So you like data, do you? Well here's some I've found: Data-storage specialist EMC (NYSE:EMC) hasn't missed a Wall Street earnings estimate since at least early 2002. EMC reports fiscal-third-quarter earnings on the morrow. Anybody want to bet it will start underperforming now?

What analysts say:

  • Buy, sell, or waffle? The 26 analysts following this electronic archivist give it 21 buy ratings and five holds.
  • Revenue. On average, analysts predict 13% sales growth to $3.73 billion.
  • Earnings. Profits are predicted to keep pace, with a 12% rise to $0.19 per share.

What management says:
CEO Joe Tucci summed up EMC's last quarter with an optimistic outlook: "EMC demonstrated solid second-quarter performance." (As you may recall, I begged to differ.) He then proceeded to argue that "spending on information infrastructure and virtual infrastructure technologies and solutions will continue to grow" -- a prediction that most analysts following the company agree with.

What management does:
Gross margins rose in Q2, but rising operating costs quickly ate away at that growth, with the result that operating and net margins slipped. EMC now has a lower operating margin than almost any of its rivals. It still has Hewlett-Packard (NYSE:HPQ) beaten, but IBM (NYSE:IBM), VASCO Data Security (NASDAQ:VDSI), and Symantec (NASDAQ:SYMC) are all leading the race.

On the bright side, EMC may soon overtake VMware (NYSE:VMW) on operating margins. But wait -- is that a good thing?

Margins

3/07

6/07

9/07

12/07

3/08

6/08

Gross

53.1%

53.5%

54.2%

54.5%

55.0%

55.2%

Operating

12.5%

12.8%

13.1%

13.4%

13.3%

13.2%

Net

10.9%

10.9%

12.1%

12.6%

11.8%

11.7%

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:
Returning to the question of growth, and Tucci's predictions of same, in July I termed the stock "not unreasonably priced" if EMC can achieve analysts' projected 12% growth. Let me tweak that comment in light of Mr. Market's recent panicked sell-off:

Thanks to the Great Panic of '08, EMC now sells for about a third less than the 13 times free cash flow I mentioned back in July. At just around eight times free cash flow, we finally have some margin of safety on this stock, sufficient that it no longer needs to meet analyst expectations to become "buyable." I think any growth rate in the double digits will now suffice. Let's see whether EMC can pull that off tomorrow.

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

Symantec is a Motley Fool Inside Value selection. VMware is a Motley Fool Rule Breakers pick. VASCO Data Security International is a Motley Fool Stock Advisor recommendation. Try out any of these services free for 30 days.

Fool contributor Rich Smith owns shares of VASCO Data Security. The Motley Fool has a disclosure policy.