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EMC Cuts Full-Year Forecast After Profit Misses Estimates

Oct. 24 (Bloomberg) -- EMC Corp., the world’s biggest maker of storage computers, cut its sales forecast for the year and posted earnings that missed estimates as a weak economy prompted corporate customers to curb spending.

Sales this year will advance to $21.6 billion to $21.75 billion, the Hopkinton, Massachusetts-based company said today in a statement. In July, it projected sales of $22 billion. Third-quarter profit excluding some items was 40 cents a share, missing the 42-cent average of analysts’ estimates compiled by Bloomberg.

EMC Chief Executive Officer Joe Tucci said he anticipates only “modest growth” in technology spending next year, reflecting economic weakness that has curbed earnings throughout the computer industry. International Business Machines Corp., the biggest computer-services company, and Microsoft Corp., the largest software maker, last week reported sales that fell short of expectations as corporate clients pared outlays.

For EMC, “there was weakness in storage and hardware,” said Shebly Seyrafi, an analyst at FBN Securities, in an interview. Sales growth for the company’s high-end Symmetrix storage gear grew just 5 percent, less than expected, Seyrafi said. “The quarter is rather disappointing.”

The shares fell less than 1 percent to $24.46 at the close in New York, and have advanced 14 percent this year.

Sales Miss

EMC’s sales climbed 6 percent to $5.28 billion in the third quarter. That compares with the $5.46 billion average estimate. Net income advanced to $626.3 million, or 28 cents a share, from $605.6 million, or 27 cents, a year earlier.

Full-year earnings, excluding some items, will be $1.68 to $1.70 a share, EMC said. In July, it predicted $1.70. Analysts project earnings of $1.72 a share on sales of $22 billion.

“Economic and political uncertainties are affecting business confidence and this is affecting IT spending,” Tucci said on a conference call with investors today.

VMware, the software maker majority-owned by EMC, yesterday reported third-quarter profit that topped estimates as it gained corporate customers. VMware is the biggest maker of software that lets computers run multiple operating systems.

Earnings excluding some costs were 70 cents a share, Palo Alto, California-based VMware said in a statement. That surpassed the average estimate of 63 cents a share, according to data compiled by Bloomberg. Sales rose 20 percent to $1.13 billion, matching analysts’ projections.

The company also appointed Jonathan Chadwick as chief financial officer, effective Nov. 5. Chadwick, 46, was previously at Microsoft as a vice president and CFO of Skype.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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