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Is EMC The Next ENRON? (Data Storage Giant Over-Stating Income)
Ron May News Report Email List ^ | 2/4/2002 | USConservative

Posted on 02/04/2002 3:16:12 PM PST by usconservative

Received this a few minutes ago in an email list that I participate in. If you're an EMC customer, pay close attention.



  
Ron May runs a newsletter about Chicago business.  He breaks news frequently
will before other sources.  Look at this!

----------------------------------------------------------------------------
-

Email number one from 2/1/02 from Ron May:

Here is the scandal. Now, I must tell you that it comes form one anonymous
caller who sounded quite credible, but it could all be bunk, or part of it
could
be, so you were warned. Here is what I heard from the caller whom I did
speak
with.

1. Monish Shah, the VP of Professional Services at the Chicago office of
EMC (on Bryn Mawr) and Bob Waltz who reported to him have been fired this
morning.

2. They are also looking into the conduct of Allen Cullen who is the VP
of Sales in the same office. He too may be dismissed.

3. For about a month now, they have been investigating the situation.

4. There is a revenue discrepancy of between $6MM and $8MM for the 4th
quarter of 2001.

5. This is where it gets a bit fuzzy. Monish had his own side business in
which he was using consultants.  He was somehow billing their work through
EMC and was paying his own company,
even though no work was being done. There are forged documents, I was told,
having to do with customers signing off on POs, etc. That is all phony, I am
told. The exact mechanics of how this scheme worked are a bit unclear.

6. Given the Enron scandal, this is a big thing if it turns out to be true.
The caller
told me that HR, Legal and Finance are all in the office going over
documents
today. I was also told that about 200 people work out of this office.

7. So here is how it might have worked. Monish faked that work was being
done for clients.
His side business firm got paid, but the customers did not pay EMC. EMC is
out
the money. The caller told me that he is not intimately involved and may not
even be an EMC employee. He was not certain about the titles of the people,
but
he did know their names with a greater degree of certainty. Again, none of
this
has been confirmed. I have had one anonymous call that sounded pretty
realistic.
But it may turn out to be pure baloney. ____________________


Email number two from 2/1/02 from Ron May

Briefly noted, by Ron May * If I had a million dollars to bet right now on
whether this is a bona fide scandal, I would make the bet in a New York
second.
My gut tells me that this is big, just based on the level of people in the
firm
that are involved.

1. The story is true about EMC. They summoned Manish Shah
yesterday to Wisconsin to make sure no one saw them. So far, the only two
people
who have been firedd are Manish and Bob Waltz. The amount of money that the
revenue figures are off by: between $5MM and $10MM, and that is what they
know
so far.

2. EMC's stock could be at $1.00 in a month. Maybe that is a bit overly
dramatic, but it could be that big. Can you spell L-E-G-A-T-O? That company
went
from $80 to $8 in less time than it will take for me to write this letter
because of phony RR (revenue recognition). That was three years ago.

3. One of my internal sources tells me that he found out about the troubles
back in July
of 2001. That is when there were some problems, and they were not just
billing
problems. Apparently they involve a two word phrase that I don't use any
more in
this report. You know, s. h. Since the anonymous call this morning, I have
tapped into my sources inside the firm and I do know these guys. They have
never
steered me wrong in the past. There is a mysterious reference to a group of
six
guys, and it is now about fifteen guys who are involved in the internal
investigation which is not over yet. My sources are telling me that this is
BIG:
SEC big, Connie Chung big.

4. The correct terminology is that they are called Statements of Work
(SOWs). They were falsifying SOWs to make it look like they made quota. That
put money into Manish's pocket by way of his bonus which was tied to that.
He cut and pasted signatures. In other words, they were forged. Or he had
his cronies at a place like Mascon or Motorola sign for him. Three firms I
have heard that were involved in the falsification of work are: Motorola,
Mascon, and UAL. The falsification has been going on for at least the last
two
quarters.

5. There is a great deal of internal concern including letters from
the Chairman. An e-mail was sent out today denying the essence of what I
reported this morning, but acknowledging that Manish is no longer with the
firm.
Why? What's the big deal if only $10MM was involved? Well, to start with,
it's
illegal. And if the SEC gets wind of this, they could go back over five
years of
revenue numbers with a fine tooth comb. Imagine what the mere hint of that
could
do to the stock.

6. Bob Waltz reported to Manish and he was also canned. Another
person under suspicion is Tim Fiedler, a district sales manager. Other bull
that
has gone on includes that Manish's brother-in-law was there three months and
got
stock options when far more senior people did not. That is all I have for
the
moment. Here is the e-mail that went out internally this afternoon from
Allen
Cullen, the Divisional VP of Sales.


