EMC Q3 Profit Edges Up, But Misses View; To Buy Most Of Cisco Stake In VCE

(RTTNews) - Data storage solutions provider EMC Corp. (EMC) on Wednesday reported a slight increase in profit for the third quarter from last year on higher revenues. However, adjusted earnings per share missed analysts' estimates, while revenues beat their expectations.

Looking ahead, EMC lowered its fiscal 2014 reported and adjusted earnings per share outlook by $0.01 each. In a separate statement, EMC said it will acquire most of Cisco Systems Inc.'s (CSCO) stake in their joint venture VCE. Cisco is the world's largest computer networking gear maker.

Net income attributable to the Hopkinton, Massachusetts-based EMC for the third quarter was $587 million or $0.28 per share, up slightly from $586 million or $0.27 per share in the year-ago period.

Adjusted net income for the quarter was $903 million or $0.44 per share, compared to $860 million or $0.40 per share in the same period last year. On average, 35 analysts polled by Thomson Reuters expected the company to report earnings of $0.46 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter rose 9 percent to $6.03 billion from $5.54 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $6.00 billion for the quarter.

Revenue from North America grew 8 percent from last year and represented 55 percent of consolidated revenue for the quarter.

Revenue from EMC's Europe, Middle East and Africa region grew 15 percent from last year, revenue from EMC's Latin America region grew 1 percent, and revenues from Asia Pacific and Japan increased 4 percent. Revenue from the BRIC+13 markets grew 9 percent from the year-ago period.

Revenue from the EMC Information Infrastructure business for the quarter rose 6 percent from last year. Emerging Storage business revenue surged 47 percent from the year-ago quarter, while Pivotal revenue grew 24 percent. EMC's subsidiary VMware Inc. (VMW) recorded a 17 percent year-over-year increase in revenue for the quarter.

EMC's total costs and expenses for the quarter include a 10 percent increase in selling, general and administrative expenses.

Looking ahead to fiscal 2014, EMC now forecasts reported earnings of $1.29 per share, adjusted earnings of $1.90 per share, and consolidated revenues of $24.5 billion. Earlier, the company forecast reported earnings of $1.30 per share, adjusted earnings of $1.91 per share and revenues of $24.575 billion for the year.

Wall Street is currently looking for fiscal year 2014 earnings of $1.91 per share on revenues of $24.54 billion.

EMC noted that its revised outlook reflects the impact of foreign currency fluctuations, the timing of the company's second-half share buyback, and the revised free cash flow outlook from VMware.

EMC expects to repurchase a total of $3 billion of its common stock in 2014.

In a separate statement, EMC said it will acquire most of Cisco Systems Inc.'s (CSCO) stake in their joint venture VCE. The transaction is expected to be finalized in the current quarter and VCE will become an EMC business.

EMC added that Cisco and VMware will continue as strategic partners and investors, with Cisco having an approximately 10 percent equity interest in VCE, which sells high-end data center equipment.

As part of the EMC family, VCE will continued to be led by CEO Praveen Akkiraju and his senior team with its mission, operating charter and organizational structure intact.

VCE's reorganization and recapitalization, which will result in the acquisition of a controlling interest by EMC, are expected to be completed in the fourth quarter of 2014. EMC said it does not expect the transaction to have a material impact to its reported and adjusted earnings per share outlook for fiscal 2014.

Once finalized, EMC will begin reporting VCE financials as part of its consolidated financial statements.

EMC is currently trading at $27.36, up $0.16 or 0.59 percent on a volume of 9.82 million shares.