EMC ( $20-$18) 2nd-Period Net Fell 75%; Year-End Outlook Is Uncertain
By Jerry Guidera
Staff Reporter of The Wall Street Journal
EMC Corp., citing delayed customer buying in a slow economy, reported a 75% decline in second-quarter earnings and warned Wall Street of a weak third quarter and an uncertain outlook for the remainder of the year.
The company, which has been cutting its costs, also acknowledged steep price-cutting in the business of selling data-storage systems to large companies, the sector that it leads.
Investors reacted sharply, pushing shares of EMC to a 52-week low of $18.03 during the day. At 4 p.m. Wednesday in New York Stock Exchange composite trading, EMC shares were off 12%, or $2.34, at $18.05.
The Hopkinton, Mass., company said net income fell to $108.9 million, or five cents a share; the per-share figure included a one-cent special item for layoffs. In the year-earlier quarter, net income was $429 million, or 19 cents a share. Revenue fell 5.8% to $2.02 billion from $2.15 billion, in line with a company forecast earlier this month that it would fall short of prior expectations by $400 million.
The price cuts reduced gross margin -- profit before nonproduction expenses divided by revenue -- to 47% from 58% a year earlier. EMC officials said margins would return to the "more normal" above-50% rate when the economy rebounds but said they couldn't say when that would be.
The company said hundreds of customers delayed projects in the second quarter, which President Joseph Tucci called a record. In an interview, he said the weak economy and cuts in technology budgets by big companies had clouded EMC's outlook for future quarters. "We can't forecast with that kind of visibility," he said.
For the third quarter, analysts expect earnings of about six cents a share on revenue of $2 billion, according to Thomson Financial/First Call, down from 20 cents a share on $2.3 billion in revenue in the year-earlier period.
Write to Jerry Guidera at jerry.guidera@wsj.com |
