raised its forecast for fourth-quarter revenue Wednesday, thanks to the faster-than-expected completion of its
EMC told investors to expect fourth-quarter revenue to range between $1.8 billion and $1.82 billion, reflecting the addition of $30 million to $35 million in sales from Documentum. Prior to the announcement, the consensus estimate of analysts was revenue of $1.76 billion, and a 7-cent profit, according to Thomson First Call. (The company didn't revise its EPS guidance.)
The company's stock, which had slipped about 11% since the beginning of December, initially spiked as high as $12.93 on the news, but quickly gave up most of its gains. In recent trading EMC was up 25 cents, or 2%, to $12.51.
The reason for the market's tepid response was obvious, according to one buy-side trader: "This isn't a real hike in guidance."
On Oct. 14, EMC said it would exchange stock worth $1.7 billion to acquire Documentum, a maker of content-management software. At the time, EMC said it expected the transaction to close in next year's first quarter, and said the deal would dilute 2004 earnings by 2 cents a share before turning accretive a year later.
Massachusetts-based EMC, a leader in disk and network-storage systems, said it now expects to complete the acquisition on Dec. 18.
The acquisition got a
mixed reception in October, and today's announcement doesn't do much to convince Wall Street that there's more value in the stock today than there was in October. The revenue is simply coming in sooner.
In a note published shortly before EMC's announcement, Goldman Sachs analyst Laura Conigliaro upgraded the stock to "outperform" from "in-line," saying that the December selloff "presents an attractive opportunity for 2004." Goldman Sachs has an investment banking relationship with the company.
Earlier this week, market researcher IDC said that EMC's
third-quarter factory revenue for disk storage grew 20% year over year, and the company gained 2.2 percentage points of market share.