EMC Warns Profit Will Miss Forecasts

EMC Corp., the leading maker of corporate data-storage systems, said Wednesday that it expects first-quarter earnings to miss expectations by 10% and revenue to fall in the mid-range of its previously lowered guidance because of the economic slowdown and customers’ tighter information-technology budgets.

The predicament also imperiled EMC’s long-stated goal of generating revenue of $12 billion 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.

The Hopkinton, Mass., company said consolidated revenue grew 29% in the first quarter. It had warned in February that it expected revenue growth of 25% to 35%, a retreat from a prior range of 33% to 38%.

EMC, whose stock was one of the best performers of the 1990s and until recently was a safe haven for investors in the technology-stock bear market, said information storage revenue, the mainstay of its business, grew 37% compared with the first quarter of 2000.

The company said it expects earnings of 18 cents a share, 2 cents below the current consensus of Wall Street estimates for the quarter. It reported earnings of 15 cents in the year-earlier period.

Wit SoundView analyst Gary Helmig called the earnings miss 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 also said he expects EMC to fall short of $12 billion in revenue this year.

The company said it expects it can grow at more than 20% and generate modest earnings-per-share growth during the year.

“While the economic situation has elongated EMC’s sales cycle for the time being, we believe that widespread corporate re-budgeting for the year is now mostly complete,” Chairman Michael Ruettgers said.

Also on Wednesday, EMC said it has acquired FilePool, a venture-backed software development company based near Brussels, for less than $50 million. EMC shares fell $2.19 to $32.21 in trading on the New York Stock Exchange.