Thursday October 22, 04:16 PM
UPDATE 3-EMC profit beats, shares down on outlook
By Jim Finkle
ORLANDO, Fla., Oct 22 (Reuters) - EMC Corp (NYSE: EMC - news) , the top maker of corporate data storage equipment, reported a higher-than-expected quarterly profit as it slashed costs and corporate technology spending improved.
The company gave a fourth-quarter revenue forecast that matched the average Wall Street estimate, but disappointed some investors looking for a bigger improvement. EMC shares fell 2.6 percent in morning trading.
Wedbush Securities analyst Kaushik Roy said EMC's forecast implied that organic revenue -- revenue excluding the impact of accusations -- would rise 13.5 percent in the fourth quarter from the third quarter, compared to about 15 percent in 2007 and 2006.
'In a year when the economy is improving, it should have been better than 13.5 percent,' Roy said.
However, he was impressed by EMC's margin improvements in the third quarter, and that investors are being too hard on the company. 'Let's give them credit. They're being conservative,' Roy said.
EMC forecast revenue of $4 billion in the fourth quarter and profit of 30 cents per share excluding items. That compared to the average analyst forecast for revenue of $3.97 billion and EPS of 29 cents, according to Thomson Reuters I/B/E/S.
'Customers are signaling more comfort spending their IT budgets, which gives EMC confidence in our ability to perform well,' said Chief Executive Joe Tucci.
He said in a conference call that he expects a 'slow and steady' recovery in technology spending next year, adding that he expects the markets in which EMC competes to grow faster than the rest of the tech sector.
Profit excluding items was 23 cents per share in the third quarter, beating analysts' average forecast of 21 cents.
Revenue at the company -- whose rivals include IBM (NYSE: IBM - news) , Hewlett-Packard Co and NetApp Inc -- fell 5 percent to $3.52 billion, beating the $3.45 billion average forecast of analysts.
EMC has cut spending over the past year as the recession hurt demand for its storage equipment, software and security products. Third-quarter gross margin, excluding items, widened to 57.3 percent, from 55.2 percent in the second quarter.
Canaccord Adams technology analyst Paul Mansky said some of EMC's customers have no choice but to start buying data storage equipment again, after delaying such purchases over the past year, pushing their current systems to near capacity.
Although companies reduced tech spending during the recession, the amount of digital information they store in their computer systems continued to grow.
'When the buckets are full, the companies have to come back for more,' Mansky said.
The amount of digital information created is expected to double in size every 18 months. In 2012, five times as much digital information will be created versus 2008, according to research from EMC.
EMC expects to save at least $450 million this year and $500 million next year from a previously announced cost-cutting plan. At the same time the economy is starting to improve.
Third-quarter net income fell to $298 million, or 14 cents per share, from $393 million, or 19 cents, a year earlier.
The results were helped by a stronger-than-expected earnings report from its VMware Inc business software subsidiary, which released results late on Wednesday .
EMC shares were down 45 cents to $17.05 on the New York Stock Exchange.
(Additional reporting by Sayantani Ghosh and Tiffany Wu, editing by Maureen Bavdek and Derek Caney) Keywords: EMC/
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
