Big-Data Company Without 'Flare' Is the Real Winner

RELATED QUOTES

SymbolPriceChange
DVMT47.79-0.10
CRM70.05-0.14
RHT79.11+0.37

NEW YORK (TheStreet) -- For as much as I have made recently regarding some of the dominant companies within the cloud such as Red Hat and Salesforce.com, there's an underappreciated name: enterprise storage giant EMC. That's because of the recent enterprise adoption of "big data," which is on the verge of being dominated by IBM and Oracle. But it's not because EMC is not a force in its own right.

Despite being a leader in a major enterprise market, EMC's problem (with analysts) is that it lacks "flare." But I am now realizing that is Wall Street's loss and astute investors' gain. It's one of the steadiest performers, one that continues to match superior sales growth with profitability. From that standpoint, the company just might be 20% undervalued even on the most conservative assumptions, and it further affirmed this with its recent earnings announcement.

The quarter that was

The company reported first-quarter net income of $587 million, 23% higher than in the previous year. It logged $5.1 billion in revenue, an 11% increase annually and in line with analysts' estimates. U.S. sales accounted for more than half of consolidated revenue, registering $2.6 billion. EMC beat the Street by a penny on profits of 37 cents a share, while also ending the quarter with $10.9 billion in cash and investments.

Revenue from outside the U.S. was highlighted by the Asia Pacific and Japan region, which reached an all-time record of 20% growth. For 2012, the company sees revenue of $22 billion, in line with the previous Street consensus at $22.2 billion. EMC sees full-year profits of $1.70 a share, a bit below the Street's view of $1.75. But that should not be perceived as a disappointment if one truly understands the company's track record of conservative outlooks, particularly when considering that profits continue to surge due to stronger gross margins as well as an increase of 26% in operating income.

In a statement, company CEO Joe Tucci offered the following: "We are in a time of unprecedented IT and business transformation, propelled by the benefits of cloud computing, Big Data and trust." I have to certainly agree with that statement and as evident by its report and its strong start of the year, the company is poised to further benefit from this transformation. This is the sort of value that prospective cloud investors should consider.

Moving ahead

As impressed as I am with EMC's performance, I do, however, remain a bit cautious about its ability to thwart competitive attacks from the likes of IBM and Oracle, particularly as the precious corporate IT expenditures have not fully returned to their glory days of big budgets. But then again, "big data" necessitates "big money" and during the call I was looking to be convinced that the company has a sound blueprint for creating separation between its services from those offered by its rivals.

The company did this by talking about its RSA Information Security business, which generated a revenue increase of 19% year over year. Also, what many investors don't realize is that VMware is a subsidiary of EMC. So essentially, EMC has VMware, the global leader in virtualization and cloud infrastructure, helping it generate an increase of 25% year over year in additional revenue. Even more noteworthy was the fact that EMC continues to demonstrate that there is strong demand for its broad portfolio of services to help customers accelerate to the cloud. It does this in partnership with networking giant Cisco as well as Intel to form the VCE, or the Virtual Computing Environment Co. If that was not convincing enough, I don't know what is.

Bottom line

It is hard to see how EMC isn't a bargain at today's prices. The fact of the matter is, data storage is a critical IT priority for many companies and should keep EMC in excellent shape. But the question is, for how long? Market leaders don't often hold market leads when everyone is simultaneously gunning for the top spot. Though the company enjoys a strong share as well as a great reputation, one has to think that the competition will eventually catch up. But until that happens, EMC at today's prices makes this look like a risk worth taking as the stock appears undervalued by at least 20%.

At the time of publication, the author was long ORCL, INTC and CSCO, and held no positions in any of the stocks mentioned, although positions may change at any time.

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • ECB needs help from other policy areas as 'lower bound' looms
    ECB needs help from other policy areas as 'lower bound' looms Reuters - 5 minutes ago

    FRANKFURT (Reuters) - The European Central Bank's monetary stimulus needs to be complemented by action in other policy areas as the ECB is already operating near a "lower bound" where interest ... … More »

  • Malaysia's SapuraKencana posts quarterly profit on forex gain Reuters - 6 minutes ago

    Net profit rose nearly 8 percent to 112.3 million ringgit ($27.16 million) in its second quarter ended July 31 from 104.1 million ringgit a year earlier, the company said in a filing with the stock exchange. Revenue, however, fell to 1.68 billion … More »

  • Brewer AB InBev shareholders approve takeover of rival SABMiller
    Brewer AB InBev shareholders approve takeover of rival SABMiller AFP News - 14 minutes ago

    Shareholders of brewing giant Anheuser-Busch InBev approved the blockbuster takeover of rival SABMiller, the brewer said on Wednesday, clearing a major hurdle towards one of the biggest mergers ever attempted. … More »

