EMC’s 2Q net more than doubles, data-storage maker ups 2010 guidance, but economic fears loom

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EMC’s 2Q net more than doubles as firms stock up

SAN FRANCISCO — EMC Corp.’s net income more than doubled in the second quarter as corporations opened the spigot on spending for more data storage.

But economic worries because of the European debt crisis and fears of a possible “double-dip” recession in the U.S. have eclipsed encouraging signs from the technology sector. Some investors fear a spike in computer spending may just be a relief valve for pent-up demand that won’t stay open long.

Shares slid 76 cents, or 3.8 percent, to close at $19.48.

Other technology heavyweights such as IBM Corp., Intel Corp. and Texas Instruments Inc. have reported higher second-quarter profits but have failed to impress investors.

Joe Tucci, EMC’s CEO, called the recovery “choppy” and said EMC is “definitely seeing a slowdown” in southern Europe. He added that information technology spending throughout all of Europe is growing, however, and that the U.S. market is “good with good prospects” and he called Asia “robust.”

Analyst Daniel Ives with FBR Capital Markets said that “very healthy demand” for EMC’s Symmetrix brand of networked storage products helped during the latest quarter, but that that must continue for the company to be successful in the second half of the year.

EMC’s numbers illustrate that information technology spending overall is recovering, a trend that should “disproportionally benefit tech bellwethers such as EMC over the coming quarters,” Ives wrote.

Still, some analysts simply don’t believe that companies will be able to hit their optimistic targets given the turmoil in world markets, stoked by fears that the governments of Greece, Portugal and Spain might default on perilously high debts and that the U.S. economic rebound is losing strength.

Technology hardware companies are particularly vulnerable. Corporations that are tight on cash can postpone hardware acquisitions such as computers, and that could mean an economic lag for companies that supply them.

Tucci said that EMC hasn’t seen a “material or abnormal” number of its customers pushing out deals.

“I haven’t seen a marked change in customer attitude,” he said on a call with analysts.

EMC has now posted three straight quarters of net income increases and said Wednesday before the market opened that it expects to top its earlier guidance for 2010, though it didn’t provide more specifics.

EMC is the world’s No. 1 maker of data-storage computers.

In the second quarter, EMC earned $426.2 million, or 20 cents per share, up from $205.2 million, or 10 cents per share, in the year-ago quarter. Excluding items, EMC earned 28 cents per share, a penny per share better than analysts expected.

Revenue jumped 24 percent to $4.02 billion, topping the $3.98 billion analysts polled by Thomson Reuters expected.

For all of 2010, the company now says it expects to exceed its previous outlook of net income of $1.18 per share, excluding items, and revenue of $16.5 billion. It didn’t provide more detail.

EMC ended the quarter with $10.3 billion in cash and investments. Cost-cutting has helped EMC. The company, based in Hopkinton, Mass., cut about 2,400 jobs as part of a restructuring announced last year to cut costs by about $500 million.

It currently has 45,000 employees, about 2,000 higher than last quarter. EMC said it has been hiring more workers as business has improved.

Company shares fell 59 cents to $19.65 Wednesday.