Previously, I told you that I would offer up my opinion of the one technology company to watch for evidence of a broad recovery in the economy and the markets. Today I make good on that promise.
I told you that my choice would surprise you. It’s not an obvious choice like IBM, Dell, Microsoft, Intel, Cisco, Nortel, or Hewlett Packard.
It’s……..(drum roll)…….. storage king EMC.
I know what you’re thinking. You’re thinking, “Gee, Alan, for months you’ve been telling us to look to the top of the supply chain for any sign of an economic recovery, and EMC isn’t at the top of the supply chain.”
You’re right, of course, but EMC is a special case even though it is not at the top of the supply chain.
What makes EMC special, other than the fact that they are the world leader in data storage?
What makes EMC special is that they are a player in every supply chain imaginable, because every company in every industry buys data storage. EMC isn’t a technology company that only sells to other technology companies. EMC sells to General Electric, General Motors, and hundreds of other companies in dozens of other industries. Specifically, EMC participates in supply chains in the following sectors:
E-Business and internet
Healthcare
Insurance
Manufacturing
Media and communication
Oil and gas
Retail
Service
Telecommunication
Utilities
Financial services
EMC’s customers run the gamut from CVS to EDS.
When the economy picks up, these companies will have more customers, more transactions, and need more storage.
And when that happens the demand for storage trickles down dozens of supply chains to EMC. (That’s not to say that EMC doesn’t have competition from the likes of Hitachi, IBM, and Network Appliance.)
The trickle down effect will be felt so quickly by EMC, and the magnitude will be so amplified because they participate in so many supply chains, that you will probably hear EMC’s CEO Joe Tucci talk about improving demand before you hear it from companies at the top of the supply chain.
Normally, supply chains melt down from the top down and also recover from the top down. That’s why I’ve been advising people to hold off on investing in semiconductor manufacturers. EMC is an interesting exception to this rule. EMC was one of the last companies to collapse in the bear market for the simple reason that it participates in so many supply chains. And it will be one of the first companies to recover for the same reason. Or, put another way, EMC is a horizontal player in a world full of vertical players.
So watch EMC closely. When things improve there, its a good sign that things are improving across the board.
Random Thoughts: So Cisco is restructuring. Well isn’t that peachy. Watch out…companies that restructure usually have fundamental problems that they don’t have a clue about how to solve. So they restructure every six months, from horizontal markets, to geographies, to vertical markets, to horizontal markets. Rinse, wash, and repeat. I call it the dreaded “Digital Equipment Corporation Disease.” The smart employees ignore every restructure and continue to do their jobs as always, until they get laid off or find a better job.
