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Technology Stocks : Son of SAN - Storage Networking Technologies -- Ignore unavailable to you. Want to Upgrade?

To: Gus who wrote (3663)	7/18/2001 8:30:34 AM
From: J Fieb	Read Replies (1) \| Respond to of 4808

EMC wieghs in... EMC Reports Second Quarter Results Information Storage Leader Achieves Continued Strong Growth in Software, Networked Information Storage Despite Difficult Economic Conditions HOPKINTON, Mass.--(BUSINESS WIRE)--July 18, 2001--EMC Corporation (NYSE:EMC - news) today reported financial results for the second quarter of 2001, reflecting the extension of its leadership position in the most advanced and fastest-growing areas of the information storage market despite the extremely difficult economic conditions facing many of its customers around the world. Total consolidated revenue for the second quarter was $2.02 billion, 6% lower than the $2.15 billion recorded in the second quarter of 2000. Net income for the quarter was $109 million, compared with $429 million in the second quarter of 2000. On a diluted basis, earnings per share were $0.05 in the quarter, including a charge of approximately $.01 per share to cover the cost of staff reductions, compared with $0.19 in the second quarter of 2000. Information storage revenue (which represented 97% of EMC's total consolidated revenue in the second quarter) was $1.96 billion, 2% lower than the $2 billion recorded in the second quarter of 2000. Software revenue grew 42% over the year-ago quarter to $498 million, achieving its most successful quarter ever and representing 25% of EMC's total consolidated revenue. Revenue from networked information storage grew 56% over the year-ago quarter to $714 million, as customers continued to choose EMC solutions for their leading-edge SAN (storage area network) and NAS (network-attached storage) deployments. Revenue from information storage services grew 73% compared with the year-ago quarter to $232 million, reflecting the expansion of EMC Professional Services as a major factor in helping customers design, deploy and manage their networked information infrastructures. Mike Ruettgers, EMC Executive Chairman, said, ``The global economic environment has become much tougher. I cannot recall a more difficult environment in terms of technology spending than the one that has unfolded over the past few months. It is now expected that IT spending may shrink on a year-to-year basis for the first time in decades. More than 800 companies have made pre-announcements that the spring quarter would be below expectations. By and large, these are our customers. We are working with them to build information infrastructures that deliver the highest value and greatest business impact over both the short and long term.'' Joe Tucci, EMC President and CEO, said, ``Weakness in capital spending is taking a big bite out of IT budgets in a number of industries around the world. Delayed purchases and cancelled projects were the largest factors preventing us from hitting our revenue goals for the second quarter, and the revenue shortfall led directly to lower margins. As expected, EMC's strongest growth is coming from the areas that deliver the greatest impact to customers: networked information storage and information storage software. The growth drivers we identified at the beginning of the year are bearing fruit, and they represent the brightest future for EMC.'' Tucci continued, ``In times of economic difficulty and reduced visibility, leaders have both the opportunity and the responsibility to continue investing to advance their leadership and to take great care of their customers. We are doing exactly that. We will continue to invest in R&D at levels that will increase our technology lead and in the sales and services resources needed to grow market share and maintain our industry-leading customer satisfaction levels, while continuing to attack unnecessary costs. Our strategy is aimed squarely at long-term profitable growth and market leadership. When the fog lifts, EMC's technological stature and market leadership will be stronger than ever.'' EMC's competitive success during the second quarter suggests continued gains in market share across various segments of the worldwide information storage industry. Head-to-head competition resulted in major EMC wins at companies like BEA Software, Harrah's Entertainment, Staples, and The Hartford Financial Services Group in the U.S.; Abbey National Plc, Volkswagen, Metro AG, AGF Informatique, Spain's National Institute of Statistics, T-Systems Italia, and Pirelli in Europe; Shanghai Stock Exchange, Jiangsu Mobile Communications, Lycos Korea, Telstra, and Singtel in the Asia-Pacific region; and Gedas, Banco Sudameris Brasil, and Universo Online in Latin America. The strength of EMC's balance sheet is another important indicator of the company's positioning for acceleration when the global economy improves. Inventories remained nearly flat compared with the first quarter of 2001. Cash