EMC Profit Falls as Demand Slows for Storage Devicesby and
Analysts see annual sales rising at slowest pace since 2009
Results follow $67 billion takeover deal with Dell last week
EMC Corp. reported sales and earnings that met analysts’ reduced estimates amid slowing demand for its storage devices, the week after the company agreed to a $67 billion takeover by Dell Inc.
Third-quarter profit excluding certain costs was 43 cents a share, EMC said in a statement Wednesday. Revenue rose less than 1 percent to $6.08 billion. Analysts on average had projected profit of 43 cents on sales of $6.07 billion, according to data compiled by Bloomberg. Analysts lowered their estimates after EMC gave a preliminary earnings report last week.
Net income in the period fell to $480 million from $587 million a year earlier.
The Hopkinton, Massachusetts-based company is grappling with slowing growth for its older and pricier products. EMC, the largest storage maker, in July said it would reduce costs by $850 million a year starting in 2017. The cuts will go forward following the Dell acquisition.
EMC fell 6.3 percent to $25.77 at the close in New York, in part pulled lower by a 19 percent drop by VMware Inc., of which EMC owns 81 percent.
Investors are looking at the Dell pact’s structure, VMware’s stock “and how this nightmare situation might affect the nature of this historic deal,” Dan Ives, an analyst at FBR Capital Markets, wrote in a note Wednesday. “Fundamentals now take a back seat.”
Dell is paying for the acquisition, the biggest technology deal ever, in part with VMware tracking stock.
“I don’t think we’ve done as good a job as we need to do in explaining the power of this combination and explaining why it’s not only good for EMC and Dell shareholders but as well for VMware shareholders,” EMC Chief Executive Officer Joe Tucci said on an earnings call. “Every fiber of my body feels this is good.” The company said it will no longer provide earnings forecasts, in light of the pending Dell deal.
EMC is trying to modernize its offerings and compete with upstart storage makers by focusing on newer products, like those using flash memory. The company also is contending with customers who prefer to rent storage from cloud vendors, such as Amazon.com Inc., than to buy their own devices. Dell’s planned purchase, the biggest technology acquisition ever, will combine EMC’s dominance in storage devices with closely held Dell’s No. 2 position in servers, the powerful machines that run corporate computing.
Analysts estimate that EMC’s revenue will increase 2 percent this year, the weakest pace since the company logged a sales decline in 2009.