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Last week, EMC Corp. (NYSE:EMC) announced innovations to three of its enterprise storage solutions. The company is updating its VMAX enterprise storage for more data protection. It is offering a new VPLEX licensing model that will save customers 50% of their investment. It has also delivered a new version of EMC RecoveryPoint to simplify data protection. In this article, I will show how the growing storage area network market will enable EMC to continue making impressive sales with the upgraded products. I believe this factor will enable EMC to maintain its current growth.

Why will EMC continue to maintain its upward momentum? Among other reasons, the proliferation of broadband Internet and data-intensive Internet-related activities have led to increased need for efficient storage networking technologies. Consequently, demand for data storage products is predicted to increase in the next few years. According to IDC, a respected industry analyst, the market for selling storage into big data deployment will increase from just $379 million in 2011 to $6 billion in 2016. This trend in the storage area network market means the new EMC products will have increased patronage. This factor will boost EMC revenues.


EMC will enjoy sales growth because the trend in the past suggests that it is set for more gain. In its fiscal 2013 first quarter, revenue from the company's high-end storage business increased 10% over the same period last year. Its emerging storage business increased revenue by 24% compared with the same period in the year prior. Information storage business revenue grew 3% year-over-year. Total first-quarter revenue was $5.39 billion, a 6% increase compared with the same period last year. Its net income was $850 million, a 4% increase.

In the fourth quarter, EMC's storage portfolio, including its high-end and mid-tier storage products, increased by 6% over the same period in the year prior. Its Full-Year 2012 revenue was $21.7 billion, an increase of 9% on year-over-year basis. EMC's 2012 full-year net income increased 11% to $2.7 billion.

"With outstanding execution by EMC employees worldwide, we once again delivered our triple play in 2012 - simultaneously taking market share, reinvesting for growth, and delivering improved earnings. EMC's broad, best-of-breed portfolio of products and services, which offer customer greater efficiency, control and choice as they transform both their IT and their business, is a key and differentiating element of our continued financial success," said David Goulden, EMC's Chief Operating Officer.

EMC's Storage Solutions

EMC has many storage solutions in the market. Its Isilon Archive Solution for Big Data caters to information and data retention needs. Its Isilon SnapshotIQ and SyncIQ enable efficient back up and disaster recovery. The Isilon Smartlock provides data protection and complete retention of data.

The updated VMAX will help customers to recover from operational errors as well as the physical failure of the storage area network. The VPLEX licensing change will broaden the audience for the product. The new version of the RecoveryPoint will simplify deployment and maximize the use of existing infrastructure.

"As customers continue to transform their data centers, EMC continues to innovate and deliver the world's most trusted, powerful, and smart storage solutions," said Brian Gallagher, President, Enterprise Storage Division at EMC.

EMC wants to position itself to grow faster than the IT marketplace and capitalize on future opportunities, which accounts for its focus on storage solutions to drive revenue. It is succeeding because the storage area network market is a growth area. EMC is innovating to stay ahead of competitors.

Analyzing its recent financial results, we notice that its high-end and mid-tier storage solutions show growth in comparison with the previous year. It is clear EMC's overall revenue and net income have been helped by them. So it can be said that the company is showing improvement in its storage business.

With a price-to-earnings ratio of 19.09, the company is trading cheaply, despite its impressive gross margin of 61.21%. The upgraded products will help EMC increase its revenue, reduce its total debt of $1.70 billion, and position it to equal IBM's with an EPS of 14.50.


How is EMC performing in relation to competitors? With a gross margin of 61.21%, compared with 60.70% for Cisco (CSCO) and 45.62% for IBM (NYSE:IBM), a price-to-earnings ratio of 19.09, compared with 11.98 for Cisco and 14.10 for IBM, and earnings per share of 1.23, compared with 1.74 for Cisco, EMC is on par with its rivals. Cisco recently unveiled the MDS 9710 Multilayer Director and MDS 9250i Multiservice Fabric. While these storage products deliver good performance, EMC's upgraded products provide better data protection. IBM System Storage DS8000 will provide some competition to EMC's products, but they cannot recover as fast as the EMC solutions from operational errors.


Based on the performance of EMC's storage solutions and the prospects for the sector in the next few years, we can say the upgraded products will improve the company's revenue. Looking at EMC's price multiples in relation to IBM and Cisco, its light debt load, and improving numbers, we can say EMC is a buy for now

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: EMC: Is It Time To Buy The Enterprise Storage Master?