EMC Corp (EMC)

mdriver78 (< 20) Submitted: 10/17/06 8:13 PM : Start Price: $12.50 EMC Score: 28.28

EMC beat EPS and guided higher. Further, consolidation of businesses acquired should increase the value of the increased revenues to the bottom line. The world's largest provider of enterprise storage systems and software reported the 13th consecutive quarter of double-digit revenue growth driven by strong demand for its new flagship product Symmetrix DMX-3 and EMC CLARiion CX3 networked storage systems and VMware infrastructure software. The September acquisition of RSA Security and Network Intelligence, which formed its new security division, contributed $37.8 mln in revenues for the quarter. Excluding gains, revenues rose 17% year/year - its highest quarterly revenues in its 27-year history. Market share gains, coupled with a larger footprint, continue to drive EMC's success. As the proliferation of digital content continues, storage becomes an even greater critical issue, which should drive long-term growth for EMC.

EMC produces a range of storage products, including hardware disk arrays and storage management software. In the quarter, systems revenues, accounting for 46% of the top line, grew 19% to $1.3 bln, while software license and maintenance revenues jumped 25% to $1.1 bln. Professional services, systems maintenance, and other service revenues rose 7% to $432 mln. While product margins held steady at 51%, service margins contracted to 56.4%. Further, higher R&D and SG&A costs as a percentage of sales weighed on operating margins.

With revenues up 14% year-to-date, the company accelerated its buyback program by more than a third, and is on target to invest $3 bln during 2006. Further, it upped Q4 guidance to $0.16 per share, in-line with consensus.

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