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TheStreet Open House

EMC Looks Incredibly Cheap

NEW YORK ( TheStreet) -- So far, 2013 has not panned out the way EMC (EMC - Get Report) investors have expected.

Although the stock has traded relatively flat since the start of the year, at one point EMC shares had lost 15%, falling to a 52-week low of $21.45.

Making matters worse is VMware (VMW), which is 80%-owned by EMC, has lost 11% of its value since the start of the year.

While EMC is still the clear-cut leader in the storage business, where it competes with NetApp (NTAP), EMC has shown no immunity to weak IT enterprise spending. That the stock has bounced back by roughly 21% over the past four months suggests investors have become a bit more optimistic about a recovery in IT spending and the direction of EMC's storage business, which has been under significant pressure.

I'm not going to boast about how well the storage market is performing. Truth be told, I don't believe the industry is as vibrant as it was, say, two years ago at the height of "everything Big Data." Even so, I believe the fear investors carry about what is projected to be a turbulent rest of the year is overblown. Although EMC posted in-line results, revenue grew 6% year over year -- ample evidence the worst is over. In my opinion, this makes the stock a strong buy at current levels.

EMC management has never gotten its due for being able to quickly adapt to changing trends. A perfect example was when management announced plans to spin off areas of its business to create a separate entity called Pivotal. The company believed that although it had assets that were performing strongly, they were getting lost in the shuffle.

Essentially, management believed the spinoff would create more value for shareholders. Given that the company recently posted 39% jump in its emerging products business, management has been right. What's more, there continues to be better-than-expected improvement in EMC's other businesses, including the company's new array of flash products.

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