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EMC tops view as profit jumps 27%
By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) -- EMC Corp. on Wednesday posted a fourth-quarter profit before items that grew 27% over a year ago as the storage-technology giant saw healthy increases in sales of both its storage system products and software applications.




Revenue rose 15% to $2.71 billion in the latest three months from $2.36 billion in the year-ago period.

Analysts surveyed by Thomson First Call were looking for EMC to earn 12 cents a share in the December period on $2.69 billion in revenue.

EMC, based in Hopkinton, Mass., said its storage-systems revenue grew to $1.3 billion, up 19% from a year ago, in the quarter. Software continued to become a bigger part of the company's overall revenue, rising 16% to $1 billion. Professional services sales posted a 4% increase from a year ago, rising to $403 million.

Looking ahead, the company forecast earnings before items of 14 cents a share for the first quarter on revenue of between $2.57 billion and $2.59 billion.

For fiscal 2006, EMC sees earnings before items of 63 to 66 cents a share on revenue of between $11.1 billion and $11.3 billion.

On a GAAP (generally accepted accounting principles basis), the company forecast earnings of 11 cents a share for the first quarter, and 54 to 57 cents a share for the full year.

Wall Street's current consensus estimates are for earnings of 14 cents a share for the March quarter, and 65 cents a share for 2006
 
EMC positive guidance: EMC CFO: 'Confident' About Opportunities in 2006

EMC Corp. (EMC) Chief Financial Officer William Teuber said Tuesday the company is "confident" about its prospects this year.

EMC is "very excited about the opportunities it sees in 2006," Teuber said during a conference call to discuss fourth-quarter results with Wall Street.

According to the financial chief, EMC is confident about 2006 because it expects its momentum from 2005 to carry on in 2006. He said products rolled out in the second half of 2005 will continue to ramp up this year, adding to the company's optimism. Teuber added that EMC will introduce new products in 2006, with a "major" announcement coming later this week.

For its fourth quarter, Hopkinton, Mass.-based EMC reported net income of $ 148.3 million, or 6 cents a share, compared with net income of $320.5 million, or 13 cents a share, in the year-ago fourth quarter. Revenue came in at $2.71 billion, up from $2.36 billion a year earlier.

Excluding charges, EMC posted profit of $409 million, or 17 cents a share. Analysts, according to Thomson First Call, had expected EMC to report earnings of 17 cents a share and revenue of $2.6 billion.

For the first quarter, EMC is targeting revenue of between $2.57 billion to $ 2.59 billion and earnings of 14 cents a share, excluding the adoption of Financial Accounting Standard No. 123R.

For the full year, EMC is targeting revenue of $11.1 billion to $11.3 billion and earnings of 63 cents to 66 cents a share. The First Call average estimates stand at first-quarter earnings of 14 cents a share and revenue of $2.56 billion. For the full year, analysts' estimates stand at revenue of $10.95 billion and earnings of 65 cents a share.

Joseph Tucci, EMC's chief executive, who was also on the call, said he is " bullish on the economic front" and expects a resurgence of the economy in Western Europe during 2006.
 
Morningstar raised EMC's fair value to $19 from $16
Analyst Note 01-23-2006

We are raising our fair value estimate for EMC to $19 per share from $16 to account for increased revenue growth and operating margin assumptions. We have modeled average revenue growth at approximately 12% over the next five years driven primarily by growth of the small and medium enterprise segment. We believe software and services growth should allow the company to continue expanding operating margins to more than 16% from the low double digits in 2004. We expect the company to earn very attractive returns on capital at more than 20% over the next five years. Options shave approximately $1.50 per share from our fair value estimate.

We believe EMC EMC represents the class of the storage industry. We are raising our fair value estimate for this storage giant to $19 per share from $16.

We expect EMC (along with NetApp NTAP) to pull away from the competition in 2006 as the storage industry both grows and consolidates. Currently, six storage vendors have more than $1 billion in revenue each, but none has the breadth of products or sales capabilities of EMC. We are forecasting average revenue growth for EMC at more than 12% on the back of a highly effective sales team. In contrast, we expect the overall storage industry to grow at about 8%. EMC spent considerable resources in 2005 to better define pricing and support for its sales channel, issues that have plagued the company in the past. We believe these efforts have been largely successful and the company will see results in 2006. We also expect operating margins to increase more quickly than our earlier forecast, exceeding 16% for 2006 as the company realizes leverage from investments made in 2005.

In our view, EMC is a leading technology company in a growth industry. We would eagerly recommend an investment at a modest discount to our fair value estimate.

EMC has risen above the competition in the market for storage hardware and software.

EMC's strategy has successfully kept the firm at the forefront of an evolving storage industry. Vendors selling both high- and mid-range systems have to incorporate a broad array of storage technologies solving different business problems. Customers' storage requirements have moved beyond mass data repositories to include compliance, continuous data protection, and disaster recovery. These diverse requirements necessitate multiple storage technologies known as tiered storage. Competitors selling single products have to partner with the large storage providers like EMC to be included in the tiered storage solution.

EMC's narrow moat centers on its large installed customer base and its focus on product integration and support. While storage hardware standards have become more open, we believe customers look to EMC to provide better software management and integration services for their evolving storage needs. EMC's customers have significant integration requirements, and it is easier and cheaper for them to buy more products and services from EMC than from rivals such as IBM IBM and Hitachi HIT. We are excited about EMC's prospects for the near to intermediate term, but we do not believe the company has a wide moat. We think that there is reasonable risk that disruptive technologies in storage and software architectures may weaken EMC's leadership position over the long term.

