EMC: Weisel Downgrades; Expects Market Share Losses
blogs.barrons.com
Posted by Eric Savitz
March 12, 2009, 5:53 pm
Thomas Weisel Partners analyst Doug Reid this afternoon cut his rating on EMC (EMC) to Market Weight from Overweight, trimming his price target to $12 from $13.
Reid says that “based on checks and recent industry trends,” he expects EMC’s share of the external networked storage market peaked at 26% in 2008 and will decline to 24% in 2010.
He’s also increasingly concerned about the potential impact on the company’s business from softening corporate spending on technology. “We expect weakness in IT spending in 2009 to impact negatively EMC earnings more than we previously anticipated,” he said. Reid now expects storage hardware spending to be down 7%-10% in the first half, worse than his previous forecast for a 2%-5% decline.
Reid contends that some customers are becoming more willing to evaluate competing storage solutions from from companies that offer lower total cost of ownership profiles than EMC. He thinks the company could lose share to NetApp (NTAP), Dell (DELL), Compellent (CML) and 3Par (PAR). He also thinks EMC could see pressure on gross margins, and expects a decline from 55% in 2008 to 53.5% in 2010, due largely to increased competition.
Reid cut his 2009 EPS estimate to 85 cents, from $1.06; for 2010, he goes to 99 cents, from $1.32. The Street consensus is 92 cents for this year and $1.04 for next year.
In late trading, EMC is down 18 cents, or 1.6%, to $10.78. |
