Here's Why EMC Looks Like a Good Prospect

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Sep 21, 2014

EMC (EMC, Financial), a data storage equipment maker, recently released results. The equipment maker posted decent results. EMC saw a good response from its data storage and automobile segment. On the other hand, from VMware, the company saw strong contribution to its top line. Despite decent results, the company’s shares fell, and investors are now more alert with the dividend offering and future investment in the stock. Let us look at some strategies and the overall business of EMC.

Why EMC is relevant for the future

The world is moving toward technological advancement. Various players in the scene are bringing in new products every day to hold a competitive advantage over its peers. EMC is one such player in race. The data storage equipment maker is well positioned to tap new opportunities from the fast growing IT segment. The company finds the new opportunities to be absolutely massive. Working in line with its protocol EMC is expecting solid revenue and earnings growth in future.

In order to improve customer engagement, EMC is focusing on mobile and cloud computing segment. The mobile world is gaining momentum and with the roll out of LTE platform the users are rapidly shifting towards smartphones. In this segment the company is helping customers to empower their mobile workforce with enterprise mobile management and mobile security. This will build a trust in customers towards EMC and the company will have bright chances of gaining market share in future.

Growth drivers

VMware is an important key growth driver to EMC. VMware is expected to provide improvement in mobile and the cloud computing segment. EMC has seen some potential markets where it can have bright opportunities for a good performance. EMC also sees exciting markets in Network Function Virtualization and IoT, which will surely give EMC more opportunities to improve its profitability and gain market share.

EMC is making exciting moves to attract more investors. The company has announced to increase its quarterly dividend by 15% which is good news for the investors. EMC has committed a share buyback program under which it expects to return about $8 billion cash to the share holders over the course of 2013, 2014 and 2015 this will lead EMC to maintain a good cash position also. In short, EMC looks well-positioned with five key technology areas.

Innovation

VMware might also prove a growth driver to EMC in future as the company is seeing marvelous growth it has introduced its new depth software as a service offering on vCHS and completed its acquisition of AirWatch in early of this month and also refreshed its VDI solution. It has launched Horizon 6 for this purpose. This makes VMware’s portfolio solid and EMC is confident of major contribution of VMware in company’s top line growth.

Moving on to flash business, the company is seeing good momentum and it is in strong position with it. Its 20 terabyte XtremIO is seeing great response. The product is flawless and consistent which is leading it to see headwinds in its demands. EMC is expecting this demand for the product to rise more in future which is a good sign for the company,

Conclusion

EMC is confident of a better future ahead and is on right track leading to profitability in the future. Also, it is making progress in key areas. On the other hand, the company looks reasonable with a trailing P/E 20.78. But, the forward P/E and CAGR of the company are upsetting. However, a 15% increase in the dividend might be attractive to some investors. Thus, overall, EMC looks like a good pick.