EMC Beats Analysts’ Estimates on Demand for New Storage ProductsDina Bass
EMC Corp.’s earnings exceeded analysts’ estimates as the company won customers for new data-storage products and attempted to fend off an activist shareholder seeking to break up the company.
Second-quarter profit excluding certain costs was 43 cents a share, the Hopkinton, Massachusetts-based company said in a statement Wednesday. Revenue rose 2 percent to $6 billion. Analysts on average had projected profit of 41 cents on sales of $6.1 billion, according to data compiled by Bloomberg.
EMC is contending with weak demand for its priciest storage equipment by winning customers for new products such as flash-memory based devices.
Word from storage sellers indicates that the market was “marginally better” than the previous quarter, even as the sector contends with customers moving to cloud-based storage, said Abhey Lamba, an analyst at Mizuho Securities USA Inc.
EMC also has benefited from growth at its VMware Inc. unit but has faced pressure from activist shareholder Elliott Management Corp. to spin off the operation and explore options for EMC’s other businesses.
EMC said profit for the year will be $1.87 a share, excluding certain costs, on sales of $25.2 billion. Analysts on average estimated profit of $1.90 a share.
VMware -- the biggest maker of virtualization software, which lets companies put multiple workloads on a single server to save money -- on Tuesday raised its annual forecast as licensing revenue increased. The company reported second-quarter profit, excluding certain costs, of 93 cents a share on revenue of $1.52 billion.
Elliott has been pressuring EMC to spin off the faster-growing VMware, saying the parent is undervalued and that the companies compete and hinder each other’s opportunities. Elliott and EMC in January reached a standstill agreement, and the company appointed two directors approved by the activist shareholder.
EMC’s board had been considering strategic options, including a spinoff, and held talks about a merger with Hewlett-Packard Co. that stalled over disagreements on price, people familiar with the matter said in September.
The company has provided no details on its strategic plans or on succession planning for Chief Executive Officer Joe Tucci, who remains at the helm even though the company had said would step down by February.
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