EMC shares tumble as targets missed

Shares of EMC, the world’s biggest maker of storage computers, tumbled after forecasting full-year profit that trailed analysts’ estimates and as VMware, the software maker it mostly owns, said it is considering job cuts.

The company, which employs 3,000 people in Ireland and 50,000 globally, said that VMware had missed its analysts’ targets due to cutbacks from corporate customers and will cut 900 jobs, exit some business lines and consolidate facilities.

EMC tumbled 6.6% to $23.53 at in New York, after earlier dropping 8.3% for the biggest drop since Aug 2011.

The stock gained 17% last year. VMware fell 19% to $79.32, after declining 22% for the biggest drop since July 2008.

EMC forecast 2013 earnings of $1.85 a share excluding certain restructuring charges and the amortisation of VMware’s software from prior periods. Analysts had estimated $1.90.

The shares are down because of “poor guidance provided by their wayward child VMware,” Brian Freed, an analyst at Wunderlich Securities, said via email. Yesterday, he cut his rating on VMware to hold from buy.

VMware is the biggest maker of software that lets computers run multiple operating systems.

Sales will be $23.5bn for 2013, EMC said in a statement. That compared to an average analyst estimate of $23.63bn.

“VMware as of yesterday still represents 60% of EMC’s value,’’ said Jeffrey Fidacaro, an analyst at Monness Crespi Hardt & Co.

Jason Ward, Country Manager for EMC Ireland, said the company continues to perform strongly in the Irish market, adding that the company was at a “crossroads” in a “disruptive shift in IT history”.

Among EMC’s newest customers in Ireland are Icon, Telecity, Celestia and Friends First.

Bob Savage, vice-president and managing director of EMC’s Centre of Excellence in Cork, said EMC is taking market share, reinvesting for growth and delivering improved earnings.

“EMC’s broad portfolio of products and services, offering customers greater efficiency, control and choice as they transform their IT and businesses, is a key differentiating element of our continued financial success.

“We believe EMC is well positioned to expand our leadership in the market segments we serve, and here in Cork our talented and highly skilled workforce is exporting to more than 140 countries,” said Mr Savage.

Bloomberg


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