-----Original Message----- From: Cullen, Allen Sent: Friday, February 01,
2002
2:53 PM To: Cullen Division Subject: May Report Good afternoon.......It has
been
brought to my attention that a report is circulating the internet with
comments
pertaining to the Chicago Office and more specifically our Professional
Services
Organization.....Let me take this moment to clarify any confusion with
regards
to this e-mail / report........Yes , it is true , Manish Shah and Bob Waltz
are
longer employees at EMC......The remaining content in this report is
absolutely
false.......There are no issues that exist in the Chicago office........We
continue to have one of the most dedicated and focused sales and services
organizations in the business.....Our Division continues to deliver the
quality
and commitment to EMC customers that the technology industry standardizes
on.......Let's not get distracted by random publications ......Let's focus
our
efforts and energies toward the client base and deliver a great Q1
........Good
selling !!!! Allen Cullen Divisional Vice President 800-337-6393 Main:
773-756-3000 Fax: 773-399-9622 cullen_allen@emc.com +++++++++++++++ Allen,
Ron
May here. I have a question. How do you spell L-I-A-R?
__________________________________



TOPICS: Business/Economy; News/Current Events
KEYWORDS:
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Ron May of the May Report is a respected Technical reporter in the Chicago area. His newsletters are cutting-edge and are correct 99 times out of 100.

As a former EMC customer, I can only say I'm all but too happy to be away from them. Their slimy, sleazy way of doing business was always a huge turn-off. The company I work for switched our data storage from EMC to one of their competitors some time ago, and we're very glad we did.

I know some of the people at UAL (which is referenced in this email) and will be calling them to see if the above is in fact, true. But based on Ron May's uncanny ability to get these things right, especially with his contacts in the IT industry, I'm betting he stumbled onto something BIG.

If you've been riding EMC's stock down from it's highs over the last year to the mere pittance of about $16/share recently, now might be a good time to salvage what you can from your EMC stock.

Couldn't happen to a "nicer" company, IMO.

1 posted on 02/04/2002 3:16:12 PM PST by usconservative
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To: Lazamataz; GRRRRR; Grendel Grey; RedWing9; Diotima
PING!
2 posted on 02/04/2002 3:18:37 PM PST by usconservative
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To: usconservative
So who is the auditor for EMC?
3 posted on 02/04/2002 3:22:58 PM PST by Grampa Dave
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To: Grampa Dave
I'm guessing it's a large accounting firm, one of the top 3. But I'm only guessing ...

If it's AA, this is going to be a HUGE nail in their coffin!

4 posted on 02/04/2002 3:24:38 PM PST by usconservative
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To: Grampa Dave
google = Price Waterhouse
5 posted on 02/04/2002 3:40:37 PM PST by demsux
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To: usconservative
This sounds, on its face, like a typical employee dishonesty loss. EMC has insurance against this. This ought to come to nothing!
6 posted on 02/04/2002 3:43:15 PM PST by FlameThrower
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To: demsux
Thank you for the search. So we can't blame this on AA. Hopefully, Senator Dodd's bill in 1995 didn't make bandits or abettors out of most the auditors.
7 posted on 02/04/2002 3:43:29 PM PST by Grampa Dave
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To: usconservative
Bump!
8 posted on 02/04/2002 3:46:55 PM PST by Incorrigible
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To: demsux
How'd you do that search on Google? (Educate us non-google users if you would, please!) :)
9 posted on 02/04/2002 3:47:49 PM PST by usconservative
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To: usconservative
searched for EMC, went to their website and looked at their most recent annnual report...voila
10 posted on 02/04/2002 3:49:30 PM PST by demsux
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To: usconservative
The founder of EMC(Egan) is Bush's ambassador to Ireland so if EMC shoud go belly-up W. will again be called on the carpet. On a more personal note, my son was hired by EMC last April. He was told that this was an opportunity of a lifetime. He moved himself from Seattle to So. CA and quickly became sorry about his decision. He was laid off in October along with many young guys in his situation. He doesn't have great things to say about the company. They went without competition for quite awhile and now can't deal with their situation. Here in MA. the company is revered.
11 posted on 02/04/2002 3:50:04 PM PST by surrey
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To: FlameThrower
This sounds, on its face, like a typical employee dishonesty loss. EMC has insurance against this. This ought to come to nothing!

You've obviously never dealt with EMC. If I had a $1 for every time they presented a "non-binding" Statement of Work in front of me over the 3 years we had their storage products in house, I'd have a few hundred bucks.

EMC wants a SOW for everything they do. My *guess* is that at the end of the day, it'll be determined that all these "non-binding" SOW's that never materialized into actual revenues for EMC will have been used to prop up their bottom line, and pump up their stock price.

Any bets? (As a *former* Excessive Margin Company customer, I'd bet I'm right!)

12 posted on 02/04/2002 3:50:42 PM PST by usconservative
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To: surrey
Sorry for your Son. Hopefully he'll land on his feet soon and be much better off.

EMC tried recruiting me from the company I work for three times over the course of a year. Funny how EMC's so-called "ethics" prohibit them from recruiting from their customers, so they hired a search firm to do it for them, and gave them my name! Unethical bastards, IMO. I hope they go belly-up and soon.

