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

To: Gus who wrote (13330)	10/17/2001 8:23:50 AM
From: Glenn Petersen	Read Replies (1) \| Respond to of 17183

EMC posts third-quarter loss on lower sales BOSTON, Oct 17 (Reuters) - EMC Corp. <EMC.N> on Wednesday reported a third-quarter net loss approaching $1 billion -- its first quarterly loss in a dozen years - as the world's top maker of data-storage systems battles stiffer competition and a global downturn in spending for devices that store e-mail, bank transactions and airline data. The Hopkinton, Massachusetts, company said it took a pretax restructuring charge of $825 million for job cuts, excess inventory and facility consolidation. EMC posted a third-quarter net loss of $945.2 million, or 43 cents a share, reversing year-earlier net income of $458.2 million, or 20 cents a share. EMC had warned last month that it was unlikely to break even in the third quarter. Revenue dropped to $1.21 billion from $2.3 billion a year earlier. Besides facing a global downturn in information technology spending, EMC is fending off stepped-up competition from rivals that are dropping prices on hardware and software. 07:11 10-17-01

To: Gus who wrote (13330)	10/17/2001 12:32:20 PM
From: marginnayan	Read Replies (1) \| Respond to of 17183

MSDW dated 10/17/2001 EMC (EMC-$13-N-V) C3Q01 Earnings Results Gillian Munson EMC reported revenue of $1.21B (down 47% Y/Y, 40% Q/Q) and an operating loss per share of $0.12. Reported loss was $0.43 per share. EMC had pre-released in the week post 9/11 and given no guidance. Our first pass had been about $1.5B and ($0.04). All businesses ex. Services were below our estimates. It looks to us like software (down 51% Q/Q) missed even more than hardware (down 45% Q/Q). While this result is lower than our estimate, it is within the range that we and the street had been talking about. At the same time, it is not good news. Gross margin was at an all time low of 30%. This is amazingly low, in our view. We thought that EMC would post at least a 40% gross margin. Given this, it is somewhat interesting that EMC even had a loss of $0.12 per share - This does show that they acted reasonably fast on opex. Had opex been at our $850MM vs. the reported $753MM the loss would have been $0.16 per share. AR DSO's were up to 96 (vs. last years range of mid-70's). Inventory turns were 4.0 flattish with previous levels. EMC says it generated $85MM in cash. However, this was generated by an increase in long term investments offset by decreases in short term assets and cash and investments. EMC took a pre-tax charge of $825MM for excess inventory, workforce reductions, facilities consolidation, and investment write downs. EMC thinks this can lower costs by $800MM going forward. Total annual costs for EMC are $6.7B for C2002 so this implies a 11% reduction from our current model. The charge was larger than expected, but lower than the whisper $1B charge. We continue to maintain our view that EMC has structural issues to deal with. While EMC will likely remain that top storage player, we don't think investors need to take on the risk of the business model changes this early in EMC's adjustment. The good news is that EMC is acting fast probably spurred on by the shocks to the economy. Still, it is early and when companies that have had stable dependable financials start to see dramatic and somewhat unpredictable business model changes it is hard to jump ahead and assume all will be ok fast. ----- Any comments on: we don't think investors need to take on the risk of the business model changes this early in EMC's adjustments.