Big-Data Company Without 'Flare' Is the Real Winner
In a statement, company CEO Joe Tucci offered the following: "We are in a time of unprecedented IT and business transformation, propelled by the benefits of cloud computing, Big Data and trust." I have to certainly agree with that statement and as evident by its report and its strong start of the year, the company is poised to further benefit from this transformation. This is the sort of value that prospective cloud investors should consider.
As impressed as I am with EMC's performance, I do, however, remain a bit cautious about its ability to thwart competitive attacks from the likes of IBM and Oracle, particularly as the precious corporate IT expenditures have not fully returned to their glory days of big budgets. But then again, "big data" necessitates "big money" and during the call I was looking to be convinced that the company has a sound blueprint for creating separation between its services from those offered by its rivals.
The company did this by talking about its RSA Information Security business, which generated a revenue increase of 19% year over year. Also, what many investors don't realize is that VMware is a subsidiary of EMC. So essentially, EMC has VMware, the global leader in virtualization and cloud infrastructure, helping it generate an increase of 25% year over year in additional revenue. Even more noteworthy was the fact that EMC continues to demonstrate that there is strong demand for its broad portfolio of services to help customers accelerate to the cloud. It does this in partnership with networking giant Cisco as well as Intel to form the VCE, or the Virtual Computing Environment Co. If that was not convincing enough, I don't know what is.
It is hard to see how EMC isn't a bargain at today's prices. The fact of the matter is, data storage is a critical IT priority for many companies and should keep EMC in excellent shape. But the question is, for how long? Market leaders don't often hold market leads when everyone is simultaneously gunning for the top spot. Though the company enjoys a strong share as well as a great reputation, one has to think that the competition will eventually catch up. But until that happens, EMC at today's prices makes this look like a risk worth taking as the stock appears undervalued by at least 20%.
At the time of publication, the author was long ORCL, INTC and CSCO, and held no positions in any of the stocks mentioned, although positions may change at any time.