Arrow-right Camera

Business

Motley Fool: EMC’s growth tops expectations

Sun., Nov. 13, 2011

Technology spending is looking strong, judging by the third-quarter earnings results of data storage king EMC (NYSE: EMC).

It was a record quarter for the company. Quarterly consolidated revenue popped 18 percent to $5 billion, while bottom-line earnings jumped 23 percent. Both of these figures slightly topped Wall Street expectations.

The record-breaking doesn’t stop there, though. Gross margins rose to an all-time high of 63 percent. Revenue from the U.S. hit an all-time high of $2.7 billion, a 17 percent increase, and revenue from the Asia-Pacific and Japan region also grew 37 percent to hit an all-time record.

EMC CEO Joe Tucci described the results as “clear evidence that EMC is at the center of the most transformative, disruptive and opportunity-rich trends in IT history – namely hybrid cloud computing and the explosion of Big Data. With the strategy, products and momentum in our favor, EMC remains extremely well positioned to help customers accelerate their journey to the cloud, discover the value of Big Data and transform IT into a source of greater efficiency, agility and control.”

If there’s one thing that society at large is good at nowadays, it’s creating data – loads of it. That data has to go somewhere, and EMC addresses that growing need while winning share from rivals such as Hewlett-Packard and IBM. (The Motley Fool owns shares of IBM and EMC.)

Ask the Fool

Q: What’s “negative equity”? – M.T., Binghamton, N.Y.

A: Too many people have ended up with it these days. It happens when you take on a hefty mortgage and then the value of your home drops, so that you owe more than the property is worth. (Also called being “under water.”)

My dumbest investment

I did what a smart investor is not supposed to: fall in love with a company without doing thorough due diligence. Because General Electric was such an admired name and had a dividend yield near 3 percent, I jumped right in. It has raised the dividend twice since then. But I’ve since realized that GE carries a lot of debt and doesn’t meet many of my criteria. Yes, it sports a high return on equity and net profit margin, but its sales are not growing quickly. – Matt, online

The Fool responds: You could do much worse than General Electric. Its dividend yield is around 3.7 percent, and as you noted, the company has been hiking it recently. GE has also been reducing its long-term debt, from $336 billion nearly two years ago to $278 billion in June. Its huge financial operations took a hit in recent years along with other financial firms, but it operates in many fields and has been investing in developing technologies such as alternative energy. You’re right that you need to study a company before buying into it, though!



Click here to comment on this story »