IT Upgrades, Cloud Computing Boom Boost EMC

EMC Corporation (NYSE: EMC) is a leading provider of information infrastructure technology and solutions. Competitors include NetApp (NASDAQ:NTAP), IBM (NYSE:IBM) and Hewlett-Packard (NYSE:HPQ). EMC is surfing a wave of IT infrastructure updates coming out of the 2009 slump, and  recently released a strong second-quarter earnings report in which it raised its 2010 guidance.

EMC is benefiting from strong demand for storage solutions as companies update their data centers.The company also has significant capacity in the emerging cloud computing market through its majority interest in VMware, a leading provider of virtualization technology. We expect both trends to boost EMC’s revenues going forward, and have raised the Trefis price estimate for EMC’s stock from $25.28 to $26.31. Our analysis follows below.

Data center upgrades

Revenues from EMC’s Symmetrix line of virtual data center products rose 32% year-on-year. We expect EMC’s storage market share to rise slightly during the Trefis forecast period, from 22.3% in 2010 to just under 24% in 2016.

You can drag the trend-line in the chart below to create your own estimate for EMC’s share of the storage market and trace its impact on the company’s stock price.

Rise of virtualization

EMC profits from rising corporate adoption of cloud-based data storage and processing services through its 80% stake in virtualization software developer VMWare.  In an earlier article, we explained how VMWare is benefiting from rising maintenance and service revenues.

Innovation pipeline

EMC is working on a number of innovative new storage solutions. One is FAST Cache, a technology that allows customers to utilize solid state storage to increase cache size for burst requirements. Another is block compression for primary storage, which EMC claims will improve storage efficiency by about 50%.

You can see the complete $26.31 Trefis estimate for EMC’s stock price here.