STOCKWATCH: Slowing growth, but still growing
STOCKWATCH: Slowing growth, but still growing
The numbers don't lie: the storage industry's growth spurt is levelling out. The roller coaster ride isn't over yet, though.
Meta Group put out a report this week saying that the storage industry's growth had "slowed to a more sustainable 40 per cent". Meanwhile, a report by an analyst from Standard & Poors quoted IDC figures on the disk storage sector that predicted the disk-based niche would shrink by 20 per cent for the second year running. The Standard & Poor's analyst, writing for Business Week magazine, went on to preach caution on EMC's "no better than a market performer", "good times" for Emulex but little upside on the stock since it was already trading at high multiples, and pressure on Brocade Systems from Cisco Systems leading to predicted future performance being "well below our previous expectation". Standard & Poors rates on a five-star system, in which EMC and Emulex got three, equating to a "hold" rating, and Brocade earned only two, which the analyst said was equivalent to a rating of "avoid". EMC was unchanged overnight at US$6.50, while Brocade was down almost eight per cent by 40 cents to US$4.81. This drop, being the first time the stock has dropped below US$5, represents a new all-time low for the stock since its IPO back in 1999.
Veritas Software moved this week to head off a downturn in its shares caused by uncertainty over the veracity of its fiscal results by reiterating its forecast for US$377 million in revenue for the current quarter. Veritas had come under scrutiny recently after being forced to sack its CFO after revelations that some of his qualifications were bogus, and the company has been implicated in irregularities within AOL Time Warner that are the subject of ongoing investigations. Reuters quoted CEO Gary Bloom as saying, "We're comfortable with the guidance we have out there for Q4."
Analyst firm CIBC World Markets was positive in its initiation of coverage on Veritas, starting it at a rating of Sector Outperform. Veritas's stock was jumped 49 cents to US$17.95 on Tuesday when the news broke, and only shaved another six cents off last night to finish at US$17.89.
In other ratings news, Thomas Wiesel sounded a bum note overnight when it downgraded Adaptec from Attractive to Market Perform and Emulex from Buy to Market Perform. The latter was down 8.25 per cent by US$1.87 to US$20.80 on the news, while Adaptec dropped over 10 per cent to close down 70 cents at US$6 even.
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