EMC Corporation (EMC), Western Digital Corp. (WDC), Seagate Technology PLC (STX): Can Profits Be Archived? A Look at Data Storage

EMC Corporation (NYSE:EMC) provides both storage hardware and software. As a result, the firm will no doubt absorb a great part of the market synergy generated by higher demands for data center and cloud-based storage. At the same time, by providing hardware and software the company has risen switching costs, turning into a respectable rival for giants like IBM, HP, and Dell.

In order to further capitalize on market synergies, EMC Corporation (NYSE:EMC) has acquired 17 companies and increased its presence in emerging markets. Such acquisitions have increased potential profits by vertically and horizontally integrating the company, promoting efficiency and lowering its bottom line. The company also started several partnerships.

On the downside, the aggressive acquisition spree has risen some red flags. Its pricing leverage is small given high competition, limiting possibilities for the company’s margin expansion. One example of such a risk is the as-yet unprofitable VCE partnership with Cisco.

EMC Corporation (NYSE:EMC) has a clean balance sheet, and holds the highest operating margin in the industry. The stock currently trades at 21.3 times its earnings, packing a 25% premium to the industry average. It is recommended to hold until recent acquisitions and issues with Cisco are resolved.

Storing it away

Industry competition will continue to stiffen, but the three companies analyzed here have secured large market shares. Future profits will deepen as new products are introduced; this is especially true for Seagate. While Seagate is not the greatest innovator, it has learned to balance research and finances. Additionally, its acquisitions have been measured and are improving the company’s overall performance.

The article Can Profits Be Archived? A Look at Data Storage originally appeared on Fool.com and is written by patricio kehoe.

patricio kehoe has no position in any stocks mentioned. The Motley Fool owns shares of EMC and Western Digital. patricio is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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