EMC Earnings Beat Expectations, But Stock Hit
HOPKINTON, Mass. (Reuters) - EMC Corp. (NYSE:EMC - news), a top maker of corporate data storage systems, on Wednesday reported fourth-quarter earnings well ahead of expectations.
But Despite what Wall Street analysts and the company touted as strong results, EMC shares fell 9-5/16 to 110-11/16.
Profits for the quarter grew 38 percent to $377 million, or 34 cents per share, excluding an acquisition-related charge, compared with $273 million, or 25 cents per share, during
the fourth quarter of 1998.
The results exclude an after-tax charge of $170 million, or 15 cents a share to cover the $1.1 billion October acquisition of Data General Corp., a maker of storage systems and computers used to run mid-sized businesses. Including the charge, net income was $207 million, or 19 cents per diluted share.
The latest quarter's earnings per share were 3 cents ahead of the 31-cent consensus estimate among analysts surveyed by First Call/Thomson Financial, a financial research service.
Chief Executive Michael Ruettgers said the company plans to hire 4,000 new employees this year, and forecast revenue growth in excess of 25 percent this year, from 1999's
$6.72 billion.
A 25 percent growth rate would push revenue to $8.4 billion in 2000, and would require EMC to grow at an even faster rate in 2001 to reach Ruettgers' stated goal of $12 billion
in revenue by the end of 2001.
Ruettgers was also emphatic in pointing out that the Y2K computer issue was a non-event for EMC, despite concerns of some company-watchers that customers would curtail technology purchases as the millennial rollover approached.
``No impact for us,' Ruettgers told reporters in a conference call.
He also said EMC continues to see strong demand from the Internet sector, which accounted for 12 percent of sales in the fourth quarter and 10 percent in the third quarter.
``We continue to see healthy penetration into the 'dot.com' business, and for the first time we're starting to see the global 2000 (largest companies) spending money in the Internet space,' Ruettgers said.
Analyst Mark Kelleher of SunTrust Equitable Securities said, ``the numbers beat expectations. The conference call was very positive. The pipeline is strong.'
Richard Chu of S.G. Cowen added, ``I think they delivered essentially on-target numbers, a tad better. The integration of Data General went extremely well.'
Total fourth-quarter revenue was $1.88 billion, 21 percent higher than the fourth quarter of 1998, the result of blending the slower-growing Data General with EMC's traditional business selling high-volume storage to large companies. For the 1999 year, revenue totaled $6.72 billion, up 24 percent from 1998.
Storage revenue for the fourth quarter was $1.66 billion, up 27 percent from the fourth quarter of 1998, but below this segment's historic rates of growth above 30 percent.
The company attributed the slower growth rate to flatness in its newly acquired Data General unit. However, Ruettgers predicted sales of that unit's Clariion storage business would grow by 50 PERCENT in 2000, to $600 million from $400 million.
Included in the storage figure was the contribution from its booming storage software business, which grew 71 PERCENT to a record $281 million and represented 17 percent of total storage revenue. |
