EMC Corporation (EMC)’s Still Storing Growth, but for How Long?

It says a lot whenever a leader uses the word “disruptive” to describe his market and ways it can be attacked. To that end, unlike VMware, EMC didn’t offer gloom and doom. In fact, management actually felt compelled to defend its optimism that enterprise IT spending will rebound by stating, “You can’t starve it for too long.” In that regard, the company is projecting 8% revenue growth for fiscal 2013. While providing the outlook, Tucci reminded investors that revenue growth for the first half of the year will arrive slightly below 8%, while the second half will make up the difference.

Although management didn’t allude to this, much of the incremental difference has to do with EMCs product cycle. I do wonder, though, how much of VMware’s poor guidance is factored into EMC’s projections. For that matter, a case can be made that EMC is “low-balling” guidance. It’s either that or management is discounting its own strength, especially considering Hewlett-Packard Company (NYSE:HPQ)‘s recent statements about declining revenue in every business except software for fiscal 2013. It’s safe to say that HP’s storage business might be up for grabs. Combine that with the privatization of Dell along with IBM’s storage struggles, and EMC could be under-projecting revenue by 2%.

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Given Tucci’s use of the term “opportunity-rich,” to describe the market, he’s salivating at the chance to jump on any new business. But let’s not assume NetApp is ignorant to these facts. The wild card here could be IBM, which has invested very little in its storage business. And this may be its only chance to finally catch up. For now, the storage market is EMC’s to win. Current trends and fundamentals support a fair value at $30, which is a 25% premium from current levels.

The article EMC’s Still Storing Growth, but for How Long? originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends VMware. The Motley Fool owns shares of EMC, International Business (NYSE:IBM) Machines, Oracle, and VMware.

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