To: LTK007 who wrote (688 ) 10/17/2001 3:55:20 PM From: LTK007 Respond to briefing.com commentary on EMC <<EMC Corp. (EMC) 12.01 -1.43: This storage system giant is under pressure today as a result of a poor earnings report. The company posted a Q3 loss of $0.12, a good bit worse than consensus of $(0.04). Revenue also came up shy at $1.2 bln vs consensus of $1.5 bln. Even though this is a big miss, the stock is not down further because many had been expecting Q3 to be terrible. In late Sep, SoundView said that EMC's business had ground to a near halt since Sept. 11. Also, DSOs were up to 96 vs mid-70s last year. In addition to general concerns on the economy, it is becoming more clear that EMC is facing a tougher competitive environment from IBM which is linking storage sales with mainframe sales. This analyst was on the IBM call and management said they gained share in storage in Q3 and they expect it to continue in Q4 and next year. Hitachi is another competitor to worry about. The competition is pressuring margins. In Q3, EMC's gross margin fell to a mere 30%, an all time low. Many had been expecting high 30s-40%, so this is pretty bad. They mitigated this with better operating expense control....To give you a sense for how competitive it is out there, players in the space will sometimes buy a customer's existing storage to take out a competitors' storage. Also, a Bear Stearns customer feedback report implies reduced differentiation (they think EMC is still ahead but are willing to consider other vendors) and concerns over service (always an EMC strength, but recent turnover has created dissatisfaction)....The balance sheet remains solid with nearly $5bln in cash and zero long-term debt. However, with EMC not expecting to return to profitability until the second half of next year, there is little in the way of a catalyst to make us jump into the stock. -- Robert J. Reid, Briefing.com>>