and investments increased to nearly $4.9 billion at the end of the second quarter. Highlights of the second quarter included further validation of EMC's market leadership and increasing momentum: Gartner Dataquest released its 2000 information storage market analysis naming EMC the #1 supplier of information storage systems in 2000 with 34.6% of the market, a greater share than the combined totals of the next four suppliers; Fast Company magazine, in its fourth annual ``Best Practices of the Best Companies'' awards issue, named EMC ``The World's Most Customer-Centric Company''; EMC Celerra HighRoad software was named ``Storage Product of the Year'' by InfoWorld; CLARiiON IP4700 NAS systems won PC Magazine's award for ``Innovation in Infrastructure;'' EMC Symmetrix was named the World's Best Storage System for IBM iSeries Servers by Midrange Technology Showcase magazine; and, for the second year in a row, EMC received General Motors' Supplier of the Year award. Also during the quarter, EMC expanded its E-Infostructure Developers Program - the industry's largest open software integration initiative - to include CLARiiON systems and Celerra Network File Servers; delivered ``E-port'' interoperability, the world's first multivendor switch interoperability for open network storage; announced availability of SRDF-DM (data mobility) and SRDF-FC-IP, new functionality for the world's most successful data-replications and disaster-recovery software; and also teamed with five other storage vendors to provide cooperative support and drive initiatives for the first qualified cross-vendor, interoperable storage networking solutions to come from the Storage Networking Industry Association (SNIA). EMC Corporation is the world leader in information storage systems, software, networks and services, providing the information infrastructure for a connected world. Information about EMC's products and services can be found at emc.com. This release contains ``forward-looking statements'' as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in economic conditions in various geographic markets and fluctuating currency exchange rates; (ii) an unexpected decline in the revenue growth rate without a corresponding decline in costs; (iii) competitive factors, including but not limited to pricing pressures, in the computer storage and server markets; (iv) component quality and availability; (v) rapid technological and market change and the transition to new products; (vi) the relative and varying rates of product price and component cost declines; (vii) the ability to attract and retain highly qualified employees; (viii) the uneven pattern of quarterly sales; (ix) risks associated with strategic investments and acquisitions; (x) the Company's ability to execute on its plans; and (xi) other one-time events and other important factors disclosed previously and from time to time in EMC's filings with the U.S. Securities and Exchange Commission. -0- EMC CORPORATION Consolidated Statements of Income (in thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2001 2000 2001 2000 Revenues: Net sales $ 1,736,485 $ 1,935,472 $ 3,793,411 $ 3,560,919 Service and rental 284,370 210,455 572,239 407,606 2,020,855 2,145,927 4,365,650 3,968,525 Cost and expenses: Cost of products 892,221 756,608 1,768,832 1,407,488 Cost of service 179,322 145,824 354,995 286,003 Research and development 245,627 194,286 469,667 356,066 Selling, general and administrative 617,336 506,149 1,210,372 954,268 Operating income 86,349 543,060 561,784 964,700 Investment income 64,239 48,051 135,848 88,694 Interest expense (3,597) (2,956) (6,855) (9,827) Other income/(expense), net 2,136 (433) 4,642 (1,069) Income before taxes 149,127 587,722 695,419 1,042,498 Income tax provision 40,265 158,685 187,762 281,474 Net income $ 108,862 $ 429,037 $ 507,657 $ 761,024 Net income per weighted average share, basic $ 0.05 $ 0.20 $ 00.23 $ 0.36 Net income per weighted average share, diluted $ 0.05 $ 0.19 $ 90.23 $ 0.34 Weighted average shares, basic 2,207,655 2,174,291 2,205,770 2,140,049 Weighted average shares, diluted 2,239,799 2,240,805 2,247,021 2,238,031 As a % of total revenue: Gross margin 47.0% 57.9% 51.4% 57.3% Selling, general and administrative 30.5% 23.6% 27.7% 24.0% Research and development 12.2% 9.1% 10.8% 9.0% Operating income 4.3% 25.3% 12.9% 24.3% Net income 5.4% 20.0% 11.6% 19.2%

To: Gus who wrote (3663)	7/19/2001 11:18:20 AM
From: J Fieb	Read Replies (3) \| Respond to of 4808

