The squabble was sparked last Friday when analyst Kevin McCarthy of Donaldson, Luftkin and Jenrette released a report stating that EMC might have problems producing some high-end storage products because of a shortage of disk drives from IBM.
In response, analyst Steve Milunovich of Merrill Lynch rallied behind EMC by issuing a research note that discounted McCarthy's concern. "We already knew IBM had problems in the disk area and do not think its disk position has worsened this quarter," Milunovich wrote.
EMC shares dipped $1.50 on Friday to $109.
The dispute simmered over the three-day weekend and erupted anew today when DLJ's McCarthy reiterated his opinion, saying "EMC has fallen behind its production ramp as orders for versions of the company's new products appear to be exceeding supply."
The analyst further stated that the Hopkinton, Mass.-based company is "also having difficulty accurately gauging the current build plan based on different versions of the new Symmetrix 8000 product line." According to McCarthy, one product line is sold out through August, and the company is trying to get customers to switch to another version.
Once again, some analysts took issue today with McCarthy's views.
"That's old news," Chase H&Q analyst Bill Lewis said of the IBM disk drive shortage. "IBM has struggled with their enterprise drives, so there's nothing new there." He added that EMC gets more than half of its high-end drives from Seagate.
Analyst Bill Shope of UBS Warburg echoed that sentiment, saying that that the "percentage of drives (EMC) gets from IBM is very low to nil at this point."
"EMC has known that there were problems at IBM for the past two quarters, so they have outsourced to other companies," said Shope, who rates EMC as a "buy."
Although McCarthy did ring the alarm bell over the problems with IBM, he also tempered the potential impact to EMC, noting in his report that a supply shortfall would, in the worst case, shave 5 percent off revenues this quarter.
"The good news is that demand for EMC's new (Symmetrix) 8000 product line is very strong...Any risk to (the second quarter) is strictly supply driven and not based on a competitive loss in market share," he wrote.
Indeed, he maintained his "buy" rating on the stock and advised investors to buy if the shares dip.
Lewis largely agreed that business is strong for EMC. "There's more risk to the stock than to the business," he said. "(EMC) is executing quite well, and there's not a lot of concern about them not meeting their financial objectives."
"The only risks to the stock," he said, "are research reports like that one (from McCarthy), and competitive product announcements."
In midday trading, shares of EMC were up $7.25, or more than 6 percent, to $116.25.