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

To: slurper who wrote (3350)	12/9/1998 11:21:00 AM
From: bob gauthier	Read Replies (1) \| Respond to of 17183

EMC: The Greatest Company You Never Heard Of Okay, maybe you're one of the few who does know about EMC Corp. (NYSE:EMC - news) . Perhaps you work in high-tech, or perhaps you're just a well-read investor (after all, we have Spotlighted this company before). But when most people think of blue chip technology stocks, names like Intel (Nasdaq:INTC - news) , Microsoft (Nasdaq:MSFT - news) and Dell (Nasdaq:DELL - news) are what comes to mind. Few people outside the high-tech industry know how EMC dominates the enterprise storage market and has delivered one of the most impressive corporate and stock performances of the decade. Now several top Wall Street analysts are pounding the table on EMC, essentially saying there's more upside to this stock despite a phenomenal run already. Just who is this company and what makes it so special? First, here are some numbers to ponder. EMC has averaged over 50% annual growth in sales and earnings for the past five years. Sales, which stood at $127 million ten years ago, are approaching $4 billion this year. The stock is up over 900% in the past two years and a staggering 33,600% this decade. If you put a mere $3,000 in this stock to start the nineties, that investment would be worth over a million dollars now. EMC is the 600-pound gorilla of enterprise storage systems. EMC leads this market estimated at $11 billion last year and projected by industry experts to hit $35 billion by 2001. These storage systems used by big businesses and institutions are much more than just giant disk drives. EMC's Symmetrix allows a company to centralized storage for all its disparate computing systems--mainframes, UNIX and Windows NT networked computers. Demand for this cross-platform functionality is driven by the proliferation of networked computing and increasing need to share and manage data across enterprises, not to mention across the Internet. Other value-added features from EMC systems and software include faster processing, sophisticated data protection, nondisruptive backup, disaster recovery and workload compression. One telling characteristic of EMC's corporate focus is that they don't just call it storage technology, they call it storage and retrieval technology. Demand for storage capacity is accelerating dramatically as enterprises generate more and more data, and capacity-hogging multimedia like audio and video become mainstream components of that data. A Business Week story earlier this year quoted CEO Michael Ruettgers as saying "A lot of customers have been talking about their plans to double their storage requirements this year." Higher-margin areas like software and open system storage products are accounting for an increasing percentage of revenues, offsetting the downward pricing pressures common to the data storage business. Going forward, analysts are predicting earnings growth of 42% this year and a long-term rate of 27.5%. With it's strong stock and earnings performance, EMC has attracted the attention of momentum-oriented investors. The stock tables in Investor's Business Daily show EMC has an Earnings Per Share Strength rank of 96, Relative Price Strength of 98. Although the growth rate is decelerating from the 50% rate in recent years, growth in the 40% neighborhood seen this year and next is nothing to be ashamed of especially for a company with nearly $4 billion in sales. Competition is an issue worth watching over the long-term, though. Heavyweights like Sun Microsystems (Nasdaq:SUNW - news) , IBM (NYSE:IBM - news) , Dell and even Compaq (NYSE:CPQ - news) are angling for a piece of the fast-growing enterprise storage market. But analysts say EMC's technological lead is substantial and unlikely to be encroached near-term. EMC has also established a strong network of alliances with computer system companies like Hewlett-Packard (NYSE:HWP - news) , Silicon Graphics (NYSE:SGI - news) and Unisys (NYSE:UIS - news) who resell EMC to compliment their products. Recently EMC even announced alliances with enterprise software leaders like Peoplesoft (Nasdaq:PSFT - news) , SAP (NYSE:SAP - news) and Baan (Nasdaq:BAANF - news) . Analysts have not been shy with their bullish comments lately. Last week Merrill Lynch reiterated its Buy rating on the stock, calling it "the next technology franchise" and issuing a price target of $87. Of course, EMC has quickly closed ground on that target, ending Tuesday at $84 1/8. Earlier in the week Soundview, the widely respected independent research firm, raised its 12-month price target to $95 from $70. All the attention from Wall Street analysts, not to mention a recent barrage of fund managers in the media praising EMC as one of their top holdings, are no doubt helping to lift EMC out of obscurity. We should note that this column's title, "The Greatest Company You Never Heard of," refers to EMC's extraordinary performance to date and in no way is intended to suggest that performance will continue. The Online Investor makes no buy or sell recommendations, we merely hope to offer insight on companies that we think our readers might find of interest.