Losing Patience With EMC

A value stock that does not, eventually, perform is not a value stock. It's with that in mind that I find my patience sorely tested by information management and storage leader EMC (NYSE: EMC). For a while now I've flown the flag of "be patient . it'll work out," but I have to admit that's getting harder and harder.

Friday's reported results weren't really any different than we expected after the company sent out a warning earlier this week. Revenue once again rose by a double-digit amount, but reported earnings were down 5%. Operationally, things were even worse: Operating income (adjusted for a restructuring item) fell 23%, and only higher interest income and lower taxes salvaged the quarter from a really nasty drop.

Management admitted it botched the execution of the business this quarter, but it's not really as though it had anywhere to hide. And speaking of execution, I'm reminded of a quote from former Tampa Bay Bucs coach John McKay when he was asked about the execution of his team during the miserable 1976 season -- McKay said, "I'm all in favor of it."

I know there's a positive spin to the quarter -- that the company wasn't able to fulfill all of the demand for high-end systems -- but I'm just not fully buying it. I think companies like Hewlett-Packard (NYSE: HPQ) are gaining on EMC and I'm skeptical about how it'll do against the IBMs (NYSE: IBM), Microsofts (Nasdaq: MSFT), and such on the software side.

Perhaps I'm just gloomy because it's the end of a long week of poor market performance and I'm sick of seeing red on my screen. Or maybe I'm just frustrated at what I see as the potential value of the EMC business being harmed by serial acquisitions and management mistakes. And it's certainly true that it's easy to hack-and-slash your price target estimates when a company disappoints for a quarter and then lowers guidance.

Maybe EMC is still a value and the aforementioned gloominess is coloring my view. Either way, though, this one is sliding down a few notches from the upper tier of my watch list. I love a good value, but with the markets acting the way they are, there are more and more of them every day and some of them are executing better than EMC is today.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).