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

To: Erwin Sanders who wrote (4977)	3/18/1999 9:17:00 PM
From: Bill Martin	Read Replies (1) \| Respond to of 17183

One issue with this analysis, if I do the math right (and assuming net margins don't change too much), is that you're implicitly expecting EMC to have something like $170B/yr in revenues 15 years out. ($5.2B in '99 compounded 40%/yr 5 yrs + 20%/yr ten more yrs). Is it reasonable to expect a company that huge to still grow revenues at 20%/yr? That's about the size of General Motors today. Alternatively, your assumptions say that EMC's market cap would grow from something like $49B today up to something well in excess of $1.6T - 2.0T. This would be bigger than the largest 7-9 companies in existence today combined (MSFT, GE, INTC, WMT, XON, Merck, Pfizer, Coke, CSCO, IBM). And that valuation would be based on revenues only about the size of GM's today. Could something that big still grow at 20%/yr? I'm not sure it passes a sanity test. I'm very interested to hear what everyone else thinks though. Bill

To: Erwin Sanders who wrote (4977)	3/19/1999 8:04:00 AM
From: JDN	Respond to of 17183

Dear Erwin: As Perot used to say--the Devil is in the Details. If your assumptions hold up then I would say your analysis has basis in fact. Its impossible in my mind to project out a growth rate that far. Obviously the revenues and earnings will become astronomical. And the higher they become the harder it is to continue the growth rate. On the other hand, where the Company to continue to grow as you say likely they would institute some kind of stock buyback since ultimately the number of shares (presuming splits along the way) would get out of hand. As to your PEG comment. I have given that concept some consideration. At first I was like you--doubtful. But the more I thought about it the more sense it made. The lower the PE ratio is as compared to the growth rate the more conservatively valued is the stock in my mind now. I dont know if its sound judgement, but fact is the market uses that information so that makes it relevant in and of itself. Now, when you get a stock selling at a PE above its growth rate--to me that means the growth is even more assured in the minds of the investors than if it were lower. IE you pay more for comfort. JDN