EMC Corp. (
reported second-quarter earnings (including stock-based
compensation but excluding other non-recurring items) of 34 cents
per share that missed the Zacks Consensus Estimate by a
Revenues climbed 4.7% year over year to $5.88 billion. Product
sales increased 1.9% year over year, while services increased
8.7% from the year-ago quarter.
Information Infrastructure segment revenues (74.4% of
revenues) inched up 1.0% year over year to $4.38 billion. RSA,
Information Storage and Information Intelligence revenues
increased 6.6%, 0.6% and 3.9% from the year-ago quarter.
EMC's emerging storage business revenues surged 52.0% year
over year driven by strong growth of XtremIO all-flash storage,
Isilon and ViPR products. Both Security Analytics and Archer
product revenues increased more than 20.0%, respectively.
EMC's majority owned
VMware Inc. (
continued to impress with revenue growth of 17.0% on a
year-over-year basis to reach $1.45 billion. Pivotal reported
revenues of $54.0 million compared with $42.0 million in the
On a geographical basis, domestic revenues increased 3.0% year
over year at $3.1 billion and contributed 52.0% of revenues.
Revenues from international operations increased 7.0% year over
year to $2.8 billion and accounted for the remaining
Revenues from Europe, Middle East and Africa region grew 12.0%
year over year in the quarter. Revenues from Latin America region
grew 14% year over year, while the BRIC+13 markets grew 5% year
Gross margin contracted 70 basis points (bps) from the
year-ago quarter due to unfavorable product mix. Research &
development expenses as percentage of revenues increased 20 bps
on a year-over-year basis. Selling, general & administrative
expense as a percentage of revenues jumped 240 bps from the
Operating margin contracted 220 bps on a year-over-year basis
due to lower revenue base and contraction in gross margin base.
Net income (including stock-based compensation) was $702.0
million or 34 cents per share compared with $767.0 million or 35
cents in the year-ago quarter.
As of Jun 31, 2014, cash and cash equivalents including
short-term investments were $8.26 billion compared with $8.26
billion at the end of Mar 31, 2014. EMC generated $1.34 billion
in cash flow from operations compared with $2.19 billion in the
Emc Corporation - Earnings Surprise |
EMC forecasts revenues of $24.6 billion for 2014, which
reflects year-over-year growth of approximately 5.5%.
Non-GAAP operating margin is expected to grow in the range of
24.0% to 24.5% for 2014. EMC expects earnings of $1.91 per share
for 2014. Currently, the Zacks Consensus Estimate is pegged at
Currently, the Zacks Consensus Estimate for third-quarter
earnings is pegged at 38 cents.
EMC also expects to repurchase shares worth $3.0 billion (up
from $2.0 billion) in 2014. Net cash provided by operating
activities is expected to be $7.2 billion and free cash flow is
expected to be $5.8 billion for 2014.
We believe that EMC is well positioned to benefit from
incremental data center hardware spending in the long run. EMC's
vast product portfolio, which has products suitable for any kind
of budget, will boost its market share. Additionally, aggressive
share repurchase will drive earnings.
Sluggish IT spending outlook for the next couple of years will
continue to keep margins under pressure. Moreover, EMC's high-end
storage systems are facing increasing competition from
flash-driven storage technology provider like
Western Digital (
. This will continue to hurt top-line growth in the near
Moreover, increasing activism from Elliott Management
regarding separation of VMware will weigh on the stock in the
Currently, EMC has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
WESTERN DIGITAL (WDC): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis Report
VMWARE INC-A (VMW): Free Stock Analysis Report
EMC CORP -MASS (EMC): Free Stock Analysis
To read this article on Zacks.com click here.