EMC delivers strong quarter, issues bullish outlook

EMC Corp. (NYSE: EMC), the leading data storage system vendor, beat Wall Street estimates Tuesday with first quarter earnings of $332 million, or 30 cents a share, on sales of $1.82 billion.

First Call consensus expected earnings of 29 cents a share.

EMC posted solid growth as sales surged 23 percent compared with the first quarter a year ago. Earnings jumped 49 percent compared to a year ago.

As for the outlook, William Teuber, chief financial officer, said the company sees consolidated revenue growth topping 25 percent in fiscal 2000. Storage revenue should be in the 35 percent range for the year. Gross margins will hover near the 56.6 percent level reported in the first quarter. First Call consensus calls for EMC to earn 34 cents a share in the second quarter and $1.44 a share in 2000.

Teuber said revenue growth will accelerate sequentially throughout 2000. In other words, expect more strong quarters.

The company's first quarter results include both EMC's storage business and its Data General division, formed after the acquisition of Data General in the fourth quarter.

Total storage revenue for the first quarter was $1.65 billion, up 34 percent from a year ago. Enterprise storage systems revenue was up 31 percent compared to a year ago with storage software sales jumping 74 percent. Gross margins were 56.6 percent in the quarter.

Officials said EMC saw strong demand among all its products. Mike Ruettgers, EMC CEO, said the company saw strong gains in Asia-Pacific as sales jumped more than 60 percent from a year ago. EMC also said it gained market share in both storage systems and software as well as emerging segments such as storage area networks (SANs) and network-attached storage (NAS).

On a conference call with analysts, Ruettgers said the company was doing well against competitors such as Compaq (NYSE: CPQ), Sun Microsystems (Nasdaq: SUNW), Hewlett-Packard (NYSE: HWP), Hitachi and IBM (NYSE: IBM). "The response has not been very significant," said Ruettgers, referring to EMC's competitors, which are launching new storage products. "The pricing environment remains benign."

EMC had nearly $3.4 billion in cash at the end of the quarter. Twenty-three analysts rate EMC at least a "buy."