Storage equipment maker EMC forecast earnings for the current quarter at the low end of Wall Street expectations, while shares rose 7 percent on relief that the news wasn't worse and also by stronger-than-expected quarterly results from unit VMware Inc.
BOSTON (Reuters) - EMC Corp. forecast
earnings for the current quarter at the low end of Wall Street
expectations as the world's top corporate storage equipment
maker faced slower spending on information technology.
But shares rose 7 percent on relief that the news wasn't
worse and also by stronger-than-expected quarterly results from
unit VMware Inc. late on Tuesday. EMC owns 85 percent of
VMware and said it had no plans to spin off more of its stake.
"I'm surprised they did not guide lower," said Kaushik Roy,
an analyst with Pacific Growth Equities. "People were pricing
in a doomsday scenario."
EMC expects fourth-quarter net income at 23 to 24 cents per
share and revenue of $4 billion. Wall Street was looking for
earnings of 24 cents per share on revenue of $4.1 billion.
EMC did not issue a forecast for 2009 and Roy thought
company executives would be reluctant to do so during a
conference call later on Wednesday.
"It all depends on the macro situation. Things are changing
every week. If I were the CEO I wouldn't know how to come up
with good guidance," Roy said.
EMC Chief Executive Joseph Tucci said he saw "a challenging
economic environment ahead" and that he expected global
information technology spending to grow between 1 percent and 3
percent next year. "Hopefully the markets we are in will have a
little bit more lift than that," he said on a conference call.
Net income fell 17 percent to $411 million, or 20 cents per
share, in the quarter ended Sept. 30, from $493 million, or 24
cents a share, a year earlier. The year-ago results included a
gain of more than 5 cents on the sale of VMware shares.
EMC's adjusted third-quarter profit excluding items was 19
cents per share, as computed by Reuters Estimates, a penny
above the Wall Street average forecast of 18 cents.
Revenue climbed 13 percent to $3.72 billion. Wall Street
had forecast $3.73 billion.
The results come after rival International Business
Machines Corp, which sells competing storage equipment
and software, reported weaker-than-expected sales and
stronger-than-expected profit earlier this month.
For Hopkinton, Massachusetts-based EMC, growth in the
United States was the slowest, with revenue climbing 7 percent.
Revenue rose 20 percent in Europe, the Middle East and Africa,
gained 19 percent in Asia, and 27 percent in Latin America.
Sales at EMC's storage hardware business, its largest unit,
rose 11 percent to $2.9 billion. Revenue at its fledgling
security division rose 11 percent to $147 million.
Sales at its content management and archiving software
unit, which competes with products from IBM, fell 1 percent to
Revenue from its VMware infrastructure software division
rose 33 percent to $472 million.
Shares of EMC were up 7 percent at $10.46 in pre-market
trading, compared to their Tuesday close of $9.69 on the New
York Stock Exchange. VMware shares were up 14.7 percent at
$21.48, from their previous close of $18.73.
(Reporting by Jim Finkle; Editing by Derek Caney)
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