EMC: Hoping for Small and Medium Business

May.31.11 | About: Dell Technologies (DVMT)

EMC has always been considered a leader in data storage and data protection. EMC has a long list of products and other companies which it wholly owns or in which it owns a majority stake. This provides EMC with a constant presence amongst any part of the technological world.

As the economy continues to slowly grind back to stable levels, I am expecting small and medium businesses to come back into fashion. As small businesses blossom, I expect to see virtualization desktop infrastructure (VDI) become a necessity for all small businesses. Along with VDI, businesses will need data storage and protection; which EMC is known for.

The demand for these products will continue to help EMC produce strong numbers for years to come. I do not expect mindblowing financial reports from quarter to quarter, but management runs a tight ship at EMC and the share price will continue to see slow continuous growth and possibly reach the all-time high of late 2000.

One way in which EMC will reach these highs is with Iomega's StorCenter PX Series Network Storage. In the demonstration, this new device allows businesses to simultaneously turn on at least 100 Wyse systems onto VMWare View. Another important aspect of EMC's devices is the use of Cisco's (NASDAQ:CSCO) Unified Computing System (UCS) that powers most of EMC's products. UCS enables VMWare and EMC to be fast, reliable and efficient.

This new product will allow EMC to reach more customers as we move forward. Also, StorCenter is priced very reasonably to a point where small business owners will be able to make the purchase. It will be a good idea to follow Iomega from here to see if StorCenter can reach small and medium businesses. Ideally the product will reach medium businesses since medium businesses need more data protection and VDI to keep pace with constantly growing employees and data.

This product is important because it will give EMC one more product to become even stronger in the big data and cloud storage scene. Currently, EMC's biggest rivals are International Business Machines (IBM) and Hewlett-Packard (NYSE:HPQ). EMC has a projected growth rate of about 11% each year for the next five years, and currently EMC is growing slightly faster than IBM and HP. Therefore EMC has the potential to surpass these two giants in the future in the information technology sector.

I expect Iomega's new product to pay big dividends for EMC's share price in the future. Despite the hiccup in 2007-08, the share price has slowly increased since 2003. This trend will continue for many years to come as the need for IT supplies continues to grow. I am not one to say the share price will eventually reach 10,000, but I do believe an all-time high of 50 by 2020 is not unreasonable.

It must be noted this assumption is based upon the fact that for the foreseeable future no new big data or IT companies will be able to step into EMC's market share. Even if another company does pop up, it will be difficult to step into EMC's market share because EMC has enough resources to purchase any threat. Along with the almost constant production of new products by EMC, Iomega's StorCenter PX System will allow EMC to further expand into the small and medium business sector; which will further generate revenue and net profits for years to come.

Disclosure: I am long EMC.