Douglas told us to look for reasons beyond the ecconomy for some things that may be happening in our sector. Re; EMC is it the ecconomy or is it HDS and others?
EMC Lowers Estimates, Sees Slower Growth in 2001
By Tim McLaughlin
BOSTON (Reuters) - Tech bellwether EMC Corp., the No. 1 data-storage firm, warned on Wednesday of slower growth for the rest of the year and said first-quarter earnings will miss expectations by 10 percent as its corporate customers spend less on the machines that store digital information.
The warning also imperiled EMC's long-stated goal of generating $12 billion in revenue this year.
``We haven't ruled it out for the year, but it's less likely it will happen this year,'' spokesman Mark Fredrickson said.
EMC shares were down $1.80, or 5.2 percent, at $32.60 in late-morning New York Stock Exchange (news - web sites) trade. Before the announcement, the stock was off about 37 percent this year, while the Standard & Poor's 500 Index .SPX) was down 11.51 percent.
SunTrust Equitable Securities analyst Joel Pitt, who rates EMC at neutral, said investors will probably have more comfort with the company now that it has laid out plans for slower growth.
``I think a lot of people were waiting for the shoe to drop for bad news,'' Pitt said.
The company said total consolidated revenues grew 29 percent during the first quarter. It had warned in February that it expected revenue growth of 25 percent to 35 percent, a slight retreat from a prior range of 33 percent to 38 percent.
EMC, whose stock was one of the best performers of the 1990s and until this year was a safe haven for investors in the technology-stock bear market, said total information storage revenue, the mainstay of its business, grew 37 percent compared with first quarter 2000.
The Competition Factor
The company said it expects first-quarter earnings of 18 cents per share, 2 cents below the current consensus estimate and the low end of the 17-cent to 22-cent range compiled by research firm Thomson Financial/First Call. Year-earlier earnings were 15 cents a share.
Wit SoundView analyst Gary Helmig described the earnings miss as ``huge.''
``They tried to hold it together, and found ultimately they couldn't,'' Helmig said. ``It's curious they just woke up to this level of miss. They're blaming the economy, but competition is a much underrated factor.''
EMC rival Hitachi Ltd., Japan's biggest electronics company, had ``a very strong'' first quarter, he said. ``If Hitachi didn't have this strength, EMC would not have this problem.''
Helmig and other analysts said they expect EMC to fall short of $12 billion in revenue this year.
The company said it expects it can grow at more than 20 percent and generate modest earnings-per-share growth during the year. Meanwhile, EMC executives said they have implemented ''swift'' cost reductions while focusing on the hire of ``revenue producing personnel'' and engineers.
``Unfortunately, we were not able to out-execute the economy and a late-quarter investment pause,'' EMC Executive Chairman Michael Ruettgers told analysts during a conference call.
Besides a spending slowdown in North America, Ruettgers said, EMC began to see the same effects taking hold in Europe.
``There's no question it's a very competitive market,'' SunTrust's Pitt said. ``EMC is competing on price, which it hasn't in the past.''
Also on Wednesday, EMC said it bought FilePool NV, a venture-backed software development company based near Brussels, Belgium, for less than $50 million cash. The company said the acquisition will help position it for ``continued industry leadership in the burgeoning information storage market.'' |
