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

To: JDN who wrote (5867)	4/20/1999 4:23:00 PM
From: VFD	Read Replies (1) \| Respond to of 17183

Tuesday April 20, 3:41 pm Eastern Time S&P raises EMC Corp ratings (Press release provided by Standard & Poor's) NEW YORK, April 20 - Standard & Poor's today raised its corporate credit rating on EMC Corp. to triple-'B' from triple-'B'-minus and its subordinated debt rating on the company to triple-'B'-minus from double-'B'-plus. The outlook is stable. EMC's upgrade reflects strong business and financial profiles, despite on-going technology challenges and very competitive industry conditions. The ratings reflect the company's solid profitability, conservative capital structure, and strong market acceptance of new products. Hopkinton, Mass.-based EMC Corp. manufactures innovative high performance data storage products. Near-term earnings momentum is expected to remain strong, fueled by new product introductions in the mainframe and open systems environments. Also, its expanding installed base enhances earnings stability. Net income for the first quarter ending March 1999 was $221 million, more than 50% higher than the previous year's quarter. Although EMC's profitability measures are very strong for the rating category, with return on permanent capital averaging above 30% for the last three years, revenues are largely tied to a narrow product line that is vulnerable to market shifts and rapid technological change. Standard & Poor's also anticipates that gross margins, currently in the low 50% area, may moderate over time as similar product offerings become available from larger competitors, and due to continued price volatility and product mix shifts. In the company's current growth phase, cash requirements could be significant to fund its working capital needs. However, capital expenditures are expected to remain moderate, in the $400 million range, as the company mostly outsources its key components. EMC's free operating cash flow (which has averaged $375 million over the past three years), coupled with the firm's current cash and investments of $2.3 billion (as of March 31, 1999), should help fund the rising cash requirements necessary to support EMC's rapid growth, as well as cushion any near term volatility . OUTLOOK: STABLE The outlook anticipates that EMC will maintain its market position and a financial profile in line with the current rating. EMC's has ample financial flexibility to fund its strategic initiatives, Standard & Poor's said.