) to outperform.
On Wednesday the data-storage maker reaffirmed the third-quarter guidance. Analyst Christopher Russ tells says he upgraded on EMC's improving competitive position in the storage market, and the potential earnings leverage to an information-technology spending recovery in 2004. He says EMC's forecast of 13% organic sales growth in 2004 beats his 12.3% estimate.
Russ notes the CEO expects that EMC's $1.3 billion acquisition of backup-software maker Legato Systems could contribute nearly $500 million of revenue on a run-rate basis by the fourth-quarter of 2004. Russ says with EMC's improving financial position, expanding product offering, and declining unit costs, Legato is an attractive way to play a nascent recovery in storage spending.
Russ pegs a $11-$13 valuation range. He sees 16 cents 2003 earnings per share, and raised the 26 cents 2004 earnings per share estimate to 30 cents.