EMC's Strong Quarter Spurred by Pent-Up Storage DemandBy Reuters | Posted 2010-10-19 Email Print
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EMC Corp has raised its full year earnings forecast, ready to reap the rewards of two years of restructuring and pent-up demand for storage technology.
BOSTON, Oct 19 (Reuters) - EMC Corp (NYSE:EMC), the top maker of corporate data storage equipment, raised its full-year earnings forecast on Tuesday as it posted record quarterly sales and continued a two-year campaign to boost margins.
Chief Executive Officer Joe Tucci told investors on a conference call that he continues to believe the economic recovery will be slow, "with a few bumps in the road."
He said he expects moderate growth in the United States, Japan and most of Europe.
The company, whose rivals include Hewlett-Packard Co (NYSE:HPQ), IBM (NYSE:IBM), NetApp Inc (NASDAQ:NTAP) and Oracle Corp (NASDAQ:ORCL), has been benefiting from two years of restructuring that have driven up margins, as well as from pent-up demand for storage space.
While companies reduced tech spending over the past few years, the amount of digital information they stored on their computer systems continued to grow. As a result, many companies' storage systems need to be replenished.
"Storage is high on the priority list," said Wedbush Securities analyst Kaushik Roy. "It's more important than PC upgrades and stuff like that."
EMC forecast 2010 profit of $1.25 per share, excluding items, ahead of the $1.21 average outlook of analysts polled by Thomson Reuters I/B/E/S. The company said it expected full-year revenue of $16.9 billion, while analysts had forecast $16.7 billion.
Third-quarter non-GAAP gross margin of 60.5 percent was up from 57.3 percent a year earlier.
Net income rose to $475.2 million, or 22 cents per share, from $298.2 million, or 14 cents, a year earlier. Excluding items, profit was 30 cents a share, in line with analysts' estimates.
Revenue rose 20 percent to a record $4.2 billion.
Analysts said disappointing results from EMC's VMware Inc (NYSE:VMW) software subsidiary overshadowed the generally positive report from EMC.
EMC shares were up 1.1 percent at $21.02 on the New York Stock Exchange, compared with a 0.8 percent drop in the S&P 500 Index .SPX.
Meanwhile, VMware shares tumbled 5.2 percent to $74.30 the day after the company reported sluggish software sales and disappointing quarterly cash flow.
VMware, which makes virtualization software that helps companies boost the efficiency of computer hardware, accounted for about 17 percent of EMC's revenue during the third quarter. (Reporting by Jim Finkle; Editing by Robert MacMillan and Lisa Von Ahn)