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

To: Nick who wrote (3277)	11/27/1998 2:29:00 PM
From: VFD	Read Replies (1) \| Respond to of 17183

Some comments on EMC in the latest issue of FORBES. A fable of two companies. What is it that the U.S. is doing right and Japan doing wrong in the information technology business?. The diverging fortunes of Oki Electric and EMC Corp. illustrate the differences crisply. Consider Intel in microprocessors, Cisco in networking and EMC corp. in corporate computer data storage. In particular why does EMC do so well, with a 35% market share in its line of business and a 19% net profit margin?. Because the technology is changing rapidly enough to demand ingenuity and imagination, and because there is a software component to it. EMC's sales grew an average of 50% a year from 1990 to 2.8 billion in 1997. EMC's market capitalization, meanwhile, has risen 227-fold to 34 billion, or 12 times last years sales. in the first 3 quarters of 1998 EMC netted 537 million on revenues of 2.8 billion. As Oki Electrics flounders in a proper way, EMC is enjoying a textbook growth. Richard Egan, an early Andy Grove protege at Intel, and former college buddy Roger Marino set up EMC in 1979 to build add-on memory for minicomputers. Rather than stick with a dying business, they moved into mainframe data storage in 1898, devising a technology far faster than what IBM was then using to control 80% of the market. The technology, called RAID, involves clever algorithms for dealing out data among an assortment of hard-disks platters. Within a few years EMC had won away top share. As corporations began deploying open client-server systems in recent years, many attached storage devices to their local servers. Pundits predicted the death of the mainframe. Turns out scattering databases among local servers leads to lots of problems managing and accessing information. EMC recognized early on that open systems were here to stay but that mainframes and centralized data storage still had big advantages. It invested heavily in technology that offers more compatibility than anyone else's among open systems, mainframes and other computer systems. Like Microsoft, Intel and other industry leaders, EMC has used acquisitions as a strategic weapon. Epic Systems, a data-backup specialist it bought in 1993, helped EMC add the world fastest open-system backup technology to its arsenal. Oki Electric, by contrast, hews to the japanese model of relying largely on organic growth or none at all. In 1997, EMC's third year in open-system data storage, sales hit 1.5 billion. Stock options and quarterly cash bonuses give EMC executives and salespeople plenty of incentive to hit their targets. EMC is again pushing the boundaries of its industry with a new technology-fibre channel. It leads in supplying data storage devices that connect to host computers via optical fibre networks to transmit masses of data over long distances without clogging up other operations. "we are in the storage business, but have redefined it from mainframes to Unix and NT systems, and increasingly to software," says EMC ceo Michael Ruettgers, 55. "under Japanese-style consensus management we probably would not have taken on the high risk of open systems, given that we already had a comfortable mainframe business. Ruettgers plans to stick to his knitting. Why not?. He sees EMC's data-storage revenues tripling to 10 billion by 2001. Oki, meanwhile, may or may not get some growth out of its new telephone gear and remains as unfocused as it ever was. The Japanese are "going to run away with the world computer market. It is going to be another TV industry.". That is what Clyde Prestowitz, former Commerce Department counselor for Japanese affairs, told Business Week in October 1989. How wrong he was. In my opinion this article confirms that EMC is one of the best if not the best managed company anywhere. I am not selling any of my shares even as it continues to set new highs.