Earnings guidance disappoints EMC investors

08-06-2006

by Charlie Taylor

Data storage equipment maker EMC told investors on Wednesday that it doesn't expect second quarter earnings to rise above its original earnings guidance.

The firm, which employs 1,500 people in Ireland, announced on 20 April that consolidated revenues for the second quarter would be at least USD2.66 billion while diluted earnings per share would be around the USD0.13 mark. In addition, the company predicted full-year earnings per share of between USD0.54 to USD0.57 on sales of between USD11.1 billion and USD11.3 billion.

At a briefing held on Wednesday, EMC executives attempted to reassure investors that all was well with the company by focusing on its expanding software solutions portfolio, which it believes will eventually enable it to bounce back.

"EMC is leading what I believe has become one of the hottest and most dynamic areas of IT: information infrastructure," said the company's chairman, president and chief executive, Joe Tucci.

"Over the next several years, we expect to continue to deliver double-digit revenue growth from information storage solutions, while growing five important emerging technologies into billion-dollar businesses," he said.

Tucci outlined five business areas within EMC's portfolio that could each reach the billion-dollar level within the next several years: content management; resource management; storage virtualisation; security and VMware -- EMC's virtual infrastructure software subsidiary. These, Tucci claimed, were "billion-dollar opportunities" which would help drive the storage giant's double-digit revenue growth.

However, while the company's bigwigs focused on outlining a rosy future, investors were more interested in hearing about EMC raising its earning guidance. The news that it had no plans to do so proved disappointing with shares in the company tumbling to a 14-month low on Wall Street. They closed down USD0.23, or 1.9 percent, at USD12.12 on Wednesday.

The shares failed to rally in early trading on Thursday and were down 6 percent to USD12.06 at 10:45AM Eastern Standard Time (EST).

In related news, EMC has announced that it has acquired nLayers -- an application discovery and mapping software company, for an undisclosed sum. The acquisition is not expected to have a material impact on revenues or EPS for 2006.