Unscrambling Monday's Egg

Unscrambling EMC

Putting EMC through the Chicks' Dozen
by Chick Suzie

The past six months opened my eyes to huge personal storage issues. First, my 16 year old son wanted more closet space, then my only sister set her moving date and I agreed to help (we moved over 20 empty shoe boxes, I am not kidding). Also, my college age daughter is spending next semester abroad, so we need to find somewhere for the typical college dorm room adornments, you know, microwave, television, VCR, DVD player, stereo system, dehumidifier (she's in college in Florida), the loft, the futon, you get the picture. Storage hit me square in the face so I started to research this very broad industry. Everything from retail stores to custom closets, off-site storage facilities to organizational seminars and retreats. With this information in hand, I decided to focus on information storage.

I obtained a wealth of information about the industry from Wallstreetcity.com.

From that initial research forward, I went about the task of future studying the information storage industry and three times proposed a company to the Chicks for our quarterly purchase. Twice, EMC lost in our vote to other companies until finally this month (December) the Chicks purchased EMC based on my Quick Chicks Dozen of the company.

1. Buy What You Know
Storage is an issue in every facet of our life, the growth of the Internet itself fuels incredible growth in the need for storage. My personal organizational philosophy is if you can't find it to use it, don't save it. This too could apply to information and data, all those bits and bytes and the leading company of the information storage industry is EMC.

2. K.I.S.S.
Just think of EMC as the Internet's closet. What a great world it would be if we didn't have to clean closets. EMC and its subsidiaries design, manufacture, market and support a range of hardware and software products for the storage, management, protection and sharing of electronic information. EMC's RAID (redundant array of independent disks) technology is considered the industry standard.

3. The Industry
Top competitors are Compaq, Hitachi, IBM, Hewlett Packard, Seagate and Network Appliance. Compaq, Hitachi, IBM and HP all include storage in their array of products. Network Appliance and EMC are true purists when it comes to storage solutions; this is the primary focus of their business. EMC and Network Appliance only compete in the midrange market, other markets, EMC simply dominates.

4. Leader In Its Field
Yes, they are top shelf. (Get the closet analogy? Sorry I won't try to be funny anymore; leave that for the other Chicks.) EMC dominates the market with 51% share.

5. Repeat Profitability
They are a leader in their field and a leader in writing new rules for customer service, something unlike any of its competitors. EMC enjoys a 99 percent customer retention rate.

6. Gross Margins: 57.7%

7. Net Margins: 20.06%

8. Cash to Long Term Debt: EMC has no long term debt

9. Flow Ratio: 1.6%

*All numbers obtained from EMC 10Q report of 11/13/00 obtained on FreeEdgar.com.

10. Increasing Growth
EMC's growth has sharply accelerated. This growth is spread across all of their major product areas, including 61% year-to-year growth in enterprise storage software revenue; 43% year-to-year growth in enterprise storage systems revenue and 40% year-to-year growth in midrange storage revenue.

11. Strong Management History
Michael Ruettgers is the Chief Executive Officer and has been with EMC since 1988, the last nine years as its CEO. Since his arrival, EMC's global revenues have grown more than 50-fold and during the 1990s, EMC's stock delivered the highest single-decade performance of any listed stock on the NYSE.

12. On Sale
EMC was not on sale at the time of the Chicks purchase early last week, however at a 76 purchase price per share, we were pretty close to that mark and genuinely feel great about our purchase. By the way, there is a sale going on right now on over-the-door shoe racks, in case that is your storage dilemma at the moment.