NEW YORK: Goldman Sachs on Friday said it cut its earnings estimates for EMC
Corp. and trimmed those for other hardware makers after the data storage giant
warned that profits would fall far short of Wall Street estimates.
In addition to sharp cuts for EMC, analyst Laura Conigliaro lowered profit
targets for computer makers International Business Machines Corp., Sun
Microsystems Inc. and storage firms Network Appliance Inc. and Brocade
Communications Systems Inc.
"The June/July quarter for enterprise systems companies is showing
similar or deteriorating trends compared with the March/April quarter. Although
the US is showing sporadic signs of stabilization, this is occurring at very low
levels," she wrote in a note.
"Among the incremental negatives this quarter are Europe, particularly
the UK, spending by tech companies, currency, and even deeper pricing
discounts." Conigliaro said EMC's expected shortfall was surprisingly large
and raised questions about its model in terms of pricing, growth, and
sustainable gross margins.
"We are reducing '01 and '02 revenue estimates by $900 million and $1.1
billion respectively, bringing growth to -2 per cent and 23 per cent." On
Thursday, EMC said it expected second-quarter revenues to be about $2 billion,
with earnings per share of 4 cents to 6 cents, compared with Wall Street
consensus estimates for earnings of 17 cents a share and revenues of $2.43
billion.
Goldman cut its earnings per share estimates to 5 cents from 17 cents for the
second quarter, to 40 cents from 73 cents for 2001 and to 55 cents from 90 cents
for 2002. Shares of EMC had fallen more than a quarter on Friday, off $7.88 to
$22.15 on the New York Stock Exchange.
Conigliaro also cut IBM's earnings per share estimate for 2001 to $4.73 from
$4.77 and for 2002 to $5.45 from $5.50. IBM fell $4.85 to $107.25 in late trade.
Sun was seen earning 43 cents per share in 2001 and 37 cents in 2002, both
targets down a penny; its stock was off $1.35 to $13.82. Brocade was dropped to
26 cents from 28 cents for 2001 and to 44 cents from 47 cents for 2002, and its
stock fell $7.83 to $32.94. Network Appliance was seen at 13 cents in 2002, down
from a previous estimate of 16 cents. Its stock lost $1.21 to $11.46.
(C) Reuters Limited 2001.