There is an allure to the title of heavyweight champion of the world. Smaller fighters often show more energy, more quickness, sometimes even more skill. However, it's the heavyweight that draws the big crowd, the electric atmosphere, and the lofty pay-per-view dollars. America loves the biggest and the best.

In the enterprise data storage industry, there isn't much debate as to who is currently holding the title belt. EMC (NYSE: EMC) is the dominant force in this sector, having an established presence in nearly every aspect of data storage. EMC provides products and services covering disk-attached storage (DAS), storage area networks (SAN), network-attached storage (NAS), and is rapidly growing its highly profitable storage software portfolio.

Software applications are the key to maintaining cutting-edge storage solutions, and EMC is giving this area full attention. R&D expenditures are expected to reach $750 million in 2001, up from $164 million in 2000, with roughly 80% of those funds dedicated to software development.

EMC enhanced its software portfolio in February of this year with the introduction of new management software for mixed-vendor information storage networks, the ESN Manager. The new software unifies and streamlines management of heterogeneous information storage networks, providing a single point of management for SAN configuration and control. This integrated functionality reduces information storage network deployment time, enhances the productivity of information technology (IT) management staff, and speeds customers' return on information.

Software sales grew 72% from 1999 to 2000, representing 19.3% of total storage revenue, up from 16.9% the previous year. The company remains optimistic about its software segment, estimating continued growth of 50% or greater.

The overall data storage industry has been slammed lately and even the top dog isn't immune to fleas. EMC has stood down from its recent charge to reach $12 billion in revenues in 2001, with estimates now ranging from $11 billion to $11.5 billion. Earnings per share for the quarter ended March 30, 2001, are expected to come in at $0.19, instead of the original $0.21. The predictable analysts' downgrades that followed sent EMC's shares tumbling. Over the past two quarters, EMC has gone from a $218 billion company to its level today of around $65 billion.

EMC closed out 2000 with $2.65 billion in cash and equivalents and carries another $2 billion in long-term investments. It has the cash on hand for future acquisitions and product development. The weakness in its balance sheet can be found in the inventory side of current assets. As you'll recall from our discussion of cash flow efficiency, nonliquid assets such as inventory and accounts receivable (A/R) act as a hindrance to a company's financial position. EMC stores more than $1 billion of inventory out of necessity, and so far hasn't had any difficulty unloading it, turning its inventory once per quarter.

You might guess from that lofty figure that the company would not have a trim Foolish Flow Ratio, and as usual, you're right. Although on the decline, EMC's Flowie of 1.64 for year 2000 is still above where we'd like to see it. Due to the inventory-intensive nature of the business, it's likely EMC's Flow Ratio never will reach our ideal.

The competition is increasingly fierce and the threat of a sustained storage spending slowdown is certainly worth noting. Due to the longer-term uncertainty, the Drip Port's high-growth study will pass on EMC, as it has with most tech-centric companies. The future for EMC remains bright, however, being at the top of the food chain in an industry that is expected to reach $80 billion within five years.

EMC does not offer a company-sponsored Drip, nor does it pay a dividend. It is available through most pseudo-Drip brokers.

Vince Hanks has storage problems of his own, mostly due to a small apartment. He does not own any of the companies mentioned in this column. The Motley Fool is investors writing for investors.