EMC Corp. cranked out a 61 percent increase in net income in the fourth quarter, the biggest maker of data storage computers said Tuesday, with sales fueled by an acceleration in technology spending.
But there was a broad sell-off in technology shares on fears that companies won’t grow as fast in 2011 as they did in 2010, when spending by businesses rebounded strongly from the depths of the Great Recession.
Overshadowing a forecast that topped Wall Street’s expectations, the company’s majority owned VMware Inc. predicted little, if any, profit margin expansion this year.
The leading maker of “virtualization” software has been forced to spend heavily to fight off a threat from Microsoft Corp and many believe the pace of VMware’s sale of new licenses will slow.
EMC shares declined 33 cents, or 1.4 percent, to $23.50. VMware shares fell $5.17, or 5.9 percent, to $82.56.
Analyst Daniel Ives with FBR Capital Markets wrote that the outlook was a “positive indicator for EMC” and the overall information technology market, but that VMware’s “less-than-stellar” forecast is weighing on shares despite strong trends in that business as well.
With corporations replacing old equipment and software again, both companies have benefited from a shift to “cloud” computing, in which software and data are stored on remote servers rather than in-house machines.
The latest was the fifth straight quarter of earnings growth for EMC.
Before the market opened, EMC reported earnings of $628.6 million, or 29 cents per share, in the last three months of 2010. That’s up from $390.6 million, or 19 cents per share, in the same quarter a year ago.
Excluding special items, EMC says it earned 42 cents, edging out by a penny the consensus estimates of analysts surveyed by FactSet.
Revenue climbed 19 percent to $4.9 billion from $4.1 billion. Analysts expected $4.8 billion.
The company’s 2011 adjusted earnings-per-share forecast of…