EMC Corp. (EMC) reported fourth-quarter and full year 2014 results. Fourth quarter adjusted earnings of 69 cents per share rose 15% year over year and surpassed the Zacks Consensus Estimate of 59 cents.
For 2014, the company reported adjusted earnings of $1.90 per share, an increase of 6% on a year-over-year basis.
Quarter Details
Quarterly revenues climbed 5.4% year over year to $7,048 million, lagging the Zacks Consensus Estimate of $7,095 million. Product sales increased 4% year over year, while services increased 7.9% from the year-ago quarter. For 2014, the company reported revenues of $24.4 billion, an increase of 5.5% year over year.
Information Infrastructure segment revenues for the quarter (75.1% of revenues) increased 2% year over year to $5,296 million. RSA and Information Storage revenues increased 4% and 3%, respectively while that from Information Intelligence declined 7.9% from the year-ago quarter.
EMC's emerging storage business revenues surged 40% year over year driven by strong growth of EMC XtremIO, EMC ViPR, EMC Isilon and EMC ScaleIO products.
EMC’s majority owned VMware Inc. (VMW) continued to impress with revenue growth of 16% on a year over year basis to reach $1,687 million. Pivotal reported revenues of $65 million compared with $55 million in the year-ago quarter.
On a geographical basis, revenues from North America increased 6% year over year while in the U.S. the increase was 7%.
Revenues from Europe, Middle East and Africa region grew 6% year over year in the quarter. Revenues from the Latin America region grew 8% year over year, while the BRIC+13 markets grew 7% year over year. Revenues from Asia Pacific and Japan grew 2% on a year over year basis.
Gross margin increased 70 basis points (bps) to 63.9%. Research & development expenses as a percentage of revenues increased 10 bps on a year over year basis. Selling, general & administrative expense decreased to 30.2% of revenues from 30.4% in the year-ago quarter.
As of Dec 31, 2014, cash and cash equivalents including short-term investments were $8.32 billion compared with $10.66 billion at the end of Dec 31, 2013. In 2014, EMC generated $6.52 billion in cash flow from operations compared with $6.92 billion in the prior year.
Guidance
EMC forecasts revenues of $26.1 billion for 2015 while non-GAAP earnings are expected to be $1.98 per share.Non-GAAP operating margin is expected to be about 21.4% in 2015.
EMC also expects to repurchase shares worth $3 billion in 2015.
Our Take
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.
However, sluggish IT spending outlook will continue to keep margins under pressure in the near-term. Moreover, EMC’s high-end storage systems are facing increasing competition from flash-driven storage technology providers like SanDisk (SNDK) and Western Digital (WDC). This will continue to hurt top-line growth in the near term.
One of the major recent developments of the company is its nine-month standstill agreement with activist investor Elliot Management Corp. The company has been persistently insisted by Elliot Management on initiating a tax-free spin-off of its 80% stake in VMware. Elliot Management has further suggested that the upside to such a spinoff will exceed 40%.
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
Be the first to comment