  • Asian markets down, energy firms hit by oil deal woes
    Asian markets down, energy firms hit by oil deal woes AFP News - 17 minutes ago

    Tokyo stocks led a broad retreat in Asian markets Wednesday as the yen recovered, while regional energy firms struggled with crude prices on concern about the chances of success at an upcoming producers' meeting. Standard Chartered Bank fell two … More »

  • AB InBev to retain its name after SABMiller takeover Reuters - 35 minutes ago

    BRUSSELS (Reuters) - Anheuser-Busch InBev said on Wednesday that it would retain its existing name after a planned $100-billion-plus (76.89 billion pounds) takeover of rival SABMiller. SABMiller shareholders ... … More »

  • UK's Phoenix to buy Deutsche Bank's Abbey Life for $1.22 billion Reuters - 1 hour 3 minutes ago

    (Reuters) - Phoenix Group Holdings, Britain's largest owner of life assurance funds closed to new customers, said it would buy Deutsche Bank AG's British insurance business Abbey Life Assurance Co for ... … More »

  • Two new tsars to be created as Airbus reorganisation takes shape
    Two new tsars to be created as Airbus reorganisation takes shape Reuters - 1 hour 7 minutes ago

    Airbus Group Chief Executive Tom Enders plans to expand a shake-up of Europe’s largest aerospace group by promoting two executives to oversee engineering and programmes as he forces through more "integration" to prepare for future competition. … More »

  • JTC launches Tuas site for sale
    JTC launches Tuas site for sale The Edge Property - 1 hour 10 minutes ago

    JTC has launced a confirmed-list site at Tuas South Link 2 (Plot 11) for sale by public tender. It is the third of the seven confirmed-list sites for the 2H2016 Industrial Government Land Sales Programme.The 53,997 sq ft site is zoned for business 2 … More »

  • Oil stages tepid rebound as hopes ease for output deal AFP - 1 hour 10 minutes ago

    Oil prices posted marginal gains in Asia Wednesday as an industry report showing a decline in US stockpiles was offset by worries about the chances of this week's key producers meeting ending with a deal ... … More »

  • Gold hits one-week low as dollar firms
    Gold hits one-week low as dollar firms Reuters - 1 hour 10 minutes ago

    Gold prices slipped on Wednesday to touch a one-week low, after suffering its biggest single-day loss in nearly a month in the previous session, on a firmer dollar. The safe haven asset slid nearly 1 percent on Tuesday, its biggest single session … More »

  • Motoring group AA posts first half revenue rise, sees no Brexit impact Reuters - 1 hour 14 minutes ago

    The results strip out any contribution from AA Ireland, which AA agreed to sell to a Carlyle Group fund and financial services buyout team in June for 156.6 million euros. The firm said it had not seen any impact of Brexit-related issues on its … More »

  • World Bank releases $300 mn for Syrian refugees in Jordan
    World Bank releases $300 mn for Syrian refugees in Jordan AFP News - 1 hour 14 minutes ago

    The World Bank announced it will release $300 million in loans to help facilitate the labor market for Syrian refugees in Jordan. The funds will be used to attract investors and create reforms that will help grant access to the Syrian labor force, … More »

  • European stocks climb at open AFP - 1 hour 15 minutes ago

    Europe's main stock markets rose at the open of trading on Wednesday, with London's benchmark FTSE 100 index climbing 0.3 percent to 6,826.28 points. In the eurozone, Frankfurt's DAX 30 grew 0.6 percent ... … More »

  • Zuckerberg initiative poaches AstraZeneca board member Reuters - 1 hour 15 minutes ago

    The $3 billion (2.3 billion pounds) health initiative set up by Facebook co-founder Mark Zuckerberg and his wife Priscilla Chan has hired one of AstraZeneca's non-executive directors to head up its science drive. The British drugmaker said on … More »

  • Yellen likely to face questions about Wells Fargo
    Yellen likely to face questions about Wells Fargo Associated Press - 1 hour 16 minutes ago

    Federal Reserve Chair Janet Yellen, who has been in the hot seat over the central bank's interest-rate policy, now has another headache: Wells Fargo. Yellen is likely to face sharp questions from a House ... … More »

  • Rolls-Royce appoints new strategy and digital executives Reuters - 1 hour 19 minutes ago

    British engineer Rolls-Royce appointed veteran M&A banker Ben Story to oversee its strategy and marketing, and Neil Crockett to develop its digital affairs, completing its new-look senior line up on Wednesday. Rolls-Royce, in the middle of a major … More »

  • BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut
    BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut The Edge Property - 1 hour 20 minutes ago

    A 474 sq ft one-bedroom unit at Parc Sophia has been listed on TheEdgeProperty.com at $898,000 or $1,895 psf.Parc Sophia is a freehold apartment on Adis Road. Completed in 2011, the 152-unit development is within 300m from Dhoby Ghaut MRT … More »

