EMC sparks storage rally

January 23, 2001: 12:35 p.m. ET

Data-storage leader's earnings draw buyers to segment

NEW YORK (CNNfn) - EMC Corp., the leading supplier of products used to store large amounts of computer data, is expecting to ride out a downturn in the broader technology sector.

That was the message it sent to Wall Street Tuesday after reporting fourth-quarter results that beat analysts' expectations and reiterated its previous revenue growth targets for 2001.

Before the U.S. stock markets opened Tuesday, the Hopkinton, Mass.-based company said its fourth-quarter profit was $563 million, or 25 cents per share. That's up 49 percent from $376 million, or 17 cents per share, during the same period a year earlier and is 2 cents better than the 25 cents per share analysts surveyed by First Call had expected the company to report.

After dipping sharply in the early going, EMC (EMC: Research, Estimates) shares gained momentum, and were 81 cents higher at $77.31 in early afternoon New York Stock Exchange trade.

Network Appliance (NTAP: Research, Estimates), one of EMC's chief competitors, got a boost from the news as well, its shares trading $2.25 higher at $69.12, a 3.4 percent gain.

At $2.62 billion, EMC's fourth-quarter revenue rose 40 percent, and executives said the company remains on track to post $12 billion in revenue for all of 2001, reaffirming their previous guidance.

That affirmation stood in stark contrast to recent revenue guidance from several other technology firms, including cell-phone chip leader Texas Instruments, which Monday drastically reduced its first-quarter revenue target and declined to provide a forecast further out into 2001, citing uncertainty in the world economy.

Intel, the world's largest supplier of microprocessors for personal computers, also ratcheted down its first-quarter revenue forecast when it reported its latest results last week.

But while softening consumer demand for products such as wireless phones and PCs stung companies like TI and Intel in the fourth quarter and is expected to weigh on their results moving into 2001, the exploding amount of data created by the use of the Internet has insulated companies like EMC that provide products for managing that data.

EMC's net income for all of 2000 was $1.78 billion, or 79 cents per share, up 51 percent from $1.18 billion, or 54 cents, in 1999, excluding one-time items. Total revenue for the full fiscal year 2000 was $8.87 billion, a 32 percent jump from 1999's $6.7 billion.

"We closed an extraordinary year with a bang -- four straight quarters of accelerating growth rates, and our highest quarterly storage growth rate in nearly six years," EMC Executive Chairman Mike Ruettgers said. "It's clear we gained share in every major segment of our addressable market, and our competitive lead has never been stronger."

Shaw Wu, an analyst who tracks EMC for Banc of America Securities, said the company's latest results reflect "the best quarter that EMC has produced in its history," and recommended investors buy shares on any weakness.

"We believe EMC is keeping expectations low to provide room for upside," Wu said in a note to clients Tuesday.

Wu also said EMC's news should bode well for Brocade (BRCD: Research, Estimates) and QLogic (QLGC: Research, Estimates), both of which are key EMC suppliers.

In afternoon trading, Brocade shares were up $4.35, or 4.1 percent, at $110.84. Shares of QLogic gained $1.38 to $23.94, a 6.1 percent advance.

-- from staff and wire reports