EMC First-Quarter Profit Rises 28% on Storage Product Demand
April 20, 2011, 10:51 AM EDTBy Dina Bass and Danielle Kucera
(Updates with comments from CEO, finance chief starting in 10th paragraph.)
April 20 (Bloomberg) -- EMC Corp., the world’s biggest maker of storage computers, reported a 28 percent gain in first- quarter profit as companies increased spending on data centers capable of delivering tasks through the Internet.
Net income rose to $477.1 million, or 21 cents a share, from $372.7 million, or 17 cents, a year earlier, EMC said today in a statement. Excluding some items, profit of 31 cents met the average of analysts’ estimates compiled by Bloomberg.
EMC, like Intel Corp. and International Business Machines Corp., is benefiting from corporations’ need to upgrade their systems after holding off during the recession. In January, Hopkinton, Massachusetts-based EMC unveiled more than 40 storage products and technologies to capture part of that boom.
“We’re in the early innings of a major refresh cycle, where EMC is in the driver’s seat,” said Daniel Ives, a New York-based analyst at FBR Capital Markets who rates the shares “outperform.” “For a few years companies were in a bunker mentality. Now you’re seeing wallets get bigger, issuing a lot more” information technology spending.
Sales rose 18 percent to $4.61 billion last quarter, exceeding the $4.5 billion average estimate. EMC reiterated its full-year profit forecast of $1.46 a share, excluding some items. Analysts on average estimate $1.48.
EMC rose 96 cents, or 3.6 percent, to $27.68 at 10:46 a.m. in New York Stock Exchange composite trading. The shares climbed 17 percent this year before today.
Cloud Computing
Companies are increasingly turning to data centers capable of providing storage, software and other computing tasks through the Internet. The global market for such cloud-related services may more than double to $148.8 billion in 2014 from $58.6 billion in 2009, according to researcher Gartner Inc. in Stamford, Connecticut.
VMware Inc., majority-owned by EMC, yesterday reported profit excluding some items of 48 cents a share, exceeding the 42-cent average of projections compiled by Bloomberg. Sales rose 33 percent to $843.7 million, said Palo Alto, California-based VMware, the biggest maker of programs that let computers run multiple operating systems.
IBM, the largest computer-services provider, boosted its full-year profit forecast yesterday, while Intel, the top chipmaker, forecast second-quarter sales higher than analysts predicted.
‘Potential Risks’
While EMC expects information technology spending to increase 5 percent to 7 percent this year, damage from the March 11 earthquake and aftershocks in Japan, public-sector deficits and rising commodity prices are “potential risks,” Chairman and Chief Executive Officer Joe Tucci said on the company’s earnings conference call.
“You just worry about the future,” he said. “Our supply- chain people have really done a heck of a job looking at first-, second- and third-order effects. So we feel OK, but you still have some angst. It’s a big supplier to the IT community.”
EMC has “only a handful” of suppliers in Japan with potential risk, Chief Financial Officer David Goulden said on the call.
Worldwide spending on information technology is forecast to total $3.6 trillion this year, a 5.6 percent increase from 2010, according to Gartner.
--Editors: Cecile Daurat, John Lear
To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Danielle Kucera in New York at dkucera6@bloomberg.net
To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net
