Struggle to meet demand triggers EMC warning

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EMC, the world’s biggest maker of data storage equipment and software, on Monday warned that results in the second quarter would fall short of expectations as the company struggled to meet demand for a new generation of storage products.

The news sent shares in the company down 3.7 per cent by midday in New York.

Joe Tucci, chief executive, said EMC had struggled to meet stronger-than-expected demand for its latest networked storage device.

“If we had been able to fulfil the strong demand . . . we certainly would have been able to meet our financial targets,” he said. EMC said it expected net earnings of
12 cents a share in the second quarter, unchanged from one year ago and a penny below previous expectations.

The company said sales would be $2.6bn, up 10 per cent from the second quarter last year. EMC is set to announce its complete results on Friday.

Shares in the company have fallen from a recent high of $14.58 in March following a string of acquisitions intended to broaden its line of storage products and services.

Late last month, shares took a hit after EMC announced a $2.1bn deal to buy RSA Security, a Boston-based maker of user authentication tokens for managing remote access to corporate computer networks.

Other acquisitions this year include nLayers, a maker of planning software, and Kashya, a data-replication company.

Mr Tucci said on Monday that EMC’s software business continued to show strong results, with license revenues at VMware, a maker of software that allows multiple computer programmes to be run on a single server, up more than 70 per cent year on year.

During Mr Tucci’s 5½ years as chief executive, EMC has used acquisitions to cement its transformation from a company that makes commoditised storage equipment into a company that sells integrated data management equipment and software tools.

As the cost of storing huge amounts of data has fallen, data management issues such as security, virtualisation, and content management have emerged as key areas of new growth for the company.

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