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

To: Jerryco who wrote (6198)	5/4/1999 11:38:00 AM
From: Tom_	Read Replies (1) \| Respond to of 17183

Briefing.com's take on HWP-EMC. 11:00 ET****** EMC CORP. (EMC) 96 -11. News that Hewlett-Packard Co. is considering selling someone else's storage products has the shares of this designer and manufacturer of enterprise systems and software products on the ropes this morning. Granted, the stock has more than doubled since last October when the shares traded just over $45 per share, but the news that HWP may be more interested in pushing someone else's product has investors taking some profit money off the table. According to the Wall Street Journal story, HWP is seeking to resell storage products from Hitachi Data Systems in order to gain more presence in the fast growing storage market. With HWP projected to generate around $1 bln in sales for EMC in 1999, or roughly 20% of its total sales, there is reason to be worried if this relationship were to change. While both companies are silent on the relationship subject, EMC and Wall Street are down-playing the possibility of this story. However, given the high proportion that HWP sales contribute to EMC's profit line, reducing sales by even a small amount could have a monumental impact on FY99 and FY00 earnings projections of $2.00 and 2.60 per share, respectively. Even after taking into account today's price reduction, EMC shares are trading at 49 times FY99 projected earnings and more than 37 times FY00 profits which, slightly ahead of the 34.6% compounded annual growth rate in earnings for the past five years. But, if this relationship does change, and if there is no offsetting means of making up for the sales lost, then the stock is vulnerable to a further correction. According to the paper, HWP plans to hold a storage-related news conference tomorrow, but details of the content are not known. While Wall Street is down-playing the whole story, safe bet is to take some profits ahead of the news conference, at least until the air clears. ~~~~~~~~ Best wishes, Tom

To: Jerryco who wrote (6198)	5/4/1999 1:41:00 PM
From: mauser96	Read Replies (2) \| Respond to of 17183

According to a news release , and the WSJ, this HP news isn't what it appears to be on the surface. Sales of EMC products to HP customers are made by a joint HP and EMC team, so that while HP makes up 20% of sales, it contributes only single digit to EMC's earnings. Under present agreements EMC can't sell directly to HP customers. If HP breaks the deal, then EMC could sell directly to HP customers at better prices than the old deal. Hitachi is a minimal force in the storage systems business (world wide share under 2% and falling) so I can't see any big interest by US companies in using Hitachi. The fact that Hitachi is losing market share to IBM and EMC might be a sign that it can't stand on it's own. HP is also in a weakened position, so maybe the HP-Hitachi deal is like 2 drunks trying to hold each other up. Furthermore, EMC says it has anticipated HP action, and has hired lots of extra salespersons in the last year. EMC has stated that they regard this as earnings neutral, and my take on it is that it may be earings positive in the long run because it increases the sales possibilities. Technically, EMC held above it's recent lows, and may be starting a double bottom "W" shaped chart pattern. Even though I think it will take time for the big money to stop chasing the cylicals, and thus there is a good chance EMC will be dead money for a while, I bought more today.