January 29, 2013 / 4:56 PM / in 5 years

EMC's sees better IT spend but 2013 EPS outlook misses Street

(Reuters) - Data storage equipment maker EMC Corp EMC.N expects IT spending to improve slightly this year on the back of demand for cloud computing and data analytics but offered a 2013 earnings outlook that missed estimates.

“I think there is some lingering uncertainty for 2013 for sure, but I see more of a cautious optimism out there, which is an improvement,” Chief Executive Joe Tucci told analysts on a call on Tuesday.

“Looking at 2013, we expect (global) IT spend to grow at 3 percent for the year,” Chief Operating Officer David Goulden said, adding that “EMC revenue will grow faster at 8 percent.”

Information technology spending growth in 2012 was around 2 percent, he said.

Tucci added that EMC expects all regions with the exception of Western Europe and Japan to show higher growth.

Nevertheless, he said, government tech budgets would be tighter than in 2012.

EMC said on Tuesday that earnings per share will be $1.85 this year on revenue of $23.5 billion.

Analysts forecast $1.90 per share for 2013 and revenue of $23.57 billion, according to Thomson Reuters I/B/E/S.

EMC said net income in the fourth quarter was $1.2 billion, or 54 cents a share, compared with analysts’ estimates of 52 cents.

Revenue was $6 billion, up 8 percent. Analysts had expected $5.98 billion.

“We did see a moderate budget flush, but customers continued to be cautious with their IT acquisitions,” Tucci said, adding that the “quarter was back-end loaded,” resulting in a strong December.

EMC is benefiting from growing demand for cloud computing - the delivery of computing power, software and storage from centralized data centers that run on technologies introduced over the past few years.

    ISI Group analyst Brian Marshall said the quarter looked solid while the outlook appeared to be “a bit light.”

    FBR analyst Daniel Ives said that EMC was well positioned to capitalize on a new generation of data centers but that its VMware (VMW.N) unit would likely weigh on the shares.

    EMC owns around 80 percent of software maker VMware, which is also publicly listed.

    VMware said on Monday that it was cutting 900 jobs as part of a restructuring plan and offered a 2013 outlook below expectations.

    VMWare shares were down 20 percent at $78.65 and EMC shares were down $1.62 or 6.4 percent at $23.58 on Tuesday.

    “The weakness in shares is mostly due to VMware,” Ives said, adding that EMC’s core business did better than expected in the fourth quarter.

    (This story was fixed to correct David Goulden’s title)

    Reporting by Nicola Leske; Editing by Maureen Bavdek, Chizu Nomiyama and Phil Berlowitz

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