EMC Corp: $1 away from a 52-week low, now what?

VMware (NYSE:VMW) had a nice 13% run over the last 5 days which made me remember EMC Corporation  (Public, NYSE:EMC). EMC still owns 86% of VMware and how could you forget that IPO last year?  Since that time, billions have been lost in market share for both companies, but now we are finally at a low and could these stocks finally start to move upward again?

In 2007 VMware got up to $125 a share and EMC got back up to $25, but last winter the tide turned and both fell hard:

EMC shareholders are holding out for their Q1 Earnings call later this month on April 23rd.

EMC began in 1979 and today stands an American Fortune 500 and S&P 500 manufacturer of software and systems for information management and storage.

EMC produces a range of enterprise storage products, including hardware disk arrays and storage management software. Its flagship product, the Symmetrix, is the foundation of storage networks in many large data centers.

EMC Corp. has a $31.47 billion market cap, and they put up incredible numbers every year:

Financials

 (In millions of USD)

It all looks good, right?  You bet, but it turns out that VMware ended up hurting EMC's comeback. 

In late January EMC beat Wall Street's expectations with a Q4 2007 profit more than one-third larger than a year earlier. EMC also beat analysts' revenue expectations. But VMware's slowing growth obscured a strong EMC earnings report. 

EMC's fourth-quarter revenue from software licenses jumped 20 percent, outpacing the 15 percent growth in the storage systems business at EMC, whose rivals include IBM Corp., Hewlett-Packard Co., and Network Appliance Inc. Revenue from professional services and systems maintenance, a smaller business segment than the other two, grew 27 percent.

EMC's North American business posted a 16 percent sales gain, compared with 23 percent growth overseas.

EMC offered its initial financial forecast for 2008, with expectations for revenue growth of 13 percent to $15 billion, and 14 percent profit growth to 78 cents per share, including one-time expenses and gains.

The revenue target beat analysts' forecast of $14.7 billion, although some observers including Bryson had expected EMC to forecast a slightly higher 2008 annual profit.

But enough about the past because now EMC and VMware face a gloomy recession feared market and their stock prices reflect the reality of investor enthusiasm.

Just this week good news finally came in for VMware after Wachovia Securities analyst Philip Rueppel on Tuesday upgraded VMware to "Outperform" from "Market Perform," and raised his earnings and revenue estimates for the company's first quarter. In a note to clients, he called the recent pullback in VMware shares "overdone."

Shares of VMware have lost nearly two-thirds of their value since setting a high of $125.25 in October. In March alone, they fell about 27%.

"Recent concerns have led to a steep decline in VMware shares, but we believe near-, medium-, and long-term fundamental drivers remain robust," he wrote.

"In the long term, we feel VMware shares do not fully reflect the potential from incremental product platforms which leverage long-term industry trends, such as desktop virtualization," he added.

Furthermore, recent channel checks with VMware reseller and technology partners confirm his positive view on the company, Rueppel said.

Bottom line Masters, if there's hope for VMware, there's hope for EMC.  EMC's Q1 2008 Earnings call is on April 23rd, should the positive momentum continue for either or both companies, the stock will finally return from the dead.

Disclaimer: The author has no positions in EMC and VMW.