EMC profit misses estimates, cuts 2012 outlook; shares fall
(Reuters) - Data-storage equipment maker EMC Corp (EMC.N) cut its full-year outlook on Wednesday, echoing peers also hurt by tight-fisted customers who are putting off spending amid slow economic growth and ahead of the U.S. presidential election.
EMC Chief Executive Joe Tucci said confidence in governments around the world to make decisions on issues such as deficit reductions and tax policies was at a low point.
"These uncertainties are affecting business confidence, and this is affecting IT spending rates," Tucci said Wednesday on a call with analysts.
Other information technology companies such as Xerox (XRX.N) and IBM (IBM.N) have also reported slower business, especially in September, and have said customers are delaying large purchases and investments while the United States and Europe remain in economic uncertainly.
Xerox narrowed its 2012 outlook, while IBM stuck to its targets despite a revenue miss.
EMC, the world's biggest maker of corporate data-storage equipment, which reported a third-quarter profit and sales below expectations, said for the full year, it expects earnings per share of $1.68 to $1.70, and revenue of $21.60 billion to $21.75 billion.
Analysts on average were anticipating $1.72 per share on revenue of $22.03 billion, according to Thomson Reuters I/B/E/S.
EMC said it would meet the lower end of its forecast should the caution that characterized the end of the third quarter continue, but it expected to hit the higher end if there is a seasonal end-of-year budget flush.
In July, EMC reiterated its full-year profit forecast of $1.70 per share and its revenue outlook of $22 billion.
EMC's shares fell nearly 3 percent to $23.94 in mid-morning trading on the New York Stock Exchange.
EMC said third-quarter net income attributable to the company totaled $626.3 million, or 28 cents per share. Excluding one-time items, it earned 40 cents per share, 2 cents below analysts' average forecast.
Consolidated revenue rose 6 percent to $5.28 billion, compared with expectations for $5.46 billion.
"We're disappointed that we did not quite meet our internal revenue expectations in Q3 and that we interrupted our string of 10 quarters of top-line growth," Tucci said, adding he still had hopes for some growth in tech spending this year.
Deals were being subjected to more scrutiny, resulting in more late orders that did not make it into the quarter, Tucci explained.
"That said, to be clear, we still believe that IT spending in the second half of this year will show some year-on-year growth, albeit at a slower rate than was experienced in the first half of this year," Tucci said.
Despite the sales and earnings miss, FBR analyst Daniel Ives said EMC was a good bet.
"It's a company that has been able to navigate through choppy seas. EMC is a name more investors will bet on that not," he said, adding that investors were focused on the fourth quarter and 2013.
"If you look at the combination VMware and EMC ... in a slow growth environment it's a compelling story."
VMware (VMW.N), a publicly traded division of EMC, on Tuesday posted a third-quarter profit that beat estimates on stronger-than-expected sales to the U.S. government. But it forecast fourth-quarter revenue in a range largely below expectations.
"EMC owns around 80 percent of VMware and their numbers were solid, extremely rare in this environment, the implied core EMC business for December 12 must be incrementally weak," said Brian Marshall, an analyst at the ISI group.
Nevertheless, he said EMC was the "preferred vehicle for cloud exposure" because "it had successfully created a business model ... with impressive revenue growth."
Tucci also made it clear that the company had no intention of severing ties with Cisco (CSCO.O), with whom it has a joint venture called VCE, and that it was not in the market to buy a networking company.
"Some have called into question the viability of our relationship with Cisco and VCE because of VMware's entrance into the networking space," Tucci said.
"EMC has no plans to drive deeper into networking by acquiring a network hardware company," he added.
Recently, speculation had swirled that EMC was interested in networking equipment maker Juniper Networks JNPR.O.
(Reporting By Nicola Leske in New York and Supantha Mukherjee in Bangalore; Editing by John Wallace and Maureen Bavdek)