Earning Warnings Hurt Storage Market Stocks

After a warning last week from McDATA that its sales will come up shorter than forecasted this quarter, analysts downgraded some storage stocks and stock prices dropped. McDATA warned that it will experience a first-quarter loss because of slow IT spending.

Jack McDonnell, McDATA's chairman and chief executive officer, said, "We have been cautiously optimistic about IT spending in 2002, recognizing that the timing of a resurgence in enterprise storage and infrastructure spending would likely be closely tied to a recovery in the economy and a favorable outlook for corporate profits. Thus far in 2002, it appears that this spending is off to a slow start, with larger customers, in particular, taking longer to make major investment decisions. However, our pipeline remains strong and is consistent with our expectations at this point in the year."

Investment firm J.P. Morgan Chase used McDATA's warning to adjust its forecast for EMC. J.P. Morgan Chase now predicts that EMC will post a loss (instead of an earlier predicted profit) in 2002.



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