EMC CEO Sees Slow Turnaround

As Joe Tucci predicts broad-based improvement in the tech industry, Wall Street shrugs

September 5, 2003

3 Min Read
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Speaking at the SG Cowen Securities conference in Boston today, EMC Corp. (NYSE: EMC) CEO Joe Tucci expressed optimism about the prospects of the entire tech sector, and especially, of course, EMC.

"I do see the industry, pretty broadly based now, improving... Even telco is showing a glimmer of light," he said. As for EMCs position in all this, he added, "We expect to be substantially above the industry, which means we’re taking share."

But Tucci’s statements this morning today did little to improve the company’s own stock price. The company’s stock price fluctuated lightly up and down, ending down 0.08 percent at $13.25 a share.

Why the lackluster Wall Street response? For starters, Tucci’s comments were pretty much in line with his statements over the past couple of months, so his optimism wasn't much of a surprise, analysts say (see EMC Sinks Despite Hiking Profits).

“This sounded a lot to me like the message he gave on the analyst day,” says Punk Ziegel & Co. analyst Steve Berg. “He’s been moderately bullish on IT recovery for a while.”Tucci's comments are "consistent with what we’ve been hearing in the industry," says Brion Tanous, an analyst with Merriman Curhan Ford & Co. “We’ve seen a growing feeling that there will be improvements in the fall and winter... It really does look like the beginning of a three-year refresh cycle."

In addition, the rosy tech turnaround picture Tucci painted this morning was still marred by a few dark, low-hanging storm-clouds. “I’ll also say that there’s no V-recovery here,” he cautioned [ed. note: does he mean a "V-neck recovery"?]. “This is going to be a long, long, very gradual recovery.”

All in all, however, Tucci said he’s optimistic that the storage industry is in the midst of a major metamorphosis, and that EMC is positioned to take the lead in a new era. “I think this is only the beginning,” he said. “I think there will be more change in the next three years than there’s been at least in the last 10, and probably the last 12 years.”

While the storage industry has come a long way since the creation of single, redundant arrays, through enterprise storage, to networked storage, and finally to automated networked storage, Tucci said that the next step in the process -- moving to information lifecycle management (ILM) -- will represent a greater shift than all of those steps put together.

ILM, which is the ability to match the value and the age of the data a customer wants stored with appropriately priced storage, is one of the hottest buzzwords in the industry right now, and everyone who’s anyone claims to be at least working on it. Tucci, however, insists that EMC, with its broad product offerings within storage hardware, software, and services, is uniquely positioned to address this growing space.“We’re going to have the best platforms… the best software… the best services,” he said, claiming that the company already holds 42.8 percent of the management software market, and 36 percent of the storage infrastructure market. And while EMC hasn’t traditionally had much presence in the backup and recovery space, Tucci says that the soon-to-be finalized acquisition of Legato Systems Inc. (Nasdaq: LGTO) will put the company in third place, with about 11 percent market share (see Behind EMC's New Software Splash).

Berg agrees that EMC is well positioned to gain share in this space. “You’ve got to have a bunch of different hardware platforms, policy management software, backup and recovery and archive software, and a decent services organization,” he says. “Does anybody besides EMC have that?”

— Eugénie Larson, Senior Editor, Byte and Switch

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