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

RELATED QUOTES

SymbolPriceChange
EMC28.74+0.11
CRM77.82-0.20
RHT74.72-0.17

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...
  • Business Highlights Associated Press - 10 minutes ago

    ___ The hidden risk to the economy in corporate balance sheets America's debt problem is showing up in an unexpected place: Corporate America. Of the $1.8 trillion in cash that's sitting in U.S. corporate ... … More »

  • U.S. banking regulators focused on cyber security after SWIFT attacks
    U.S. banking regulators focused on cyber security after SWIFT attacks Reuters - 12 minutes ago

    U.S. banking regulators said on Wednesday they are focused on cyber security risks and controls for U.S. financial institutions after attacks earlier this year involving the global financial network known as SWIFT. In a letter responding to … More »

  • Dismal time for Gulf oil = record low lease bidding
    Dismal time for Gulf oil = record low lease bidding Associated Press - 25 minutes ago

    The federal government's annual sale of oil and gas leases in the Gulf of Mexico attracted hardly any interest on Wednesday, reflecting a dismal outlook for offshore drilling. Only three oil companies ... … More »

  • HP Inc forecasts weak profit on low demand for printers
    HP Inc forecasts weak profit on low demand for printers Reuters - 29 minutes ago

    (Reuters) - HP Inc (HPQ.N) forecast fourth-quarter profit below analysts' estimates as the company, which was split off from the former Hewlett-Packard Co, struggles with weak demand for its printers. ... … More »

  • The Latest: Quake rescue work suspended at Italian hotel
    The Latest: Quake rescue work suspended at Italian hotel Associated Press - 34 minutes ago

    The Latest on the earthquake in central Italy (all times local): 10:45 p.m. A rescue official says Italian rescue workers have been forced to suspend their search at the site of a hotel that was badly ... … More »

  • Australia's Luxury-Car Binge Belies Its Drop in Living Standards Bloomberg - 34 minutes ago

    "A lot has been made of softer economic conditions over the first half of 2016, however the same cannot be said for the luxury car market,'' said Savanth Sebastian, an economist at CommSec. "Higher home prices are boosting wealth levels and … More »

  • Canada takes tough line with China over canola export dispute Reuters - 35 minutes ago

    OTTAWA (Reuters) - Canada notably hardened its line with China on Wednesday in a dispute over Canadian canola exports, saying bilateral relations could not improve until Beijing took action to settle the ... … More »

  • How the Dow Jones industrial average fared on Wednesday Associated Press - 45 minutes ago

    Stocks closed lower on Wednesday, led by sharp declines in health-care companies as outrage over the steep price hikes for Mylan's EpiPens escalates. On Wednesday: The Dow Jones industrial average fell ... … More »

  • Stocks end lower as health-care companies decline
    Stocks end lower as health-care companies decline Associated Press - 46 minutes ago

    Stocks closed lower on Wednesday, led by sharp declines in health-care companies as outrage over the steep price hikes for Mylan's EpiPens escalates. Trading remains quiet overall with many investors still ... … More »

  • Ex-Comverse CEO pleads guilty to fraud, a decade after fleeing U.S.
    Ex-Comverse CEO pleads guilty to fraud, a decade after fleeing U.S. Reuters - 47 minutes ago

    The former chief executive officer of Comverse Technology Inc pleaded guilty to securities fraud on Wednesday, a decade after fleeing the United States for Namibia to avoid prosecution. Jacob "Kobi" Alexander, the Woodbury, New York-based software … More »

  • Pharma shares under fire as US stocks fall AFP - 49 minutes ago

    US stocks fell Wednesday with pharmaceutical shares tumbling as controversy over the sky-high price of Mylan's EpiPen prompted rebukes from the White House and Democratic presidential candidate Hillary ... … More »

  • Williams-Sonoma meets 2Q profit forecasts Associated Press - 1 hour 11 minutes ago

    On a per-share basis, the San Francisco-based company said it had net income of 58 cents. The results matched Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment ... … More »

  • Wall St. falls as healthcare, materials stumble
    Wall St. falls as healthcare, materials stumble Reuters - 1 hour 14 minutes ago

    Wall Street retreated on Wednesday, pulled lower by weakness in the materials and healthcare sectors as investors continued to weigh the possibility of an interest rate hike in the coming months. The market is awaiting Federal Reserve Chair Janet … More »

  • Markets Right Now: US stocks close lower Associated Press - 1 hour 22 minutes ago

    The latest on developments in global financial markets (all times local): 4:00 p.m. Stocks are closing lower, led by drops in health care companies, more than erasing a modest gain from the day before. ... … More »

  • Stocks Drop as Political Risk Haunts Emerging Markets; Oil Sinks Bloomberg - 1 hour 32 minutes ago

    Developing-nation shares dropped the most in seven weeks after Turkey launched a military operation in Syria and North Korea conducted a missile test. South Africa’s rand led losses among its global peers as the nation’s finance minister refused to … More »

  • The Tiny Ski Town Defying Japan’s Scary Population Collapse Bloomberg - 1 hour 35 minutes ago

