Now that Christmas is out of the way, it's time for that other "most wonderful time ... of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their Q4 and full-year results. Next up, electronic archivist EMC (NYSE:EMC), which reports bright and early Tuesday morning.

What analysts say:

  • Buy, sell, or waffle? Two dozen analysts follow EMC, with a bare majority rating the stock a buy and the remaining 11 saying hold.
  • Revenues. On average, they're looking for 17% sales growth and $3.2 billion in revenue.
  • Earnings. Profits are predicted to decline a penny to $0.16 per share.

What management says:
The big news at EMC this quarter came in December, when it announced changes to a major restructuring effort to better integrate the 21 firms it has eaten up over the past three years. Expanding on the original consolidation plan (announced in October), management now expects to lay off as many as 1,350 employees -- more than 5% of its workforce -- by the end of this year, but at a cost no more than was estimated in the original plan: $175 million. Of that figure, about $134 million is expected to come in the form of cash payments for severance and termination of contracts, with the remainder of the charges being non-cash. The total estimated hit to pretax earnings: $0.06 per share (and for the record, the analyst estimates noted above do not account for this reduction, which Wall Street views as a "one-time" event).

What management does:
Thus, we're likely to see the string of declining rolling net margins -- already four quarters in length -- continue Tuesday.

Margins%

6/05

9/05

12/05

3/06

6/06

9/06

Gross

52.5

53.1

53.7

53.9

53.8

53.6

Op.

15.0

15.6

16.4

16.7

16.4

16.5

Net

12.3

14.0

11.7

11.4

11.0

9.2
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
More significant than the net results, however, are what's going on farther up the income statement. Over the past six months, sales are up 14% year over year. Not bad, but not good enough, either. Cost of goods sold (COGS) and selling, general, and administrative expenses (SG&A) both continue to outpace sales growth, up 16% and 15% in the same six-month-period, respectively.

Meanwhile, the reservation I raised three months ago still stands. Even as COGS and SG&A outpace sales growth, the one line item that doesn't even match them is EMC's research and development spending. Over the past couple of quarters, it has grown less than 10% year over year on average. And while I'm usually all for cutting operating costs to goose margins upward, in a tech company, the last place I want to see management skimping is on R&D.

Competitors:

  • Hewlett-Packard (NYSE:HPQ)
  • Hitachi (NYSE:HIT)
  • IBM (NYSE:IBM)
  • Network Appliance (NASDAQ:NTAP)
  • Oracle (NASDAQ:ORCL)
  • Sun Microsystems (NASDAQ:SUNW)

What did we expect out of EMC last quarter, and what did it produce? Find out in:

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.