  • Trump has turned over tax returns _ for lawsuits and loans
    Trump has turned over tax returns _ for lawsuits and loans Associated Press - 1 hour 27 minutes ago

    While Donald Trump won't publicly release his income tax returns, the New York businessman has turned them over when it suited his needs — if he stood to make a profit, needed a loan or when a judge forced ... … More »

  • US fines RBS bank $1.1 bn over pre-crisis mortgages
    US fines RBS bank $1.1 bn over pre-crisis mortgages AFP News - 1 hour 31 minutes ago

    Royal Bank of Scotland on Wednesday said it had agreed a fine of $1.1 billion (982 million euros) with US authorities over the alleged mis-selling of mortgage securities ahead of the 2008 financial crisis. It comes a week after US authorities said … More »

  • Asian stock markets turn lower after Wall Street gains
    Asian stock markets turn lower after Wall Street gains Associated Press - 1 hour 37 minutes ago

    Major Asian stock markets were lower Wednesday after investors were reassured by trade-friendly Hillary Clinton's performance in a U.S. presidential debate with rival Donald Trump. KEEPING SCORE: Tokyo's ... … More »

  • Travel firm TUI Group nudges up full-year profit outlook
    Travel firm TUI Group nudges up full-year profit outlook Reuters - 1 hour 41 minutes ago

    Holiday company TUI Group lifted its 2015/16 core profit guidance on Wednesday, helped by strong demand from British tourists and a lower exposure than its biggest rival to Turkey which has been hit by security fears. TUI said on Wednesday that it … More »

  • Shareholders vote on AB Inbev-SABMiller beer megamerger
    Shareholders vote on AB Inbev-SABMiller beer megamerger AFP News - 1 hour 43 minutes ago

    Shareholders of brewing giants Anheuser-Busch InBev and rival SABMiller will vote on Wednesday on a blockbuster merger that would create the biggest beer company in the world. Belgium-based AB InBev, the brewer of Budweiser and Stella Artois, is … More »

  • Oil climbs after industry data shows U.S. inventory draw
    Oil climbs after industry data shows U.S. inventory draw Reuters - 1 hour 44 minutes ago

    Oil prices rose in mixed trading on Wednesday, after sharp losses in the previous session, as industry data showed a surprise draw in U.S. crude stocks, although worries over a lack of agreement among producers to curb output kept a lid on gains. … More »

  • 10 things in tech you need to know today
    10 things in tech you need to know today Business Insider - 1 hour 45 minutes ago

    Reuters/Beck Diefenbach Good morning! Here’s the tech news … Continued The post 10 things in tech you need to know today appeared first on Business Insider. … More »

  • Canada approves $36 bn LNG project, eyes Asia
    Canada approves $36 bn LNG project, eyes Asia AFP News - 1 hour 47 minutes ago

    Canada approved a massive Can$36 billion ($27 billion USD) project by Malaysia's Petronas to build a liquefied natural gas pipeline along its Pacific Northwest coast, targeting Asian markets. The project is the first deal by Canada's year-old … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.148+0.007+4.96%
    N21.SI
    0.975+0.010+1.04%
    Y92.SI
    0.144+0.002+1.41%
    5DM.SI
    3.990.000.00%
    Z74.SI
    0.665+0.040+6.40%
    BMT.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.24+0.05+26.32%
    AWI.SI
    0.15+0.02+15.38%
    RF7.SI
    0.215+0.026+13.76%
    I07.SI
    0.13+0.01+8.33%
    5UE.SI
    0.161+0.011+7.33%
    5PL.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.112-0.028-20.00%
    BEH.SI
    0.22-0.03-13.73%
    AZT.SI
    0.66-0.05-7.04%
    BTE.SI
    0.40-0.03-6.98%
    B58.SI
    0.325-0.005-1.52%
    BEW.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3612+0.0017+0.12%
    USDSGD=X
    1.5248-0.0001-0.01%
    EURSGD=X
    1.7691-0.0011-0.06%
    GBPSGD=X
    74.0020+0.146+0.20%
    SGDJPY=X
    5.6954-0.0069-0.12%
    SGDHKD=X
    3.0408+0.0018+0.06%
    SGDMYR=X
    9,522.0586-6.3945-0.07%
    SGDIDR=X
    4.9014-0.0041-0.08%
    SGDCNY=X
    1.0449+0.0027+0.26%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,326.60-3.80-0.29%
    GCZ16.CMX
    19.11-0.05-0.26%
    SIZ16.CMX
    92.98-1.47-1.55%
    ^XAU
    2.18+0.01+0.55%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.11-0.02
    ^FVX
    1.56-0.03
    ^TNX
    2.28-0.05
    ^TYX