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Last tech stock standing
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November 14, 2000: 6:15 a.m. ET
EMC may not be a household name but it has made some investors quite happy
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - It has a market value larger than Sun Microsystems. And it earns more per share than Oracle Corp.
But for EMC Corp, size and profits pale compared with the company's stock performance. Over the last 12 months, when the Nasdaq composite index fell 8 percent, EMC's shares nearly doubled, rising 98 percent.
How has a large technology company soared amid a tech sell-off that humbled such once-mighty firms as Lucent Technologies, Intel and Apple Computer?
 Analysts say two words: data storage.
Hopkinton, Mass.-based EMC builds software and networks used by companies to house their ever-expanding oceans of digital information.
"It reflects the fact that this area has remained really robust," said Marc Klee, whose $2 billion John Hancock Global Technology Fund has about 4 percent of its assets in EMC, the fund's largest holding.
Internet companies are subject to slowing advertising sales. Telecommunications firms aren't spending as much on equipment. And in a wireless world, personal computer makers can't unload their products the way they used to.
But many analysts who cover the data storage field see no similar slowdown in demand as a culture weaned on paper information continues its conversion to electronic data.
"Storage has been a very strong market and this company is definitely a leader," said Paul Meeks, who as manager of the $723 million Merrill Lynch Global Technology Fund, owns the stock.
 The company may be its own biggest booster. EMC's director of communications, Mark Fredrickson, said the storage market is growing by about 22 percent per year. That rate, he said, is far faster than the 6 percent growth in the server market, 6 percent growth in personal computers, and 8 percent growth in networking equipment. EMC says overall information technology spending is growing at about 11 percent.
And EMC may have another thing going for it.
"They don't have direct competitors but battle on the fringes with Compaq, Sun, IBM, and Hewlett-Packard," said Bill Lewis, who covers the company for Chase H&Q, an investment bank in San Francisco.
Then there's the bottom line.
Analysts surveyed by earnings-tracker First Call expect EMC to post profit next year of $1.03 a share, up 34 percent from the 77 cents the company is forecast to earn this year.
But bargain hunters be warned: EMC (EMC: Research, Estimates) stock costs plenty. At $79, it trades at almost 80 times next year's earnings. And analysts such as Merrill Lynch's Meeks view EMC as not immune from the kind of sell-offs that have tamed JDS Uniphase (JDSU: Research, Estimates), Intel (INTC: Research, Estimates) and Dell Computer (DELL: Research, Estimates) this fall.
And the company is hardly invulnerable to selling. The stock has fallen in recent weeks, down 24 percent from it 52-week high of almost $105.
Still, by near doubling over the past 52 weeks, EMC stands out.
Lucent Technologies (LU: Research, Estimates), whose stock rose 38 percent in 1999, has lost 72 percent of its value this year. Amazon.com (AMZN: Research, Estimates), 43 percent higher last year, is 63 percent lower in 2000. And Apple Computer (AAPL: Research, Estimates), which saw its shares jump four-fold in 1999, has also seen two-thirds of its market value disappear this year.
And analysts say EMC doesn't face such problems as Lucent's earnings warnings, Amazon's lack of earnings or the slower business sector growth confronting Apple.
Klee, of John Hancock Funds, says the company has met its financial forecasts amid a market quick to punish the slightest imperfections. Just ask Nortel Networks (NT: Research, Estimates), which lost nearly a third of its market value last month when it reported smaller-than expected sales.
But asked about future threats, Klee cited the competition, which tends to hunt down any company that is seemingly doing everything right, aiming for a piece of its lucrative market share.
He expects the likes of Sun Microsystems (SUNW: Research, Estimates), Compaq Computer (CPQ: Research, Estimates) and Network Appliance (NTAP: Research, Estimates) to nibble away at the data storage sector with products it has or will create.
Founded in 1979, EMC, if it were a person, wouldn't be old enough to drink. Can this powerful adolescent keeps it strength?
"No one is immune (from a sell-off)" said Chase H&Q's Lewis.
Still, to the degree they can predict the future, analysts maintain surprisingly strong short and mid-term outlooks for this stock. And no one can argue with its performance. 
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