EMC Shares Surge

EMC Corp. (NYSE: EMC) shares shot up almost 10 percent Tuesday, to $7.44 a share, after the company announced stronger-than-expected preliminary results, driven by Clariion sales, for the fourth quarter of 2002 (see EMC to Beat Q4 Expectations).

For the quarter ended December 31, 2002, EMC expects to report total revenue of more than $1.47 billion, and earnings in the range of $0.01 to $0.02 per diluted share, excluding a previously announced restructuring charge of approximately $160 million. The charge is primarily associated with the previously announced workforce reduction and consolidation of facilities.

Including the charge, the net loss for the fourth quarter is expected to be in the range of $0.02 to $0.04 per share. These preliminary revenue results compare with revenue of $1.26 billion in the third quarter of 2002.

In a prepared statement, EMC president and CEO Joe Tucci said, "We are encouraged by the strength of these results. Overall, customer spending was better than we anticipated in the fourth quarter." He said demand was particularly strong for the company's newly introduced Clariion CX family systems (see EMC Moves Downmarket With CX400 and EMC Launches Clariion CX200).

"It makes sense that the Clariion would be strong, as it's aimed at the midmarket, which is growing the most... There is probably a pause in Symmetrix sales, compared with Clariion, in anticipation of the new Symm box," says Steve Berg, analyst at Punk Ziegel & Co. (see EMC Readies Symmetrix Upgrade).EMC's reseller deal with Dell Computer Corp. (Nasdaq: DELL) for its Clariion systems is also thought to be driving sales of the new products (see EMC and Dell Double-Down and Dell, EMC Toast Anniversary).

Wall Street analysts say the news isn't that surprising, given McData Corp.'s (Nasdaq: MCDTA) upward guidance today. The company raised its fourth quarter expectations by $20 million (see McData Blows Doors Off Q4).

The good news from EMC should bode well for Brocade Communications Systems Inc. (Nasdaq: BRCD), as it suggests the market in general grew in the fourth quarter, rather than just McData's share of it, which analysts thought came at the expense of Brocade.

The Hopkinton, Mass., storage vendor reported third-quarter 2002 sales of $1.26 billion, a drop of 9 percent from the prior quarter. Its net loss for the quarter was $51 million, or 2 cents per diluted share, excluding one-time after-tax benefits. The results were in line with EMC's previous lower guidance (see EMC Cuts Headcount