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

To: John Carragher who wrote (13292)	10/9/2001 3:26:07 PM
From: JakeStraw	Read Replies (1) \| Respond to of 17183

Analysts See Dismal EMC Third Quarter dailynews.yahoo.com By Tim McLaughlin BOSTON (Reuters) - Wall Street analysts say EMC Corp., the world's top data-storage systems company, could post its first quarterly loss in a dozen years as revenues fall as much as $450 million below the point where EMC said it needed to break even. ``I think it's going to be a miserable quarter,'' said Thomas Mancino, an analyst at Pacific Growth Equities. Mancino and other analysts said they expect EMC next week to report revenues of $1.35 billion for the third quarter ended Sept. 30. This is far below the $1.8 billion EMC said on Sept. 20 it needed to break even. EMC then warned that it was ``highly unlikely'' to turn a profit, but it has not estimated how far revenues will fall for the quarter. EMC last posted a net loss in the fourth quarter of 1989. A tough quarter got worse for Hopkinton, Massachusetts-based EMC (NYSE:EMC - news) when the Sept. 11 attacks disrupted the company's final push for selling refrigerator-sized machines that store e-mail, credit card data and other computer network traffic. EMC's performance had been suffering prior to Sept. 11 from a global downturn in spending for information technology hardware and software, and price discounting by emerging rivals such as Hitachi Data Systems. ``The last few weeks to the quarter are critical to EMC,'' said Peter Labe, an analyst at Buckingham Research. ``Anybody with a September quarter is going to have a hard time. ... The Sept. 11 disaster created a halt to the entire industry.'' Typically, EMC's third quarter is already a challenge because the sales cycle in Europe slows when customer executives go on vacation, said EMC spokesman Michael Gallant. Labe expects EMC's revenue to drop to $1.5 billion for the quarter, but other analysts predict even sharper declines. Merrill Lynch analyst Thomas Kraemer cut his third-quarter revenue projections to $1.35 billion from $1.55 billion. He expects EMC to lose 5 cents a share, which is the consensus estimate among 32 analysts polled by research firm Thomson Financial/First Call. Meanwhile, EMC has been slow to cut its work force, compared with massive layoffs at other tech firms. EMC is expected to end the year with a worldwide staff of about 21,000, down from 23,400 currently. Wall Street has yet to see EMC Chief Executive Joe Tucci's ''Plan B,'' a plan of action he said he keeps in his pocket just in case things get really ugly. EMC's flagship Symmetrix machine already is battling the growing popularity of the hardware of Hitachi Data Systems, a unit of Japanese electronics giant Hitachi Ltd. (6501.T). EMC's information storage systems business shrank 19 percent in the second quarter to $1.22 billion as rivals won over customers with slimmer storage budgets. After meeting with Hitachi recently, UBS Warburg analysts told investors in a research note that EMC's clear intellectual property advantage over rivals had diminished. Even more troubling to Wall Street are reports that software, the engine behind EMC's lofty profit margins, is being discounted along with price cuts in data-storage hardware. Kraemer said in his research report that ``we have heard comments implying software discounting.'' Labe said a typical Symmetrix machine is loaded with six pieces of hardware. Since prices are often given on an entire package, he said it is hard to tell which parts are being discounted. EMC is trying to sell more software that supports hardware made by competitors. Much of EMC's current software revenue is closely linked to its own storage devices. EMC estimates 30 percent of its business will come from software sales in the near future, from 23 percent during the first half of this year.