EMC cuts targets for quarter, year

Data-storage giant EMC said Wednesday that its first-quarter earnings will fall short of Wall Street estimates amid a slowdown in information technology spending.

The Hopkinton, Mass.-based company also cut its growth projections for 2001.

EMC, one of the tech bellwethers on Wall Street, said that earnings for the first quarter will be about 18 cents a share. According to First Call, analysts were expecting earnings of 20 cents a share. Those estimates were cut following EMC's Feb. 22 profit warning.

The company added that it expected revenue to grow about 29 percent to $2.34 billion in the first quarter compared with the same period a year ago. Analysts had been expecting sales of $2.45 billion, according to First Call.

For 2001, EMC said it was confident it could "double the rate of overall IT spending for the year 2001, or more than 20 percent." EMC said in February that it expected to post sales growth of between 25 percent and 35 percent. Just a month before that warning, it had been expecting sales growth to top 35 percent.

The company also noted that it would continue to invest in research and development, a move that would produce "modest EPS growth for the year." EMC reported earnings of 79 cents a share in 2000. Analysts were expecting earnings of 94 cents a share, according to First Call.

EMC is a dominant player in the information storage sector, which had been viewed as resistant to a tech slowdown until February. After a warning from high-flier Brocade Communications, EMC cut its growth rates. EMC supplies data-storage systems to banks, manufacturers, Internet providers, retailers and government agencies. Hardware sales account for the bulk of the company's revenue.

EMC maintained that demand for its products was strong, but that some customers had "purchase hesitation." Joe Tucci, EMC's chief executive, said that U.S. customers were holding back on spending their IT funds because of negative economic news. That caution also spread to Europe, where customers have taken a "wait-and-see attitude," he said. Tucci's assessment echoes what dozens of high-tech executives have said.

However, EMC indicated that IT spending may be stabilizing. Mike Ruettgers, EMC's executive chairman, said IT budgets are "in the final firming process." After meeting with customers, Ruettgers said those budgets have settled to reflect a slowdown for the rest of the year.

Tucci agreed. "We've seen customers redo their budgets two or three times this quarter," he said.

Despite the slowdown and analyst skepticism during a conference call, EMC was confident it could hit its latest sales target. "This forecast is realistic," said Ruettgers.

EMC reports earnings on April 19.