The recently released survey, conducted in the fall of 2000 by InformationWeek Research, rated EMC the highest in overall satisfaction among the nine storage vendors included, and No. 1 in five other specific categories that are critically important to customers. The results reflect direct experience with different storage suppliers -- not reputation or hearsay. Storage purchasers were asked to identify their primary storage providers and evaluate each supplier on several criteria. According to the survey, customers rate EMC No. 1 in: .
Overall Customer Satisfaction .
Product Reliability .
Interoperability Standards .
Service-Level Guarantees .
Product Innovation .
After-Sale Service .
Economic and Security Market forces.
According to EMC, the current economic environment for information technology spending is worsening globally, causing major cutbacks in many of the industries that EMC sells to. Furthermore, the terrorist attacks in the United States have added to customers uncertainty and hesitation. The week of the attack, EMC saw sales slow significantly, practically coming to a stand still in the New York City area. I believe that EMC is being hit very hard in the airline and financial segments, which are both large parts of the company's business. .
Moreover, I think that the gap between European demand and expectations continues to be quite broad as compared to the United States, where expectations have been down for a longer period of time. In the third quarter of 2001, 23% of EMC's sales were from Europe.
EMC should be able to generate industry-leading gross and net margins over time. However, we believe that increasing focus on the space and the education of customers with regard to capacity utilization and optimization is causing commoditization. EMC's business model is built upon an expectation of gross margins in the 50% range. I am concerned that the high 40% range is more realistic.
