EMC Loads Both Barrels In Price War

Don't expect EMC Corp. to wave a white flag in the storage price war any time soon, according to company chairman Michael Ruettgers. He was quoted by Reuters as saying, "We're driving pricing down aggressively during the period, and we'll continue to do that."

As IT budgets shrink, the storage stalwart faces a tough fight to meet its goal of 20% revenue growth for 2001. EMC faces some serious competition from Hitachi, IBM, and others. "Other vendors have made radical price cuts on enterprise-class storage platforms based on overall commitments to buy hardware, software, and services--amounting in some cases to potential giveaways" of equipment, says William Hurley, an analyst at the Yankee Group.

EMC is willing to match or even undercut competitors' prices on machines because it sees greater long-term revenue potential elsewhere, says Chris Foster, an analyst at Technology Business Research. "If they're going up against Hitachi or IBM, they'll get aggressive on the box side and then try to make up margin with the storage software and services that come with it." Software accounts for more than 20% of EMC's revenue today, compared with 12% in 1999.

EMC says its market share for external data-storage equipment in 2000--34.6%, according to Gartner Dataquest--was well beyond any competitors'. That's "old news," Foster says, adding that today's percentage could be significantly lower. Storage is one of the few areas where IBM and Hewlett-Packard are still hiring, and Hitachi posted higher revenue growth rates for the first quarter than anyone else in the market, Foster says.

But in spite of current competitive and economic challenges, Hurley believes EMC will continue to succeed in the sector. "If any storage vendors make [their earnings estimates] this year, EMC and Hitachi have the best chance." - Sandra Swanson and Reuters