EMC Gives Weak Outlook, Sees Slower Tech SpendingBy Reuters | Posted 2008-10-22 Email Print
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IT storage vendor EMC forecast earnings for the current quarter at the low end of Wall Street expectations on slower spending on information technology. EMC CEO Joseph Tucci said he saw a challenging economic environment ahead and Tucci said he expected IT spending to grow between 1 percent and 3 percent next year.
By Jim Finkle
BOSTON, Oct 22 (Reuters) - EMC Corp (EMC) forecast earnings for the current quarter at the low end of Wall Street expectations as the world's top corporate storage equipment maker faced slower spending on information technology.
But shares rose 7 percent on relief that the news wasn't worse and also by stronger-than-expected quarterly results from unit VMware Inc (VMW.N: Quote, Profile, Research, Stock Buzz) late on Tuesday. EMC owns 85 percent of VMware and said it had no plans to spin off more of its stake.
"I'm surprised they did not guide lower," said Kaushik Roy, an analyst with Pacific Growth Equities. "People were pricing in a doomsday scenario."
EMC expects fourth-quarter net income at 23 to 24 cents per share and revenue of $4 billion. Wall Street was looking for earnings of 24 cents per share on revenue of $4.1 billion.
EMC did not issue a forecast for 2009 and Roy thought company executives would be reluctant to do so during a conference call later on Wednesday.
"It all depends on the macro situation. Things are changing every week. If I were the CEO I wouldn't know how to come up with good guidance," Roy said.
EMC Chief Executive Joseph Tucci said he saw "a challenging economic environment ahead" and that he expected global information technology spending to grow between 1 percent and 3 percent next year. "Hopefully the markets we are in will have a little bit more lift than that," he said on a conference call.
Net income fell 17 percent to $411 million, or 20 cents per share, in the quarter ended Sept. 30, from $493 million, or 24 cents a share, a year earlier. The year-ago results included a gain of more than 5 cents on the sale of VMware shares.
EMC's adjusted third-quarter profit excluding items was 19 cents per share, as computed by Reuters Estimates, a penny above the Wall Street average forecast of 18 cents.
Revenue climbed 13 percent to $3.72 billion. Wall Street had forecast $3.73 billion.