Jul 6, 2001 : EMC Warns Results Will Miss Targets
📅 - Data storage giant EMC Corp. (emc.com) warned on Thursday that its revenues and earnings for the second quarter would fall well short of Wall Street estimates due to the global slowdown in technology spending.
EMC said it expected its second-quarter revenues to be about $2 billion, andearnings per share to be in the range of four to six cents a share, a dismalfigure compared to Wall Street's consensus of earnings of 17 cents a shareand revenues of $2.43 billion.
Gross profit margin would also decline sharply, as the company was cuttingprices. The margin, or the profit of sales minus cost of sales as apercentage of revenue, would be in the mid-40 percent range. In the secondquarter of 2000, EMC had a 57 percent profit margin.
"The earnings results for EMC's major customers -- the bulk of the S&P 500,for example -- have been like a ball rolling down a hill for each of thepast three quarters," EMC Chief Executive Joe Tucci said in a statement."When our customers earn less money, most of them have less to spend on IT,and they take a longer time to spend what they do have."
Once seen as a safe haven for investors due to booming growth, corporatecomputer use has succumbed to the same technology slowdown that has hitother sectors.
EMC's warning came just after microchip maker Advanced Micro Devices(amd.com) reported a 17 percent drop in fiscal second-quarter sales, compared to the first quarter, and warned that its profits would miss Wall Street forecasts, citing competition in the PC chip market and weak flash memory demand.
But storage software developer Veritas Software Corp. (veritas.com)reconfirmed its targets of revenue growth of 35-50 percent for its recentlyfinished second quarter and for the year.
For its part, EMC said the slowdown in the United States had spread globallyand its impact had been aggravated by a strong dollar.
``As a result, sales cycles have continued to elongate. We expect grossmargins for the second quarter will be in the mid-40 percent range,reflecting several factors: lower sales volume than anticipated, customerincentive programs, and our competitive pricing actions,'' EMC ChiefFinancial Officer Bill Teuber said in a statement.
Tucci said that EMC was winning business at the expense of competitors,although a number of analysts have pointed to strong competition fromsmaller rival Hitachi Data Systems, a unit of Japan's Hitachi Ltd.(hitachi.com) that focuses on storage, and saw results rise 145 percent to nearly $500 million in its fiscal fourth quarter, ended March 31.
Gary Bloom, chief executive of Veritas, which sells to EMC but also competeswith some products, said customers were still buying software to managetheir storage hardware.
``In many cases, and I think even more so in EMC's case, there is anoversupply of storage hardware in the market,'' he said. ``To some extent Ithink that EMC is feeling competitive pressure,'' he added. ``You don't getprice pressure unless you have competition.''
EMC plans to announce complete second-quarter results on July 18.
EMC said it expected its second-quarter revenues to be about $2 billion, andearnings per share to be in the range of four to six cents a share, a dismalfigure compared to Wall Street's consensus of earnings of 17 cents a shareand revenues of $2.43 billion.
Gross profit margin would also decline sharply, as the company was cuttingprices. The margin, or the profit of sales minus cost of sales as apercentage of revenue, would be in the mid-40 percent range. In the secondquarter of 2000, EMC had a 57 percent profit margin.
"The earnings results for EMC's major customers -- the bulk of the S&P 500,for example -- have been like a ball rolling down a hill for each of thepast three quarters," EMC Chief Executive Joe Tucci said in a statement."When our customers earn less money, most of them have less to spend on IT,and they take a longer time to spend what they do have."
Once seen as a safe haven for investors due to booming growth, corporatecomputer use has succumbed to the same technology slowdown that has hitother sectors.
EMC's warning came just after microchip maker Advanced Micro Devices(amd.com) reported a 17 percent drop in fiscal second-quarter sales, compared to the first quarter, and warned that its profits would miss Wall Street forecasts, citing competition in the PC chip market and weak flash memory demand.
But storage software developer Veritas Software Corp. (veritas.com)reconfirmed its targets of revenue growth of 35-50 percent for its recentlyfinished second quarter and for the year.
For its part, EMC said the slowdown in the United States had spread globallyand its impact had been aggravated by a strong dollar.
``As a result, sales cycles have continued to elongate. We expect grossmargins for the second quarter will be in the mid-40 percent range,reflecting several factors: lower sales volume than anticipated, customerincentive programs, and our competitive pricing actions,'' EMC ChiefFinancial Officer Bill Teuber said in a statement.
Tucci said that EMC was winning business at the expense of competitors,although a number of analysts have pointed to strong competition fromsmaller rival Hitachi Data Systems, a unit of Japan's Hitachi Ltd.(hitachi.com) that focuses on storage, and saw results rise 145 percent to nearly $500 million in its fiscal fourth quarter, ended March 31.
Gary Bloom, chief executive of Veritas, which sells to EMC but also competeswith some products, said customers were still buying software to managetheir storage hardware.
``In many cases, and I think even more so in EMC's case, there is anoversupply of storage hardware in the market,'' he said. ``To some extent Ithink that EMC is feeling competitive pressure,'' he added. ``You don't getprice pressure unless you have competition.''
EMC plans to announce complete second-quarter results on July 18.
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