EMC Boasts Its Best Quarter

FRAMINGHAM (01/28/2000) - EMC Corp. said last week that it had its best quarter ever and met analysts' expectations for the period that ended Dec. 31, but it also fell short in its traditional systems business.

The Hopkinton, Mass.-based company tallied $1.88 billion in sales in 1999's fourth quarter, a 21% increase from the same period the previous year. Storage systems sales totaled $1.66 billion for the quarter.

EMC's core enterprise storage business historically has grown about 30% each quarter, but it garnered 27% growth in the last quarter. CEO Mike Ruettgers said the company was on target, having expected 25% to 30% growth.

But Wall Street didn't agree: EMC stock spent last Wednesday rising and falling, opening at $114 and closing at $110.18.

Gary Helmig, an analyst at Stamford, Conn.-based SoundView Technology Group, said investors expected EMC to deliver more storage sales. But he said EMC's stock will recover in the coming months, in part because of Symmetrix 5, an upgrade to EMC's enterprise storage system that will feature Fibre Channel throughout.

During last week's earnings conference call, Ruettgers mentioned EMC's leadership over IBM, Hewlett-Packard Co. and Sun Microsystems Inc. in general.

Robert Gray, an analyst at International Data Corp. in Framingham, Mass., said he was surprised that EMC didn't mention Network Appliance Inc. in Sunnyvale, Calif., its main competitor in the network-attached storage arena. According to Gray, EMC is doing well in the network-attached storage market, but Network Appliance takes the top spot.

Despite the company's failure to meet analysts' expectations, EMC's fiscal 1999 and fourth quarter proved to be its "most successful" to date. It reported $6.72 billion in sales last year, which was 24% higher than in 1998. Profits last year totaled $1.18 billion, a 50% increase from the year before.

Excluding the October acquisition of Westboro, Mass.-based Data General Corp., profits totaled $377 million in the fourth quarter of 1999. Profits, including charges from the DG deal, were $207 million.

Ruettgers said EMC's software sales - $822 million in sales last year, up 85% from 1998 - "put us on a path to become one of the 10 largest software companies" this year. That group includes Microsoft Corp. ($6.11 billion in sales); IBM ($3.6 billion); Islandia, N.Y.-based Computer Associates International Inc. ($1.81 billion); and Sun ($3.55 billion).

In addition, Ruettgers said EMC is still on target to reach $12 billion in sales by next year and will hire 4,000 more employees this year.

Gray said "EMC has set some ambitious goals" for itself but "hasn't lost its edge" and has shown it's up to meeting these goals.

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