered to be lost in terms of significant stock appreciation, the server vendors won't be able to hide the magnitude of the losses of their storage businesses.