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Author: sandhillroad Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 12284  
Subject: Annual Meeting Date: 5/8/2002 5:55 PM
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I was there, and can report that it was quite mild considering the price of the stock lately. I am doing this from memory so please forgive small errors. And these are just some of my general observations.

First, the company says that corporate system attached storage market is for the company, a declining business and a low margin business, and that the company was not going to put much resource into that area. The Network Attached Storage business is strong and growing.

The new product, sitting on the stage with a black shround until the proper moment, was described as a "next wave" of opportunity for the company. The point that caught my attention was that they were not trying to solve the product problem -- that is probably pretty easy -- but the systems and management problem associated with long term and archival storage. That could be formidable. They also make the point that there is a need to know that the documents contained therein are exact copies of the originals, and have not been modified. This suggests a need for a method of verification and may involve an independent party. One thought while driving home. Document retention policies call for the distruction of documents after a specified time. I wonder if a company would trust that to an independent party?

The make the point that future revenue will come more from services than from hardware. Add the software piece to that and hardware becomes an even smaller portion.

Cost cutting was a major topic. The company as much as admitted that they were blind-sided (my words) by the reductions in year to year revenue growth by quarter. They had projected 14 percent for storage, and saw a decline in the last half of 2001. That caused them to implement "Plan B" (their words) with the intent of reducing the break even point from an annual revenue of 12 billion to 6 billion. That work was to have been completed in the second quarter of this year, but was, in fact, completed one quarter earlier.

I am skipping stuff, but what they ended up was a couple of screens on the importance of partnerships. There were two screens, one for systems partnerships (Unisis and the like) and another for Service partnerships (Accenture and the like). Finally, there was a big deal made out of a partnership with Dell, with a hint of a future product specially designed for the Dell customers.

The Q and A session was taken over pretty much by the advocates of more outside directors and more diversity on the board. Whether that will ever affect the bottom line, I don't really know. One questioner pushed on Tucci for apparently having said in past meetings that "we are not worried about competition, because we are so far ahead of them." Tucci denied making such a statement, and reiterated that the company had a health paranoia about competition.

Whether this is enough to cause people with cash to exchange that for EMC stock I have no idea. I did run into several folks who had been holding the stock for a long time, and were still holding. One said he has a base of $2.00 per share. Oh well. It's tough all over. I must take a wait-and-see attitude about the new strategy. Naturally, they appear enthusiastic -- several orders already on the books and all of that kind of stuff -- but I have concerns about how fast the market will grow. It looks to me as if the future rests on Network Attached Storage and Services.

But, am I the only one who is concerned about the emphasis on partnerships, with EMC in competition with its own partners? When Tucci shaves in the morning, and asks himself the question "What businesses should we be in?" I hope he had a good answer.

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