EMC Disappoints with 2013 Earnings Outlook

Tuesday, 29 Jan 2013 03:19 PM

 

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Data storage equipment maker EMC Corp expects IT spending to improve slightly this year on the back of demand for cloud computing and data analytics but offered a 2013 earnings outlook that missed estimates.

"I think there is some lingering uncertainty for 2013 for sure, but I see more of a cautious optimism out there, which is an improvement," Chief Executive Joe Tucci told analysts on a call on Tuesday.

"Looking at 2013, we expect (global) IT spend to grow at 3 percent for the year," Chief Operating Officer David Goulden said, adding that "EMC revenue will grow faster at 8 percent."

Information technology spending growth in 2012 was around 2 percent, he said.

Tucci added that EMC expects all regions with the exception of Western Europe and Japan to show higher growth.

Nevertheless, he said, government tech budgets would be tighter than in 2012.

EMC said on Tuesday that non-GAAP earnings per share will be $1.85 this year on revenue of $23.5 billion.

Analysts forecast $1.90 per share for 2013 and revenue of $23.57 billion, according to Thomson Reuters I/B/E/S.

EMC said net income in the fourth quarter was $869.9 million or 39 cents a share from $832 million or 38 cents in the previous year.

Non-GAAP earnings were $1.2 billion or 54 cents per share compared with analysts' estimates of 52 cents.

Revenue was $6.01 billion versus $5.57 billion a year earlier. Analysts had expected $5.98 billion.

"We did see a moderate budget flush, but customers continued to be cautious with their IT acquisitions," Tucci said, adding that the "quarter was back-end loaded," resulting in a strong December.

EMC is benefiting from growing demand for cloud computing - the delivery of computing power, software and storage from centralized data centers that run on technologies introduced over the past few years.

ISI Group analyst Brian Marshall said the quarter looked solid while the outlook appeared to be "a bit light."

But Topeka Capital Markets analyst Brian White called the outlook good enough in light of economic conditions.

"Given the challenging macro environment and weakening across the IT world, we are relieved with EMC's 2013 outlook," he said.

FBR analyst Daniel Ives said that EMC was well positioned to capitalize on a new generation of data centers but that its VMware unit would likely weigh on the shares.

EMC owns around 80 percent of software maker VMware, which is also publicly listed.

VMware said on Monday that it was cutting 900 jobs as part of a restructuring plan and offered a 2013 outlook below expectations.

VMWare shares were down 20.7 percent at $77.95 in late New York trading Tuesday, and EMC shares were down $1.01 or 4 percent at $24.19.

© 2014 Thomson/Reuters. All rights reserved.

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