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Hopes Up for Storage Earnings

The next few weeks may show happy days are here again for tech companies -- or at least, happier ones. Nobodys saying we're back in the 90s, but analysts forecast storage companies will ride an overall technology upswing when earnings season begins next week.

“While we expect any enterprise recovery to be gradual, demand should begin to build as the year goes on, with the financial services vertical leading the way,” Laura Conigliaro of Goldman Sachs & Co.

writes in a preview of December-quarter results. “Just as financials’ IT spending proved to be a leading indicator to the downside in 2001, we expect it to be a leading indicator as demand continues to gradually improve in 2004.”

Emulex Corp. (NYSE: ELX)
will kick things off when it reports its earnings this coming Wednesday, and analysts give both Emulex and its Host Bus Adapter (HBA) rival QLogic Corp. (Nasdaq: QLGC)
positive outlooks.

That's not surprising: The HBA vendors have avoided the pricing pressures that hurt switch vendors Brocade Communications Systems Inc. (Nasdaq: BRCD) and McData Corp. (Nasdaq: MCDTA) after Cisco Systems Inc. (Nasdaq: CSCO) entered the market last year.

There are other reasons HBAs are in favor. Paul Mansky of ThinkEquity Partners

writes in a note this week that he anticipates Emulex benefitting from a strong product cycle, positive sales, and positive results from the Vixel acquisition. As a result, he raised his estimates for the quarter.

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