FBN Securities Downgrades EMC (EMC) to Sector Perform on Weak Storage Checks

FBN Securities downgraded EMC (NYSE: EMC) from Outperform to Sector Perform with a price target of $27.00 (from $30.00). Analyst Shebly Seyrafi noted a weak enterprise storage market, increasing competitive challenges, and FX.

"We are rather surprised by the uniformity of negative data points about storage spending in CQ1. Reasons provided include the usual “movement to the cloud” and technologies such as data deduplication and compression hurting storage bit demand growth, but we are also hearing that IT managers are reallocating storage dollars toward security (which our checks note is a very attractive market currently)," said Seyrafi.

"A potentially positive future catalyst is the removal of a standstill agreement between Elliott Management and EMC that will occur in Sept. 2015 after which EMC may be pressured into engaging in some shareholder-value creating activities (e.g. increased capital return, spin-off of VMW, additional cost cuts), but we see a difficult storage spending environment over the next few months before such possible benefits may occur. Note that we are now estimating that without VCE (which adds ~$700M to revenue this year as EMC consolidates it), EMC’s revenue in F2015 will grow by only 2% Y/Y (down from our prior estimate of 6% Y/Y growth)," added the analyst.

For an analyst ratings summary and ratings history on EMC click here. For more ratings news on EMC click here.

Shares of EMC closed at $26.23 yesterday.

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