13 posted on 02/04/2002 3:52:39 PM PST by usconservative
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To: demsux
Thanks! Now why didn't I think of that? Doh!
14 posted on 02/04/2002 3:53:07 PM PST by usconservative
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To: usconservative
HOLY TACO! What the heck is going on here, first Enron, than Kmart followed by The Global co. and now this! Buckle up cowboys, this is going to be one hell of a BUMPY year.
15 posted on 02/04/2002 3:53:09 PM PST by RoseofTexas
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To: usconservative
There are wild and unfounded rumors flying all over Wall Street and other places right now. It's always the same. Everytime the short sellers want to tank the market they start a rumor that Greenspan suffered a heart attack or CA just slipped into the Pacific. Don't believe a word of it.

Richard W.

16 posted on 02/04/2002 4:05:36 PM PST by arete
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To: usconservative
I deal with EMC all the time, I have worked directly and indirectly for them, have been a customer of theirs and know their products inside-out (keeps me in golf balls and puts food on the table), and for the most part cannot stand their sales people.

For the record, a SOW or statement of work is a consulting standard method of "scoping" out a job to be performed. This document details assumptions, deliverables, customer and consultant responsibilities, etc. so that all parties involved are playing from the same page. All parties review and "sign-off" on the SOW before work begins. Work ends when all deliverables have been met and agreed to. In fact, I just finished reviewing one for my next engagement.

It would not surprise me if this were true about EMC. The EMC sales force is by far the most arrogant group of sales people I have ever met in 22 years in the IT business. I know of two EMC sales persons whom if I ran into them today I would probably cold-cock on the spot as in both cases, I wasted alot of work and lost money so that these scumbags could meet their quotas. I have witnessed on two occassions EMC sales people being escorted off a customer's premises by local law enforcement authorities.

On the other hand, they do have a decent product, on par with the best in the business but on the pricey side. EMC's are not "low-end" storage.

---max

17 posted on 02/04/2002 4:06:32 PM PST by max61
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To: max61
It would not surprise me if this were true about EMC. The EMC sales force is by far the most arrogant group of sales people I have ever met in 22 years in the IT business. I know of two EMC sales persons whom if I ran into them today I would probably cold-cock on the spot as in both cases, I wasted alot of work and lost money so that these scumbags could meet their quotas.

You and I probably had the same rep! LOL! I gotta ask ... why would you spend your budget to help EMC meet their quota? I never would. I did what was in the company I worked for, best interest period.

As far as EMC's product goes, they're NOT the best in the business anymore. Hitachi (and the HP labeled Hitachi product) is kicking their sorry arse up and down the street. The Hitachi 9900 far outperforms anything EMC has to offer, at 2/3'rds (or cheaper!) the price. We switched about a year and a half ago, and saw our average performance go up 70% - just by changing the disk.

When we tweaked our code to take advantage of features already built into the Hitachi system, we saw some applications perform 700% better and more.

It was truly amazing. I have absolutely NO idea why anyone would continue to pay EMC's extortionist prices for disk, and deal with their arrogant, smug sales force. They remind me of used car dealers. Slimy to the max, and even more untrustworthy than Clinton.

But that's just my opinion.

18 posted on 02/04/2002 4:24:22 PM PST by usconservative
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To: surrey
They went without competition for quite awhile and now can't deal with their situation.
I'm thinking that they are finding out that there are only a couple dozen companies that really need their storage solutions and once they sold to them they can't branch out any more. Most small companies only need about 300-500G of storage, for that go with NetApp for about 1/10th the price of an EMC box. Provided, of course, that you can get an EMC sales slug to talk to you with storage needs less than a terrabyte.
19 posted on 02/04/2002 4:25:47 PM PST by lelio
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To: usconservative
why would you spend your budget to help EMC meet their quota?

Believe me, it is not by choice. The firm I work for is both an HP and EMC var (as well as Cisco, IBM, etc. etc.). It has almost come to the point where many of our firm's server/storage consultant's are refusing to do work for EMC which for the most part is a result of EMC ethics (or lack thereof).

As far as EMC's product goes, they're NOT the best in the business anymore. Hitachi (and the HP labeled Hitachi product) is kicking their sorry arse up and down the street.

I am also quite familiar with HP's XP line as well and am currently assisting my present customer with configuration and capacity planning for a XP512 they are considering purchasing. Have worked on the XP48, 256 and 512 models and agree with you on their respective performance. I've not worked on any native Hitachi storage however but since HP basically rebadges Hitachi's unit, I don't think that it would be too differing from HP's.

And you are right EMC's margin is more than most customer's would want to know about. Whenever a customer I am with talks about purchasing a Symm I always tell them to get a quote from EMC, and when the rep calls back tell him that you are waiting for a competetive quote from HP or Hitachi. This typically will result in a follow on quote from EMC for about 15-20% less than the original.

---max

20 posted on 02/04/2002 4:43:57 PM PST by max61
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