Gus, After you have had time to digest MCDT results and cc please let us know what you think.... SOURCE: McDATA Corporation McDATA Reports Second Quarter Results Revenue Up 44 Percent Over Prior Year, Pro Forma EPS of $.04, Results In Line with Guidance BROOMFIELD, Colo., July 18 /PRNewswire/ -- McDATA Corporation® (Nasdaq: MCDTA - news, MCDT - news), a global leader in open storage networking solutions, reported a 44 percent increase in revenue to $81.3 million for its second quarter ending June 30, 2001. These results were driven by solid demand for recently-introduced high-availability Switch products and continued strong sales of its market-leading, high-end enterprise Director products, which together provide storage area network (SAN) solutions for the entire enterprise. Pro forma net income for the second quarter 2001, excluding non-cash charges related to stock options, declined 24 percent to $5.0 million, compared to pro forma second quarter 2000 net income of $6.6 million. Pro forma diluted earnings per share (EPS) were $.04 in second quarter 2001, compared to $.07 in the second quarter of 2000. EPS was consistent with the lower end of the company's guidance range for the quarter, which primarily reflected production constraints and continued costs related to the manufacturing ramp-up of its new multi-product line. ``Our revenue performance was strong, at the high end of our guidance range, despite a difficult market environment,'' said Jack McDonnell, Chairman and CEO of McDATA. ``We were particularly pleased with the increased traction evidenced by our major new product introductions in the storage area network (SAN) market. This includes strong demand for McDATA's fifth generation, 64-port 6000 Series Director, as well as our new high-availability Switch products, which together provide us with the most complete SAN hardware product suite in our market. McDATA's Switch revenue in the second quarter exceeded $10 million. '' Second Quarter Details McDATA's revenue from products reached $72.4 million in the second quarter, a 43 percent increase over the same period in 2000. Revenue from software and professional services totaled $4.8 million, increasing 210 percent over second quarter 2000. Other revenue was $4.1 million, down six percent from a year-ago due to an expected decline in ESCON service fees. On a channel basis, McDATA's largest customer, EMC, represented 68 percent of total revenue in the second quarter of 2001, IBM accounted for 16 percent and other OEMs, resellers and systems integrators represented 13 percent, with service fees accounting for the remaining three percent. Pro forma gross margins were 42.6 percent for the second quarter of 2001, compared to 51.9 percent in the second quarter of 2000, and 45.7 percent in the first quarter of 2001. Gross margins continue to be adversely affected by higher manufacturing costs related to the introduction of McDATA's new generation of SAN products. McDATA has launched a new product in each of the last four quarters, including the 6000 Series Director during the second quarter of 2001, and three new fabric Switch products in the preceding quarters. ``McDATA is the only company in its sector that has introduced four new products in the last four quarters,'' said McDonnell. ``While we have effectively diversified our product line as well as our revenue streams, these product introductions have resulted in higher-than-expected manufacturing costs, including component and production costs, which have compressed our gross margins. Our most important priority for the remainder of this year is to improve manufacturing efficiency and margins, so we can fully pursue the opportunities in our market as the economy and IT spending improve. We anticipate gross margins to improve in each of the next two quarters, driven in part by the achievement of process maturity for our new products during the third quarter.'' Reported net income declined 28 percent to $3.4 million for the second quarter of 2001, compared to $4.7 million in the prior year. McDATA's balance sheet remained solid with no debt, and cash and investment securities totaling $356 million at quarter-end, compared to $364 million at March 31, 2001. For the first six months of 2001, McDATA revenue totaled $164.3 million, up 58.6 percent from the comparable period in 2000. Pro forma net income for the first six months totaled $14.5 million, or $.12 per share, an increase of 11.6 percent from the first half of 2000. Reported net income totaled $10.9 million, an increase of 14.2 percent from the first six months of 2000. Executive Management Additions During the second quarter, McDATA strengthened its senior management team to position the company for its next stage of growth, with the addition of Bob Finley as vice president of manufacturing (most recently vice president, business programs management -- global accounts at SMTC Manufacturing), Richard Search as vice president of marketing (more than 15 years marketing experience in the storage industry with companies including IBM, Hitachi Data Systems and Digital Equipment), Rich Carlson as vice president of lifecycle operations (most recently the vice president of quality and customer support at McDATA) and Linda Dill Dellett as vice president of investor relations (formerly vice president, investor relations for Requisite Technology, Corporate Express and TCI Communications). In addition, John Kelley, formerly executive vice president, Qwest Communications International, will join McDATA on August 27, 2001 as president and chief operating officer, as