When Bill Harnisch spots a stock he likes, he starts buying until he has accumulated a big stake--usually 5% to 10%. Of late, he has been going after EMC (EMC), which he says has ''grossly underperformed'' the market since 1994. The president of New York investment firm Forstmann-Leff Associates, Harnisch says EMC is a key technology company that is ''still undervalued,'' and he expects the stock to double in 6 to 12 months.

So far, his firm owns 6.6 million shares--2% of the stock outstanding. The price has crept up from 26 to 29 in recent days.

What's so alluring about EMC? The market for intelligent storage-and-retrieval systems for information--where EMC is the dominant world player--is ''exploding,'' notes Harnisch. EMC makes high-performance storage products for mainframe and midrange computers, mainly those of IBM and Unisys.

From estimated sales of $4 billion this year, the industry is expected to balloon to $50 billion by 2000, according to Harnisch and several observers. The demand, explains Harnisch, will come from banks, insurers, and other financial-service providers. UNUM, a major disability insurer, now uses EMC's Symmetrix systems to support its entire information system, including claims processing, underwriting, and policy administration. EMC's system, UNUM says, has helped boost its productivity. EMC has also been chosen by Oracle, a leader in database software, ''as the storage solution'' for its new systems.

The newest customers are intranet- and Internet-linked companies, in particular the servers of Web sites. ''EMC's products--such as its Symmetrix 3000 open-storage system--provide the solution to the bottleneck that has slowed the traffic of information to Internet users,'' says Harnisch. EMC is completing a transition into proprietary systems, using its own software that will customize its products.

A new ''growth phase'' in EMC's earnings has begun, according to Harnisch. In this fourth quarter, analysts expect EMC to make 49 cents a share, vs. 41 cents a year ago. For all of 1996, analysts predict earnings of $1.55, up from $1.49 in 1996's. They expect $1.90 next year.

But Harnisch is more optimistic: He believes EMC will earn $2 to $2.20 next year. And he sees the stock increasing at twice EMC's earnings growth rate of 25%, reaching about 50 a share.



Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
Terms of Use