) reported first-quarter earnings (including stock-based
compensation but excluding other non-recurring items) of 27 cents
per share that were in line with the Zacks Consensus Estimate.
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Revenues inched up 1.7% year over year to $5.48 billion, slightly
better than the Zacks Consensus Estimate and management guidance.
Product sales declined 3.3% year over year, while services
increased 8.6% from the year-ago quarter.
Information Infrastructure segment revenues (74.4% of revenues)
decreased 2.6% year over year to $4.08 billion. RSA revenues
increased 4.7% from the year-ago quarter, which was fully offset
by 3.1% decline in Information Storage and modest decline in
EMC's emerging storage business revenues surged 81.0% year over
year, driven by strong growth of XtremIO all-flash storage,
Isilon, Atmos and ViPER products. EMC Syncplicity revenues soared
well over 100.0% from the year-ago quarter. Both Security
Analytics and Archer product revenues surged more than 25.0%,
) continued to impress with revenue growth of 16.0% on a
year-over-year basis to reach $1.35 billion. Pivotal reported
revenues of $49.0 million compared with $35.0 million in the
On a geographical basis, domestic revenues remained flat year
over year at $2.8 billion and contributed 52.0% of revenues.
Revenues from international operations increased 3.0% year over
year to $2.6 billion and accounted for the remaining 48.0%.
Revenues from Europe, Middle East and Africa region grew 8.0%
year over year in the quarter.
Gross margin contracted 40 basis points (bps) from the year-ago
quarter due to unfavorable product mix. Research &
development expenses as percentage of revenues increased 80 bps
on a year-over-year basis. Selling, general & administrative
expense as a percentage of revenues jumped 200 bps from the
Operating margin contracted 290 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 $560.0 million or
27 cents per share compared with $694.0 million or 32 cents in
the year-ago quarter.
As of Mar 31, 2014, cash and cash equivalents including
short-term investments were $8.26 billion compared with $10.66
billion at the end of Dec 31, 2013. EMC generated $1.34 billion
in cash flow from operations compared with $2.19 billion in the
EMC forecasts revenues of $24.6 billion for 2014, which reflects
year-over-year growth of approximately 5.5% and is slightly
higher than the Zacks Consensus Estimate of $24.5 million. The
Zacks Consensus Estimate for the second quarter of 2014 is pegged
at $5.41 billion.
Non-GAAP operating margin is expected to grow in the range of
24.0% to 24.5% (down from 25.0%) for 2014. EMC expects earnings
of $1.90 per share (down from $1.95 per share) for 2014.
Currently, the Zacks Consensus Estimate is pegged at $1.61 per
Currently, the Zacks Consensus Estimate for second-quarter
earnings is pegged at 36 cents per share.
EMC also expects to repurchase shares worth $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
We believe that EMC is well positioned to benefit from
incremental data center hardware spending, going forward. EMC's
vast product portfolio, which has products suitable for any kind
of budget, will boost its market share, going ahead.
Additionally, aggressive share repurchase will drive earnings,
However, increasing competition from the likes of
) and a sluggish IT spending outlook for the next couple of years
will continue to keep margins under pressure in the near term.
Currently, EMC has a Zacks Rank #3 (Hold).