Wall St Worried About Storage

Its been a tough week for the storage sector. Most firms were whipped by the market following the events of September 11, only to be downgraded by Wall Street analysts who believe the negative impact of the attacks will continue well into the third quarter.

Sources at Wit Soundview say that business has ground to a near halt for EMC Corp. (NYSE: EMC) since September 11, and they believe that it is still not time to buy the stock.

Goldman Sachs & Co. analyst Laura Conigliaro cut her 2001 estimate for EMC from $0.22 to $0.20 per share and lowered her 2002 forecast from $0.27 to $0.22 a share.

Veritas Software Corp. (Nasdaq: VRTS), one of the strongest and most resilient stocks to date in this sector, felt the pinch from SG Cowen Securities. In a note to investors, Cowen said the firm has lowered its estimates on the stock to reflect “softening demand outlook following the terrorist attacks.” It has cut 2001 and 2002 EPS estimates to $0.61 and $0.65 from $0.71 and $0.85, respectively.

Merrill Lynch & Co. Inc. jumped on the bandwagon mid-week and lowered its earnings estimates for Network Appliance Inc. (Nasdaq: NTAP).“Despite some incremental hardware sales to the companies directly affected by the dislocation from lower Manhattan, we believe that IT spending will be generally down for the September quarter as customers try to assess the economic impact of the attacks on their own businesses,” said Merrill Lynch analyst Thomas Kraemer in a research note to investors. He added, “Given the back-end loaded nature of the quarter, the timing of the disruption increases the likelihood of a negative disruption to the business.”

CE Unterberg Towbin raised its rating for Brocade Communications Systems Inc. (Nasdaq: BRCD) from “neutral” to “buy,” but the firm still cut estimates on the stock. Morgan Stanley Dean Witter & Co. also cut 2002 estimates on Brocade to $0.33 a share from $0.50 a share.

At market close Friday, EMC shares were trading at $11.75, down .14 (1.18%). Network Appliance shares were trading at $6.80, up .12 (1.80%). Brocade shares were $14.03, down .13 (.92%).

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com