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Hopkinton, Mass.-Based Data Storage Firm Optimistic about Growth

Posted on: Wednesday, 6 August 2003, 06:00 CDT

Aug. 7--NEW YORK--EMC Corp. executives yesterday told financial analysts that the data storage company is poised for steady revenue growth, even if demand for computer gear remains weak.

Chief executive Joseph Tucci told guests at the company's annual analysts' meeting that aggressive cost cuts and a host of new hardware and software products would fuel revenue growth. Executives also said EMC's future will be built on a commitment to "information lifecycle management" techniques to help customers tightly control their data from cradle to grave.

EMC's chief financial officer, Bill Teuber, said EMC's comprehensive product line and information lifecycle management strategy will help it pick up market share from rival firms such as IBM Corp., Hitachi Data Systems, and Veritas Software Corp. Indeed, Teuber said the company will have to gain market share to achieve the goals it laid out yesterday.

Teuber affirmed that the company would meet earnings projections for the rest of the year. Analysts have estimated EMC should earn 4 cents a share in the third quarter and 6 cents in the fourth quarter. Teuber also predicted a revenue growth rate in "the midteens" for the rest of the year and all of 2004, with gross margins to hit 48 percent by the fourth quarter of 2004, compared to 43.5 percent in the second quarter of 2003. Much of this improvement in margins would come through increasing unit sales volume. "As volume rises, margin goes up," said Teuber.

But that means selling more product into a market that still shows few signs of a solid upturn. "The IT spending market continues to be pretty tough," Teuber said.

EMC executives said their emphasis on information lifecycle management will help them snare new business. The concept involves not just the storage of corporate data, but also data about the data. For instance, some files must be stored on high-speed hard drives for instant access, while others are rarely used and can be archived on tape. Federal laws require some files to be stored with very strong data security, while other files aren't as sensitive.

An information lifecycle management system would store data about a company's files, automatically storing different kinds of data on different media, in different locations, for different periods of time.

EMC's recent acquisitions of storage software companies, including its $1.3 billion planned purchase of backup software maker Legato Systems, is supposed to give the company a set of comprehensive tools to provide management of a customer's entire information life cycle.

EMC also expects to pick up more market share by stressing a line of storage hardware, ranging from small boxes based on Microsoft Corp.'s Windows operating system to multimillion-dollar disk arrays for use with mainframes. Yesterday, EMC said Internet provider EarthLink will purchase products from EMC's entire range of storage hardware, and manage the hardware using ControlCenter, EMC's data storage management software product.

Claus Mikkelsen, the senior director of storage applications at rival Hitachi, in Santa Clara, Calif., was skeptical of EMC's approach. "Our strategy is similar," Mikkelsen said. "The main difference is we don't believe we can offer every bit of hardware and software to every company."

Mikkelsen said Hitachi is more inclined to build data storage solutions in partnership with other firms. However, EMC officials stressed their own partnerships with many leading hardware and software firms, such as Dell Computer Corp., which manufactures some of EMC's midrange Clariion storage gear. Tucci said EMC plans to have Dell manufacture more of the company's lower-end storage products.

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(c) 2003, The Boston Globe. Distributed by Knight Ridder/Tribune Business News.

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