EMC thrives amid competition

September 16, 2007|By Andrew Leckey | Andrew Leckey,Tribune Media Services

I've been following EMC Corp. for months. I've noticed that it is an actively traded stock and the share price has gone up. What do you think of this stock?

- M.B., via the Internet

The No. 1 provider of data-storage hardware, software and services is benefiting from strong industry spending on storage, which is expected to continue for the next several years.

Sales of software licenses have been robust, and the company's large installed-customer base helps in this highly competitive field. Although Asia remains its strongest sales region, North America lately has made some significant gains.

Shares of EMC Corp. are up 45 percent this year after declines of 3 percent last year and 8 percent in 2005. The company is close to completing its planned $1 billion stock repurchase this year.

Second-quarter profit was up nearly 20 percent, the fourth consecutive quarter that the company exceeded earnings estimates. Management expects the solid second half to be somewhat better than initially expected.

The consensus rating of EMC stock by Wall Street analysts is "buy," according to Thomson Financial. That consists of six "strong buys," 12 "buys" and nine "holds."

After the successful initial public offering of VMware Inc., EMC retains an 89 percent stake in that company. It purchased VMware in 2004 for $625 million and must retain a controlling stake for five years so EMC shareholders avoid a taxable gain on the acquisition.

VMware's "virtual" software, enabling one piece of hardware to run multiple operating-system images at the same time, reduces processing power costs. EMC's substantial stake in VMware adds appeal to EMC shares.yourmoney@tribune.com

Andrew Leckey is a Tribune Media Services columnist.

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