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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Z Analyzer who wrote (5147)	1/2/1999 6:37:00 AM
From: Gus	Read Replies (1) \| Respond to of 9256

Just some clarifying points... EMC has a ways to go before dominance is assured EMC has 65% of the IBM mainframe compatible storage market. IBM is the preferred non-EMC source even though it currently has the fastest mainframe (after a 2 year absence from the lead thanks to Hitachi which is plotting a comeback in 2-3 years with a box 3x more powerful than its current line) on the market. Hitachi, Fujitsu, SGI(Cray) are also minor players here because they have mainframe storage businesses attached to their main mainframe businesses. Overall, EMC has 27-30% of the enterprise storage market -- a $11 billion market in 1998 that is expected to reach $35 billion in 2001 or in 3 years. If I recall correctly, EMC's guidance is that they will have $10 billion in revenues by 2001. Merril Lynch, Morgan Stanley and Salomon Smith Barney all believe that EMC has a 1 to 2 year lead over the competition including IBM. Also, ff you look closely at EMC's history, they have shown this distinctive, some would say fanatical, ability to listen to its customers -- the evolution-only-PLEASE crowd that rule the data centers -- that has translated at times to EMC buying or licensing superior technology from the outside in order to improve the package of hardware, software and services that they offer to their customers, at a considerable premium I might add. Having 90 out of the top Fortune 100 as customers is a remarkable accomplishment. Furthermore, once a company becomes an EMC customer, an IBM or a SUN or a Compaq has a hard time getting that account because while EMC has demonstrated that it can make its storage systems work with whatever combination of mainframes, UNIX servers and NT servers the customer wants to use, an IBM or a SUN or a Compaq can not make the same claim. Track record versus white papers. In fact, one of the main reasons the storage upgrade cycle is being decoupled from the processor upgrade cycle is that the CIOs believe that as the enterprise processor market gets commoditized to a crisp, the naturally increasing tendency will be for the server vendor to lock-in the customer in such a way that it cannot grow its storage systems without upgrading the processors. Industrial strenght storage is a high-margin business. Look at Sun. It is using freeware and no-money-ware (Java, Jini) to basically sell the processor (SPARC), the OS (Solaris) and the storage systems. Microsoft, Intel and EMC all rolled into one. When Dell enters the UNIX market in 2000 and join IBM, Compaq and HWP in the effort to use the servers as loss leaders for their systems integration/support and financing businesses, industrial strenght storage will probably be the one category left with decent margins. I've looked and I've looked, and relative to its size, EMC is surely among the top percentile of a shrinking universe of companies with increasing revenues and expanding margins. If we have a stampede away from equities, no stock is a safe haven of course, but even then we have seen how quality stocks tend to bounce back faster. When asked, Charles Revlon, the founder of Revlon, used to answer that he wasn't in the business of selling cosmetics, he was in the business of selling hope. Anybody who buys EMC, or any stock for that matter, has to answer something similar too. The people who believe that EMC is in the business of repackaging disk drives will surely get sticker shock at its multiples. Those who believe that EMC is in the business of maximizing the use of a company's most precious asset -- data -- will continue to buy. Regards, Gus P.S. RE: Y2K. Michael Dell believes that PCs will have extended play during the first half of 1999 (muting the effect of the summer slowdown) while servers will be exceptionally strong in the second half. Others believe in your scenario that the first half of 1999 will be exceptionally strong for technology but then tail off. In either case, industrial strenght storage seems to be insulated from those seeing as how companies would be more likely than not to keep multiple copies of their databases should the unforseen happen. That doesn't mean that EMC's stock won't tank along with the rest, though. Nice entry point, if you can get it. Put some size and a bit of conviction behind it and similar dips and before you know it you'll have a single digit cost basis.<G>

To: Z Analyzer who wrote (5147)	1/2/1999 10:37:00 AM
From: T Bowl	Read Replies (1) \| Respond to of 9256

<<HTCH's 60 or 70 percent market share seems likely to increase and I have to wonder when their competition decides the business is unattractive given the increasing technology, innvestment, precision and proprietary technology which must be paid for.>> OTOH, if the technology is so expensive to produce TSA, if it is by far the best approach to take, and since HTCH has such a commanding lead and market share...why are others still trying to compete? RDRT's adventure, INVX's Flex tech, Fujitsu,... Are they all in denial? Don't get me wrong, I don't have a position in either INVX, HTCH, etc. The whole game scares me because someone is going to lose BIG. A while back HTCH was pretty good at reporting TSA's EPS drag, but they stopped being very specific recently. My current WAG is that they've cost themselves somewhere on the order of $100mil in BV during the transition so it better work out! Look back thru the EPS history and work it out how long it will take to make that back up... It's scary. This is a company that way underestimated the costs of transitioning to this technology. They are in it too deep to pull out now, but others don't have to follow the same path. This is the gamble when you buy HTCH for the long haul. Last I heard TSA ACP was still >$2. Any idea what it is now? What will happen to HTCH if someone discovers a cheaper way of doing things? HTCH's D&A has increased by 1/3 in less than a year. What are the estimates going fwd? Don't underestimate the potential drag of expensive equipment. Surely something is in the works. Can you see FC's new company using TSA components? A $50 DD just won't allow it. Scared out of the biz by Gloom and Doom Larry, todd