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Storage maker shoots to double revenues

That's a big step up from 1998's total of $4 billion, but EMC counts on 36 percent annual growth, 35 percent market share, and growing industry need.

EMC, a company that's staked its future on the need for corporate data storage, has set itself a lofty goal: revenues of $10 billion by the year 2001.

That's a big step up from the company's 1998 revenue total of about $4 billion, acknowledged chief executive Michael Ruettgers, speaking yesterday at a NationsBanc Montgomery Securities meeting. But it's attainable, he said, based on the combination of EMC's 36 percent annual growth, 35 percent market share for large-scale storage, and estimates that the market for EMC products will grow to $35 billion by 2001.

$10 billion in revenue is reasonable, as long as EMC can keep ahead of competitors and on top of rapidly changing technology, agreed Paul Fox, an analyst with NationsBanc Montgomery Securities. "They continue to out-execute their competition," he said.

Investors apparently share some of EMC's optimism, as shares in the company currently are trading near the company's all-time high of 110.

Hopkinton, Massachusetts-based EMC beat Wall Street expectations when it announced quarterly earnings last week, prompting Morgan Stanley Dean Witter analyst Gillian Munson to raise her earnings per share predictions for 1999 from $1.90 to $1.98, partly on the basis of growth in EMC's storage software business.

"We continue to like the EMC story a lot," Munson said in a report. "EMC is a technology franchise that is tough to beat these days and it shows in the numbers. We also think that it is significant that we feel more comfortable about the company's competitive position today than we did a year ago."

NationsBanc Montgomery Securities projects yearly earnings of $1.96 for EMC in 1999 and $2.47 for 2000, Fox said.

Future EMC success will greatly depend on products that let large companies take control of the increasingly complex storage situation they face in trying to manage many different computers of many different sizes, each with its own storage system. Transferring data from one computer's storage to another's--for example, from a mainframe to a Windows NT system--is clogging corporate networks with huge amounts of traffic.

"It's like a pig going through a python," Ruettgers said.

EMC offers products that tie together disparate servers across a network based on Fibre Channel, a high-speed networking standard that offers redundancy and frees companies from the requirement that storage equipment be located right next to servers. With Fibre Channel, storage can be several miles away, gathered together in a single site where managers can keep closer control.

Ruettgers touted EMC's ability to provide storage products that work for mainframes, Unix machines, and Windows NT servers. Competitors' strengths, on the other hand, are restricted to one segment or another, he said, though some companies dispute his assessment. IBM and Hitachi have storage strengths with mainframes and Unix machines, but not NT machines, he said. Compaq and Dell are strong with NT products, but not with the higher end, he said. Storage products from Sun Microsystems and Compaq, through that company's acquisition of Digital division, are in the middle, with Unix-based storage systems, he said.

EMC spans all three categories and adds software to the mix, Ruettgers said. Together, EMC's offering is called "enterprise storage networks." The storage area network (SAN) is the hardware infrastructure that makes this possible.

While EMC has been successful in the past by selling arrays of hard disks to big companies, enterprise storage is the big new market, and EMC will become the prime mover in the market, with at least 50 percent market share, Ruettgers predicted.

EMC foresaw the rapid rise of Microsoft's Windows NT operaing system, Ruettgers said, and was able to incorporate that rise into its product line. EMC expects that rise to continue, he added. "NT will proliferate faster than any other system in the future" and will likely replace Unix systems in three or four years, he said.

But one problem with deploying Fibre Channel equipment is the fact that different devices can't necessarily work together. To fix that situation, EMC has led the creation of the FibreAlliance, a consortium of several companies who have products such as switches or backup software that need to make sure Fibre Channel devices work together.