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NEW YORK – (NYSE: EMC) says profit fell 24 percent and sales fell 5 percent in the third quarter as corporations spent less on data storage.
The company says its clients’ budgets are getting better, though, which is another sign that information technology spending is slowly recovering.
Tech bellwethers like Intel and IBM have also pointed to signs of stabilization.
Hopkinton, Mass.-based EMC’s results topped Wall Street’s forecasts, and the company’s guidance was also ahead of estimates.
Net income was $298.2 million, or 14 cents per share, versus $393.4 million, or 19 cents per share, in the year-ago period.
Sales were $3.5 billion, down from $3.7 billion.
Following is a summary of rrecent key developments and analyst opinion related to the period.
OVERVIEW: EMC, which is expanding its presence in the Research Triangle Park area, scored a big new hire last month when Pat Gelsinger, a 30-year veteran of Intel Corp. who ran the chip maker’s main division, took a job as EMC’s president and chief operating officer for "information infrastructure" products.
Also, EMC emerged as the victor this summer in a bidding contest that revved up a staid but increasingly critical part of the computing world. EMC outbid rival NetApp Inc. for a company called Data Domain, whose technology prevents companies from storing information multiple times, which lowers costs. Data Domain had originally agreed to be acquired by NetApp, until EMC swooped in with a higher offer worth $2.1 billion.
In August, EMC bought FastScale Technology, a software company whose technology helps companies manage their applications and decrease the amount of memory and disk space their programs are eating up. EMC also bought Kazeon Systems, whose technology helps companies collect and analyze their data.
EMC, the world’s No. 1 maker of external disk storage machines, has been hurt by the recession along with other storage companies. While corporations have postponed or canceled big hardware buys, market research firm IDC reports an area that has remained strong is entry-level to mid-range networked storage.
One reason why storage has suffered, even though companies keep needing more and more of it, is computer server sales across the industry have fallen. When fewer servers are sold, companies generally buy less storage.
Total disk storage systems revenue fell nearly 19 percent to $5.7 billion in the second quarter, IDC reported.
There are signs the market is still weak. IBM Corp., an EMC storage rival, reported last week that its storage revenue fell 13 percent year-over-year in the latest quarter. But some analysts are optimistic since corporate spending is expected to recover next year.
BY THE NUMBERS: Analysts expect EMC to earn 21 cents per share, excluding stock-based compensation expenses and one-time items, on $3.45 billion in sales, according to a poll by Thomson Reuters. In the same quarter a year ago, EMC earned 25 cents per share, also excluding one-time items, on $3.7 billion.
ANALYST TAKE: Analyst Keith Bachman with BMO Capital Markets recently upgraded his firm’s forecasts for EMC on the belief that EMC has an opportunity to gain market share this year because of a strong product lineup. He said the company has "several strong catalysts looking to year-end and into 2010."
"We believe storage products will have a stronger recovery than other product areas," Bachman wrote.
STOCK PERFORMANCE: EMC’s stock rose 30 percent in the third quarter to end September at $17.04. The stock has rallied 74 percent in the year to date.