EMC reports jump in 1st-quarter profit as tech spending by companies picks up

Wednesday, April 21, 2010

EMC profit nearly doubles as tech spending rises

SEATTLE — Data-storage leader EMC Corp. reported a 92 percent jump in net income Wednesday and raised its full-year forecast, saying businesses have started spending on technology again after a lull during the economic downturn.

However, it’s not clear how much longer the surge in demand for new hardware and software will last. EMC said that it has seen a spike in buying because of pent-up demand, but that it already may be over, and corporate spending on technology could resume normal patterns.

EMC, like most technology companies, took a hit in 2008 and 2009 as businesses put off updating old technology. Its strong first-quarter results add to mounting evidence that the sector has rebounded. IBM Corp. and Intel Corp. both recently reported signs of a turnaround in corporate spending.

“Customers have firm IT (information technology) budgets in place, and they are investing in IT,” said EMC CEO Joe Tucci during a conference call.

EMC said earnings rose to $373 million, or 17 cents per share, from $194 million, or 10 cents per share, in the same period of 2009.

Excluding one-time items such as restructuring and acquisition-related costs, EMC earned 26 cents per share. On that basis, net income topped the average forecast of 24 cents, according to Thomson Reuters.

Revenue climbed 23 percent to $3.9 billion, higher than the $3.7 billion Wall Street was expecting.

EMC is benefiting not only from the explosion of information that companies must store and manage but also from a shift in the way businesses operate their computer networks. It owns a majority stake of VMWare Inc., whose products help turn server computers into better multitasking machines. That is a key part of the trend to move software into “the cloud,” or distributed across servers other companies manage instead of ones operated in-house.

EMC Chief Financial Officer David Goulden cautioned analysts during a conference call that while he expects 2010 to be a strong year, the period of intense demand for its products seen in the last two quarters is not likely to continue.

EMC boosted its full-year forecast to $1.18 per share, excluding items, on revenue of $16.5 billion, and said the strong first quarter may account for a larger percentage of the full-year results than usual.

In January, the company had predicted net income of $1.12 per share and revenue of $16.0 billion for 2010. Before Wednesday, analysts were looking for $1.14 per share and revenue of $16 billion.

EMC’s numbers have been helped by cost cutting. The company has cut about 2,400 jobs as part of a restructuring announced last year to reduce costs by about $500 million in 2010.

Shares of EMC, which is based in Hopkinton, Mass., gained 32 cents, 1.7 percent, to $19.73 in morning trading.

AP Business Writer Andrew Vanacore in New York contributed to this report.

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