EMC Corporation: Ready To Jump $4 By 2013

| About: Dell Technologies (DVMT)

EMC Corporation (EMC) is the latest computer hardware winner driving the industry upward, with the industry recently rising as a whole by 0.2%. Other companies within the Computer Hardware industry finding similar support in the market were: XRS Corp (XRSC), up 6.8%, Stratasys, Inc. (NASDAQ:SSYS), up 5%, Cray Inc (NASDAQ:CRAY), up 3.8%, and Aruba Networks, Inc. (NASDAQ:ARUN), up 3.2%.

EMC is a leader in developing, delivering, and supporting information and virtual infrastructure technologies and solutions. EMC is sitting on a market cap of $55.43 billion. Its P/E ratio of 21.8 parallels the average computer hardware industry P/E ratio and exceeds the S&P 500 P/E ratio of 17.7. Shares are up over 22%. The majority of analysts rate EMC a buy, no analysts rate it a sell, and two rate it a hold.

The company's strengths are stable in multiple areas, such as its impressive record of earnings per share growth, revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance over time. EMC's recent initiatives in expanding into flash storage technology, and partnering with Lenovo to serve China are propelling the company forward. Management recently noted, "We believe we have the right strategy in place to leverage the three major waves of change in IT: cloud, Big Data and trust."

The new partnership with Lenovo will fuel innovation and additional R&D in the server and storage markets by utilizing the product development talents and resources of both companies. The partnership will leverage the two companies' respective strengths, across three main areas. First, the partners have formed a server technology development program in an effort to accelerate and extend Lenovo's capabilities in the x86 industry-standard server segment. Lenovo servers are going to come to market embedded into selected EMC storage systems over time. Second, the companies are developing an OEM and reseller relationship in which Lenovo will provide EMC's networked storage solutions to its customers, initially in China and spreading into global markets overtime as Lenovo develops its server business. Finally, Lenovo will utilize EMC's Iomega to provide Network Attached Storage (NAS) systems for small/medium size businesses.

EMC's "Project Thunder" may be a threat for Cisco Systems, Inc. (NASDAQ:CSCO). Data storage is increasing annually by 60%. Project Thunder builds upon EMC's Project Lightning server-based flash storage. The thunder-and-lightning combo takes direct aim at Fusion-IO, a popular PCIe flash pioneer. The foundational promise is a solid, flash storage with rapid response time. This is key for high performance enterprise database applications, like SAP (NYSE:SAP) and Oracle (NASDAQ:ORCL). Flash storage boosts performance dramatically.

Revenues from EMC's Information Storage business increased 7% year over year, leading the company overall to a reported Q2 earnings of $0.39 per share. Revenues shot up 9.6%. EMC is also forging ahead in emerging markets at a rate of 20%.

In an effort to continue the growth curve analysts predict, EMC may explore acquiring Fusion-io, Inc. (NYSE:FIO) if it's Lightning-Thunder combo aren't successful. EMC does not want a replay of 10 years ago, when NetApp, Inc. (NASDAQ:NTAP) leaped ahead of EMC in the Network-attached storage market. NetApp's proposed partnership with Fusion-io may stoke the fires of EMS to take action soon. EMC may also be eyeing Flash PCIe (peripheral component interconnect express) data storage technology as the emerging battleground to conquer NetApp. EMC recently acquired ExtremIO, a flash storage startup, which NetApp was also courting.

Some analysts believe that Cisco may itself be toying with buying NetApp. If NetApp does come up for sale, EMC will be at the door knocking. It could become a showdown between Cisco and EMC. However, to combat possible competition Cisco and EMC have formed a partnership.

The joint Cisco-EMC strategy is focusing on custom-design infrastructure, validated reference architectures and pre-integrated converged infrastructure. Jointly, Cisco and EMC are forging joint reference architectures, aligned channel partner incentives and integrated customer support accelerating a customer's path to the cloud. The unified focus is targeting small and mid-sized business customers.

The converging infrastructure promises to standardize processes and life cycle management in an effort to improve application availability and enable a virtually seamless support experience. Combining expertise, customers will have a powerful solution that enables deployment in the cloud arena quickly and efficiently.

EMC appears to be pleasing its investors. The stock continues to grow stronger and forging new partnerships and deals will continue to benefit the company. I project that EMC stock will continue to rise in the coming quarters and be a solid investment long term.

Analysts agree that this stock is a "buy". EMC's high price target for the year is around $38. At the recent EMC Forum 2012, EMC highlighted the importance that China will play in the cloud computing industry. The Chinese government is encouraging this progress. EMC is involved in five major projects with regional Chinese governments and is employing about 3,000 workers in the country.

Additional partnerships with Verizon (NYSE:VZ), AT&T (NYSE:T) and Singapore Telecommunications strengthen EMC's place in the market as an important cloud provider. Zebra Technologies (NASDAQ:ZBRA) is also partnering with EMC to transform Oracle's enterprise resource planning infrastructure. This strategic partnership provides additional revenue for the company and provides the company an opportunity to showcase its services.

Investors have good reason to have a positive impression of the company. A recent market analysis reports that EMC dominates the industry in another way as well. It has about 65% of the disc-based backup appliance market. IBM (NYSE:IBM) is the only other real competitor. IBM only holds about 15% of the market share. The next highest share for a company drops to 4%. EMC looks ready to quickly become a dominant force in the industry. EMC Corporation is ready and poised to see its stock price reach $30 by late 2012.

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.

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