To: ACAN who wrote (16297 ) 3/16/2006 7:42:17 AM From: Galirayo Respond to of 23958 [EMC] Uncle Sam Wants Storage Tech investors have been very slow to get over the PC as an investment and focus more intensively on the demand for data storage. It's not just consumer and business email, multimedia and documents. There's practically a government mandate to make money in storage-technology companies, as there are regulatory requirements and corporate policies mandating long-term data preservation. The research firm IDC says that, worldwide, companies shipped 831 petabytes worth of disk-storage systems in 2003, but are expected to ship 5,444 petabytes in 2008 -- a compound annual growth rate of 46%. (A petabyte is 1 million gigabytes of information.) IDC says that companies are spending an increasing part of their budget on storage hardware and software, with the gross global bill expected to rise to $75.3 billion in 2008 from $56.6 billion in 2003. Not all of this stored data is of equal value, so a large industry has grown up to offer a variety of access, prioritization and protection at a range of price points. And that is where technology investors need to focus right now for growth and value. A '90s Survivor I've got two companies that appear rather attractive now: one a familiar large-cap, and the other a somewhat obscure but important, and cheap, small-cap. The first is EMC (EMC:NYSE - commentary - research - Cramer's Take), which those of you who have been around for a while will recall as one of the three greatest success stories of the 1990s. It was much, much more than the Google or Apple of its time, rising a stunning 65,740% from January 1990 to January 2000. Since then, EMC is off 73%, but the entire decline occurred in 2001 and 2002, and business has actually been great lately. After a period in which growth had slowed, its legendary sales team's focus on large- and medium-sized companies' need for fast, economical and reliable storage has pushed earnings up 22% again. If EMC brings in 75 cents a share in 2007, which is the conservative consensus estimate, its shares are going for a multiple of just 18, which is very low for a company with its track record, management and growth prospects. One reason for the small multiple, according to an analysis at Sanford Bernstein, is that the company is carrying an unusually large amount of cash -- about $3 a share. Bernstein notes that if EMC was to merely announce a large stock buyback, investors would return and shares would get moving again to keep pace with flashier peers such as Network Appliance (NTAP:Nasdaq - commentary - research - Cramer's Take). I believe the fundamentals are in place for EMC shares to earn up to 80 cents in 2007, and EMC deserves a multiple of 23. If that happens, the stock could break out of a four-year range and get back to $18 over the next 12 months, which suggests the potential for 28% appreciation. thestreet.com