EMC Leaps, Bucking Tech Trend

All the data being generated in the information economy has to be managed by someone. EMC Corp.’s latest earnings indicate it’s a prime beneficiary of that need.

EMC, the No. 1 maker of corporate computer-storage systems, said Wednesday that second-quarter profit rose 50% as companies bought more of its equipment to run their Web sites and store data.

Net income rose to $429 million, or 19 cents a share, from $285.9 million, or a split-adjusted 13 cents, a year earlier.

Sales surged 30% to $2.15 billion from $1.65 billion.

EMC’s stock (ticker symbol: EMC), one of the hottest of the last two years, jumped $5.44 to a record $84 on the New York Stock Exchange--on a day when many tech issues tumbled.

EMC’s vending-machine-size computers store the equivalent of more than 1 million novels. Sales of EMC’s software that runs the machines almost doubled in the quarter as more companies do business on the Internet and need to store information online.

“This was an amazing, bullet-proof quarter,” said Mark Kelleher, a SunTrust Equitable Securities analyst, who rates EMC a “strong buy.”

EMC, based in Hopkinton, Mass., is one of the world’s 10 largest software firms, developing programs to run its machines and manage reams of data. Software revenue rose 96% to $350 million in the latest quarter from a year earlier.

Chief Executive Michael Ruettgers said EMC’s storage-software business is growing faster than that of rival Veritas Software (VRTS), whose stock was pounded down $15.31 to $112.25 on Wednesday after the firm reported a large loss for the quarter.

“EMC is growing this side of the business faster than anyone else and is gaining share,” Ruettgers said.

EMC’s revenue growth for the year will be closer to 30%, more than its previous forecast of 25%, Ruettgers said. He said he’s confident that the company can achieve $12 billion in revenue next year, which would be an increase of 79% from 1999 revenue of $6.72 billion.

If not for some anticipated component shortages for the rest of the year, EMC could be selling even more machines, Ruettgers said.

“Component shortages may hurt a bit, but this market is growing like crazy and there is still room for upside surprise,” said David Brady, senior portfolio manager at Stein Roe & Farnham, which owns about 2 million EMC shares.

Some analysts said EMC’s greatest challenge may come from Network Appliance (NTAP), which makes a different type of storage system called network attached storage, or NAS. Network Appliance’s products are designed for small to mid-size businesses.

EMC’s stock is priced at 114 times analysts’ average earnings per share estimate of 74 cents for 2000, according to Zacks Investment Research.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

EMC’s Surge

Shares of data storage giant EMC Corp. (ticker symbol: EMC) hit a record high on the New York Stock Exchange on Wednesday after the company reported sharply higher earnings. Monthly closes and latest:

*

Wednesday: $84.00, up $5.44

*

Source: Bridge News