EMC promises booming 2004
Company pledges to grow twice as quickly as overall storage market.
Excluding some items, Hopkinton, Mass.-based EMC said it expects profit in 2004 of $850 million, and the company backed its second-quarter targets for revenue of between $1.95 billion and $1.975 billion, with earnings of 8 cents per share.
EMC Chief Executive Joe Tucci said at a meeting of analysts that the profit goal, which represents a 70 percent increase over 2003, would not be an easy target.
"There are a lot of things that have to go right," he said.
The predicted $850 million profit, which excludes a first-quarter charge of $25 million, is about 34 to 35 cents per share, depending on rounding and the share count, in line with analysts' estimates.
Tucci said that $8.1 billion in revenue would be an increase of 30 percent over 2003 revenue of $6.24 billion, but stripping out EMC's acquisitions of software companies Legato Systems and Documentum, revenue would grow 19 percent, he said.
EMC shares fell 19 cents to $11.22 in afternoon trading Thursday, after having closed down 3.5 percent, or 41 cents, on the New York Stock Exchange on Wednesday.
Analysts said the outlook may have been a slight negative, as investors often hope for higher-than-expected results, but they noted positive changes at EMC, which turned profitable last year after heavy losses when the Internet bubble burst in 2000.
"It would be very slightly disappointing from a Street perspective, but from a strategy point of view, they are doing a lot of interesting stuff," said Chuck Jones, an analyst for Stein Roe Investment Counsel.
EMC, which once relied only on sales of million-dollar data storage systems, now sells less-expensive systems with Dell. The storage company has spent billions of dollars on software acquisitions and has expanded its services business.
EMC said it expects to grow twice as fast as the broader market in the long term, as software and services growth outpaces that of hardware. Tucci said the company will likely make some small services acquisitions to augment internal growth of that division.
Tucci raised his expectation for industry growth slightly, saying he expects spending on data storage to grow 7 percent in 2004, compared with his previous view of 5 percent to 6 percent.
He said data storage would outpace spending on broader information technology, which he sees increasing 3 percent to 4 percent this year. That compares with 1 percent growth in 2003, he said, when the industry was still recovering from a sharp downturn in spending.
Chief Financial Officer Bill Teuber said U.S. spending was progressing slowly but steadily. "People aren't spending wildly, but they are spending," he said, adding that corporations that have deferred projects are now starting to put them into place.
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