We believe that EMC's next phase of growth will be driven by an effective sales channel strategy, furthering penetration into the small and medium enterprise segment. We are big believers in the future growth of this largely untapped segment driven by a need for affordable storage hardware optimized by sophisticated storage management software. Most notably, EMC entered a partnership with Dell DELL to sell a mid-range line of storage servers. The partnership has allowed EMC to successfully penetrate a new customer base. Through partners, EMC can grow revenues with relatively little investment in its salesforce. We expect EMC's channels to help the company expand operating margins and drive overall growth.

We are impressed by EMC's position in the storage industry and believe in the investments the company has made in its sales channels and software products. We feel the company is setting the pace for the storage industry and would gladly invest at a modest discount to our fair value estimate.
 
Time to load back IM with good news this morning. Solid company with strong balance sheet.

Analyst comment:

"Slim profit margins and cyclical demand make the IT distribution industry challenging. Nevertheless, an expanding market presence in Asia and a focus on reducing costs should contribute to Ingram's long-term success.

IT product distribution has evolved into a two-tier system. First-tier distributors, such as Ingram Micro and Tech Data TECD, consolidate thousands of products from hundreds of vendors for second-tier resellers, such as CDW CDWC and Insight Enterprises NSIT, which integrate those products into complete solutions for end users. Distributors also provide service, support, and financing to resellers. Two-tier distribution is valuable because a direct sale from vendors to resellers is costly for both, given the number of parties involved.

Cyclical IT demand and increasing competition have made the distribution industry extremely challenging. Average gross margins have declined from 8% in the mid-1990s to about 5.5% today, while operating margins have dropped from 2.25% to about 1% during the same period. The fallout could have been worse, but Ingram's management implemented tight cost controls and strict working-capital management standards to restore profitability. Other decisions by management, such as developing tiered pricing, offering supply-chain management services, and a focus on vertical markets have aided profitability as well.

To gain market share, low-margin vendors have been expanding distribution channels globally. Ingram Micro's $550 million acquisition of technology distributor Tech Pacific is an example of this strategy. Because of the acquisition, Ingram Micro is now the largest technology distributor in the Asia-Pacific region. Tech Pacific adds about $2.5 billion to revenues, and increases the Asia-Pacific region's share of total revenues to almost 20% from 10%. Though regional operating margins are just above 1%, competitive advantages from Ingram Micro's dominant position could help lower costs and deter potential market entrants, providing a potential boost to profitability."

Management has been working hard to improve financial health as well. Over the past five years, Ingram Micro has paid down more than $1 billion in debt, strengthened its inventory management system, and enhanced fixed-asset turnover. Given these business model improvements, we would buy shares at a reasonable discount to our fair value estimate.
 
If you like the steel stocks that I picked last year, such as SCHN, OS, you might need to pay attention to TUES. Big company with a little trouble before, but back on track and getting healtier. TUES not only have strong balance with dividend payout, but also have the best timeliness now. Bottom formed at $20-21 with large volume and momentum. I like TUES because it has huge upside appreciation room with less risk.

TUES is too cheap to miss it. My target at least $27 in 3 months.
 
Seagate's strong stock momentum and revenue shed light on the data storage business. EMC is the number one in high end data storage industry, I believe EMC's stock trend will like RHAT or STX since by just thinking the demand side of the data storage I can figure out how good the business is. $13 is too cheap for EMC now, I found RHAT when it was $13, and now is almost $30.I picked RHAT based on its market share in Linux and the demand side on Linux system. I use the same logic pick EMC due to its expanding business in data storage. When a day EMC is $30, check back this thread.
 
IM touches its 200MA line, possible rebounce from here. IM is one of my picks in IT industry together with MPS and ACN. IM has 11 forward PE and <1 PEG ratio with low debt. Pretty stable company. $18.18 won't be a bad entry point. I bought it back at $18.9, a little bit red here, but I have confidence on good company.
 
IM rebounce from its 200MA like i mentioned this morning. IM should traded above $20.

TUES accumulate some momentum here, based on morningstar's evaluation, TUES has fair value $27. With TA and FA are both good, I am bullish on TUES.

Waiting for CHB back to $14. CHB has touched $15.23 last week with large volume. Institution accumulate shares when CHB is down to lower $13. CHB is a solid compnay with demnad of factory-built home demand is surging due to hurricane.
 
TUES has strong support on its 20MA.Yesterday closed at exactly 20MA line which I think is the rebounce point. $22 is still cheap compared to is P/E. Also TUES has very low debt and strong cash position. With the short term rebounce momentum, now is still not late to load some shares.
 
Sell RES and FCEL due to oil price pull back. Although RES shouldn't correlate with oil price, almost $10 per share profit satify my return. Maybe get back in oil when when the trend is more clear. Long term oil is still a big concern, be ready to get in any time.

EMC momo still, very strong buy side even with market in red. EMC should go all the way up like RHAT. Strong and optimistic guidance for 2006 should push it to close $15.

TUES showing strong resistance today with low volume. 20MA should give it some push. We saw $22 today, my target is $27 or higher. Yesterday TUES had 1M volume that is three times higher than average. TUES easy money here for short term.
 
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