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EMC Hammered: Page 2 of 4

Hewlett-Packard Co. (NYSE: HWP)
spurned EMC about a year ago when it formed a partnership with Hitachi. Current rumors are that Hitachi is about to ink a similar agreement with Sun Microsystems Inc. (Nasdaq: SUNW), potentially further eroding EMC’s market share.

If that deal comes to fruition, however, it may not be as sweet as Sun and Hitachi are hoping. “Sun and HP are very competitive with each other,” says Jim Porter, president of Disk/Trend Inc. “You might have two major customers getting in each other’s way.”

EMC officials on the conference call downplayed the competition and insist they are “winning” more business from these rivals than they are losing.

Meanwhile, as other vendors encroach more on its top-tier customers, EMC is attempting to expand to the mid-tier market. But that is also becoming a crowded domain, as low-end storage vendors like Compaq Computer Corp. (NYSE: CPQ) and Dell Computer Corp. (Nasdaq: DELL) have begun to move up.

Still, EMC's revenues from network storage products grew 56 percent over
the year-ago quarter to $714 million, according to the company. EMC says it's outshipping archrival Network Appliance Inc. (Nasdaq: NTAP) with sales of its Clarion IP4700. It sold $100 million more of these devices than Network Appliance sold of its NAS boxes, for the first quarter of the year.