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Merrill Cuts EMC Rating


EMC Corp. (EMC) reduced Q2 guidance. Merrill Lynch downgraded the shares to near-term neutral from buy.

Analyst Thomas Kraemer says the downgrade reflects continuing hardware pricing pressure and deteriorating domestic and European macro-economic demand. He cut his $0.70 2001 earnings per share estimate to $0.36 and his 2002 forecast from $0.98 to $0.49. He notes the revenue shortfall did not startle him, but the EPS was a surprise, and suggests that the company could not offset the effects of the economic downturn, falling hardware prices, and competitive pressures with higher margin software revenue. This is troubling on a near-term basis, according to Kraemer. However, he is keeping his long-term buy rating on the shares; Kraemer continues to believe in EMC's ability to be the leader in the storage market.


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