    The area’s booming economy has spurred investment in luxury hotels, restaurants, and shops--and attracted local and expat workers who’ve become full-time residents. Niseko’s population grew 2.9 percent last year to 4,952 compared with 2010 levels, … More »

  • Grain lower, livestock lower Associated Press - 1 hour 37 minutes ago

    Grain futures were lower Wednesday on the Chicago Board of Trade. Wheat for Sept. declined 3.75 cents at $4.04 a bushel; Sept. corn fell 1 cent to 3.2750 a bushel; Sept. oats was off 2.25 cents at $1.6925 ... … More »

  • Oil pipeline: The legal challenges and protests Associated Press - 1 hour 40 minutes ago

    A federal judge has heard testimony in the Standing Rock Sioux Tribe's request to temporarily block the construction of a four-state oil pipeline near their reservation, which straddles the North Dakota-South ... … More »

  • Oil slides on surprise jump in US crude stockpiles AFP - 1 hour 49 minutes ago

    Oil prices slumped Wednesday as a surprise jump in US crude stockpiles added to lingering concerns over a global supply glut. The US Department of Energy said commercial inventories of crude grew by 2.5 ... … More »

  • North Korea test-fires sub-launched missile close to Japan
    North Korea test-fires sub-launched missile close to Japan AFP News - 1 hour 52 minutes ago

    North Korea on Wednesday test-fired a submarine-launched missile 500 kilometres (around 300 miles) towards Japan, marking what weapons analysts called a clear step forward for its nuclear strike ambitions. The flight distance, which was tracked by … More »

  • U.S. crude down 3 percent after big stockpile build
    U.S. crude down 3 percent after big stockpile build Reuters - 2 hours 16 minutes ago

    The U.S. Energy Information Administration (EIA) said crude inventories rose 2.5 million barrels last week, versus analysts' forecasts for a draw of 500,000 barrels. U.S. West Texas Intermediate (WTI) futures settled down $1.33, or 2.8 percent, at … More »

  • European stocks rebound as euro slips; oil tumbles
    European stocks rebound as euro slips; oil tumbles Reuters - 2 hours 24 minutes ago

    European stocks scored consecutive daily gains for the first time in three weeks on Wednesday, drawing support from a weak euro, but U.S. and Canadian stocks drifted down as lower metal and oil prices weighed on the materials sector. Emerging … More »

  • EU, Portugal agree on 5 billion euro recapitalisation for ailing bank CGD
    EU, Portugal agree on 5 billion euro recapitalisation for ailing bank CGD Reuters - 2 hours 28 minutes ago

    LISBON/BRUSSELS (Reuters) - The European Commission and Portugal have agreed in principle on the recapitalisation, on market terms, of ailing state-owned bank CGD, envisaging an injection of up to 2.7 billion euros (£2.3 billion) in state funds and … More »

  • Ecuador, Iran officials meet on need to stabilise oil prices Reuters - 2 hours 51 minutes ago

    QUITO (Reuters) - Ecuador's Foreign Minister Guillaume Long said on Wednesday that the South American country's authorities spoke with a visiting Iranian delegation about the need to stabilise oil prices. ... … More »

  • Syria rebels backed by Turkey tanks 'seize' IS-held town
    Syria rebels backed by Turkey tanks 'seize' IS-held town AFP News - 2 hours 52 minutes ago

    Turkish tanks and hundreds of opposition fighters thrust deep inside Syrian territory Wednesday in a lightning operation that within hours ousted Islamic State jihadists from a key Syrian border town. The air and ground offensive -- the most … 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
    0.1290.0000.00%
    N21.SI
    0.250.00-1.96%
    5ME.SI
    0.60+0.04+6.57%
    5TP.SI
    0.99-0.02-1.98%
    Y92.SI
    0.156+0.007+4.70%
    AFC.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.30+0.06+22.45%
    T18.SI
    0.15+0.02+15.38%
    5TI.SI
    0.225+0.025+12.50%
    Y35.SI
    0.51+0.05+12.09%
    BHU.SI
    0.162+0.017+11.72%
    QS9.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.011-0.115-91.27%
    QF6.SI
    0.23-0.17-42.50%
    AWI.SI
    0.205-0.055-21.15%
    I06.SI
    0.45-0.10-18.18%
    BFK.SI
    0.385-0.085-18.09%
    E8Z.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3537+0.0024+0.18%
    USDSGD=X
    1.5247-0.0023-0.15%
    EURSGD=X
    1.7912+0.0085+0.48%
    GBPSGD=X
    74.1150+0.006+0.01%
    SGDJPY=X
    5.7237-0.0118-0.21%
    SGDHKD=X
    2.9770+0.0012+0.04%
    SGDMYR=X
    9,783.3848-33.3193-0.34%
    SGDIDR=X
    4.91340.000.00%
    SGDCNY=X
    1.0307+0.0018+0.17%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,327.30-18.80-1.40%
    GCZ16.CMX
    18.50-0.42-2.20%
    SIU16.CMX
    95.34-8.55-8.23%
    ^XAU
    2.08-0.03-1.63%
    HGU16.CMX
    46.80-1.30-2.70%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.140.00
    ^FVX
    1.56+0.01
    ^TNX
    2.24+0.01
    ^TYX