EMC Corporation (EMC): May Witness Weakness In Storage Market In 1Q

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EMC Corporation (NYSE:EMC) will announce its results on April 22 before market hours.

If reports are to be believed, EMC Corporation (NYSE:EMC) would have likely witnessed weakness in enterprise storage market in the March quarter. As a result, its revenue, as well as, earnings would have come under pressure in the first quarter. The company had to face highly competitive environment from Nimble Storage and Pure Storage. Aside from this, its results would have been impacted by foreign currency due to strengthening Greenback.

The coming year is filled with new product developments which should allow the company to gain market share due to its broad hardware and software offerings and increased presence in small and medium-sized business segments. The long term market for data storage and electronic record-keeping remains strong and the company can also capitalize on growing interest in cloud computing and virtualization.

Investors will look for any signs of weakness in economic recovery that results in lower corporate IT spending and montior affects of unfavorable foreign currency exchange due to a rapid rise in the dollar.

What To Expect

In a research note to clients recently, FBN Securities said that it was surprised a bit by the uniformity in unfavorable data pointing out the spending in the first quarter. Therefore, it was natural that EMC Corporation (NYSE:EMC) would have also come under pressure. One of the reasons attributed was the shift towards the cloud and technologies like data deduplication, as well as, compressing hurting storage demand growth.

The brokerage also pointed out the IT managers’ fresh thinking about reallocating the budget towards security, which might be a deciding factor in the second quarter. However, FBN thinks that it expects difficult storage spending conditions to prevail in the next few months. Sales of both enterprise SSD and HDD were expected to be 5 – 10% below the predictions hurt by weak demand. FBN thinks that storage system market would have witnessed 2% drop in the March quarter following a flat growth in the fourth quarter.

Street Expectations

FBN Cited the SanDisk Corporation (NASDAQ:SNDK)’s pre-quarter announcement while its results missed the Street analysts’ expectations by a wide margin. The company pointed out weakness in enterprise SSD storage. It remains to be seen as how EMC Corporation (NYSE:EMC) managed it in the March quarter.

Street analysts are estimating the company to report earnings growth of 2.9% on revenue uptick of 5%. This meant that it would deliver earnings of 36 cents a share and $5.75 billion revenue. Analysts’ have already reduced their EPS estimations from 37 cents a share two months ago and 42 cents a share three months back. EMC Corporation (NYSE:EMC)’s earnings missed only once in the past four quarters.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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