Another Great Player
Abir is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
3 years ago, EMC CORPORATION (NYSE: EMC) was considered as takeover bait. But things have changed and since then the world’s biggest maker of storage computers has made 15 acquisitions and its mergers team is figuring out how to use $5.65 billion in cash to bulk up in security technology. The data storage based company is driving the industry upward, with the industry recently rising as a whole by 0.2%. Other companies in this computer hardware industry that increased are XRS Corp up 6.8%, Stratasys, Inc. up 5%, Cray Inc. up 3.8%, and Aruba Networks, Inc. up 3.2%. The latest hardware winner has a market cap of $55.43 billion and its P/E ratio of 21.8 parallels the average computer hardware industry P/E ratio and exceeds the S&P 500 P/E ratio of 17.7. Shares are up over 22%. Analysts expect its earnings to grow by 15% for the next five years.
The company has already strengthened its market position by improving cash flow from operations, revenue growth, earnings per share, as well as profit margins which have all bolstered its stock price performance. EMC, the seller of data storage products and services is now taking an interest in expanding into flash storage technology for growing its business wings in China along with the hands of Lenovo, the world’s second-largest computer maker. Lenovo rose 1.2 percent to close at HK$6.62, the highest level since Aug. 21. Earlier it gained as much as 5.2 percent. EMC told "We believe we have the right strategy in place to leverage the three major waves of change in IT: cloud, Big Data and trust."
The new partnership with the computer maker will help to introduce new concepts in the technology sector by utilizing the product development talents and resources of both companies. This partnership will help to leverage its individual strengths in three major areas. First, to accelerate and extend Lenovo's capabilities in the x86 industry-standard servers segment the duo has formed a server technology development program and Lenovo servers will be available with EMC storage systems. Secondly, Lenovo will provide EMC's networked storage solutions to its customers, initially in China and later in global markets as Lenovo develops its server business. For this the companies are developing an OEM and reseller relationship. Finally, the computer maker will utilize EMC's Iomega to provide Network Attached Storage (NAS) systems for small/medium scale businesses. Lenovo’s computer backed up by EMC’s storage system will be a great combination in this computer hardware industry. Other partnerships are with Verizon, AT&T and Singapore Telecommunications to strengthen the position as an important cloud provider. Zebra Technologies is also partnering with EMC to transform Oracle's enterprise resource planning infrastructure.
The Hopkinton, Massachusetts based company’s "Project Thunder" may be a threat to Cisco Systems, Inc. Data storage is increasing day by day which comes around an increase of 60% annually. Project Thunder builds upon EMC's Project Lightning server-based flash storage. This thunder-and-lightning combination will accelerate EMC to take direct aim at Fusion-IO,Inc. a popular PCIe flash pioneer. The combination is not only confined at Fusion-IO but also a key for high performance enterprise database applications, like SAP and Oracle. If the Lightning-Thunder combo isn’t successful then as per analysts EMC may acquire Fusion-IO,Inc. 10 years back NetApp Inc. (NASDAQ: NTAP) jumped ahead of EMC in the Network-attached storage market. The company engages in design, manufacture, marketing, and technical support of networked storage solutions. It also has a market cap of $13.01 billion and is part of the technology sector. The company has a P/E ratio of 24.1, above the average computer hardware industry P/E ratio of 22.1 and above the S&P 500 P/E ratio of 17.7.
Keeping the overtake in mind EMC is also eying at Flash PCIe (peripheral component interconnect express) data storage technology as the emerging battleground to conquer NetApp. The data storage based company recently acquired ExtremIO, a flash storage startup, which NetApp was also courting. So EMC’s strategy is “Look before you Leap”. Keeping every past in mind the company is moving very strategically. Therefore the majority of analysts rate EMC a buy, no analysts rate it a sell, and two rate it a hold.
EMC appears to be pleasing its investors. The partnerships will be a strong benefit for the company and the stock will also continue to grow stronger and stronger by providing additional revenue. Its high price target for the year is around $38. Therefore it can be predicted that the company’s stock will continue to rise in the coming Qs and will be a solid long term investment.
The Massachusetts based company’s first target is in China as because the Chinese Government is encouraging the progress of cloud computing industry. It is also involved in 5 major projects in China and is employing about 3,000 workers in the country. A recent market survey says that the company dominates the industry in another way also by having 65% of the disc-based backup appliance market where International Business Machines Corp. (NYSE: IBM) is the only other real competitor who holds about 15% of the market share. The growing pace of EMC will make the company to gain a dominant position in the industry and it is expecting to have a stock price of $30 by late 2012.
So the investors can have a positive impression about the company and can also expect a good return from it in the near future. So many strategies and partnerships will definitely help the company to fulfill its target. The data storage based company will not let its investors down and will reward them with huge returns. What do you think?
abirk has no positions in the stocks mentioned above. The Motley Fool owns shares of EMC and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.