announced yesterday. Other Highlights Other highlights from the second quarter of 2001 include: -- Introduction of McDATA's fifth-generation, Series 6000 Director product, the only single-stage 64-port Director and the foundation of the company's Core-to-Edge SAN platform. -- Expansion of the company's OEM agreement with EMC to sell and distribute McDATA's expanded family of products, including its new Director (under the Connectrix ED-64M brand name) and fabric switch products. -- An OEM agreement with Hewlett-Packard to sell and distribute McDATA's new Director (under the SureStore brand name) worldwide through both direct and indirect channels. -- A new solution that provides expanded "E-Port" interoperability across industry switch vendors and the first release of open code for multi-vendor interoperability, providing users with the first cost-effective migration path to high-availability Core-to-Edge SAN solutions. -- A new solution developed with Tivoli Systems Inc. that provides a local area network (LAN)-free backup solution. -- A worldwide reseller agreement with Data Systems International (DSI) for McDATA's Core-to-Edge line of Fibre Channel connectivity products. -- An agreement with HiTRON Systems to resell McDATA's Core-to-Edge product line within the Korean market. -- A partnership with ACAL to resell McDATA's Core-to-Edge family of products and software in the Pan-European market. -- Global expansion with the opening of new McDATA offices in Seoul and Zurich and expanded operations in London. -- A leadership role in the development of the Storage Networking Industry Association's (SNIA) initiatives to provide storage product customers with the first qualified cross-vendor, interoperable storage networking solutions. -- Confirmation by market research firm IDC that McDATA maintained the largest portion of the fastest growing storage area networking segment, representing more than 94 percent of the fibre channel Director class switch unit shipments in 2000. Their research shows that Director class switches are expected to be the fastest growing portion of the Fibre Channel hub and switch market, and that Director class products will account for more revenue than any other segment of the market by 2004. -- Early in the third quarter, McDATA announced the recent deployment of McDATA's Enterprise Operating System (E/OS), the world's first and most advanced Core-to-Edge Fibre Channel Operating System. Among other features, McDATA's E/OS provides advanced enterprise security, unrivalled high availability through non-disruptive firmware downloads and activation including seamless integration of upgrades and feature-enablement into existing SAN environments. Outlook McDATA has revised its forward-looking guidance to anticipate revenues in a range of $82 to $86 million for the third quarter ending September 30, 2001, which represents year-to-year growth of 23 to 29 percent, and a range of 35 to 45 percent revenue growth for the full year, compared to previously estimated growth of 50 to 60 percent, based on continued market uncertainty surrounding the protracted economic slowdown and its effect on customers and end-users. The company's guidance continues to be dependent on factors such as continued market growth and other industry trends. As was true in the first quarter, McDATA believes it would be helpful in this environment to provide investors with a best-guess range of EPS guidance. On that basis, current revised guidance is for pro forma fully diluted EPS to be in a range of $.03 to $.05 in the third quarter, and $.25 to $.30 for the full year 2001. Further guidance on assumptions will be provided on the company's conference call today. ``I believe McDATA is positioned better than ever to fully implement our Core-to-Edge strategy, realize our vision of global market leadership in open SAN solutions, and increase value for our shareholders,'' said McDonnell. ``We are ready to capitalize on the long-term anticipated growth in the SAN build-out, which is still in its early stage. Our solutions remain mission-critical to the companies that use them, and our customers continue to demonstrate strong demand for our products, despite the economic slowdown. As the only storage area network vendor to provide a complete family of Core-to-Edge enterprise solutions, McDATA continues to lead the market at the enterprise level and compete in every segment of the switch market. We expect to continue the increase in market penetration with our full family of products, develop additional customer-focused solutions and expand our distribution channel to meet our customers' needs in the future.'' McDATA will hold a conference call to discuss second quarter 2001 results today, July 18, 2001, at 3:00 p.m. MDT. The conference call will be simultaneously Web cast on the company's Web site and will be archived for future review. The Web cast presentation will include slides containing additional detailed information of interest to investors. About McDATA (www.mcdata.com)