This company was my favorite back in 1998 for its dominant market position and the fact that it went up several percent seemingly every single day. The former is still true although the latter won’t happen until the next uber bubble. The amazing thing is that it is also now a value play as well. I think there is big upside for this former high flyer and should be bought now. Say hello to EMC Corp (EMC).
For those that don’t know the company, it develops, delivers, and supports information infrastructure and virtual infrastructure technologies and solutions. The company’s Information Storage segment offers networked information storage systems and software. It is the 800 pound gorilla in the storage space to put it simply.
Shrewd Purchase
EMC just announced a deal to acquire Isilon Partners (ISLN) for about $2.3 billion. Despite the hefty price tag, I am a fan of the acquisition. It shows that management is still looking to grow and get in on cutting edge technologies in the industry. Isilon specializes in storage for very large types of files, and should add value to EMC shareholders over time. This industry has been rife with consolidation of late and should continue going forward.
I think that the company’s crown jewel is its 80% stake in fast grower VMware (VMW). It is a leader in the high octane field of virtualization with huge potential ahead of it. VMW has a market cap of $34 billion compared to a market cap of $44.7 billion for EMC. Buying EMC is a great way to play VMW as well. Additionally, if you include VMW, you are getting the full operations of EMC on the cheap. I don’t think investors have fully appreciated the VMW stake in EMC’s valuation.
On a valuation basis, EMC is not particularly cheap at 18.2x next year’s estimates, but again is quite attractive based on its growth prospects and its stake in VMware. Management has achieved a 6% average earnings surprise over the past four quarters. Analysts have increased their earnings estimates by four cents over the past 60 days for the current year. Conservatively, I would put a $25 price target on the stock, but more realistically, I think it could see $30 over the next 18 months.
My Favorite Large Cap Stock is an article from: 
