EMC Q3 earnings fall short of expectations, $5.5 billion in revenue

The U.S. enterprise storage and security company's financial results were weaker than expected in the third quarter.
Written by Charlie Osborne, Contributing Writer

EMC on Tuesday reported quarterly earnings (.pdf) of $0.27 on revenue of $5.5 billion, an increase of five percent over the same quarter a year ago but failing to meet analyst expectations.

Wall Street estimated that EMC would achieve a profit level of $0.37 a share, a rise from $0.32 per share in 2012. For the full fiscal year, analysts expect earnings of $1.55 per share.


Revenue was predicted to reach $5.8 billion in the third quarter.

A breakdown of the company's businesses:

  • The Information Infrastructure group fail to grow its revenue, falling from $4.3 billion to $4.17 billion.
  • The Information Storage group decreased revenue, to $3.77 billion from $3.9 billion.
  • The RSA Information Security group improved in revenue, from $228 million to $252 million.
  • The Information Intelligence group's revenue stream also plummeted, ending the quarter with $149 million from $152 million.

Pivotal grew its revenue from $70 million in the second quarter to $80 million in Q3 2013. Pivotal is an EMC-VMware joint venture that has recently completed its first acquisition of Xtreme Labs, a Toronto-based firm which has developed mobile strategies and products for firms including Facebook and American Express. It is believed the all-cash transaction came close to $65 million.

In Q3, quarterly revenue from the U.S. increased two percent year over year to $3 billion, representing 53 percent of all Q3 revenue.

Revenue from emerging markets did well in the third quarter. Dubbed the BRIC+13 by EMC, Brazil, Russia, India, China, Mexico, Colombia, Argentina, Poland, Czech Republic, Hungary, Turkey, Saudi Arabia, South Africa, United Arab Emirates, Thailand, Indonesia and Vietnam all increased revenue streams by 19 percent year-over-year.

Overall, business outside the U.S. experienced an 8 percent increase year over year, with revenues of $2.6 billion, representing 47 percent of entire Q3 revenue. Asia-Pacific and Japan grew by 8 percent year over year; Latin America grew 13 percent; and Europe, the Middle East and Africa grew 8 percent.

Report highlights include:

  • Third-quarter GAAP net income attributable to EMC was $586 million, or $0.27 per share.
  • Non-GAAP net income attributable to EMC was $860 million, or $0.40 per share.
  • Operating cash flow: $4.7 billion.
  • Cash on hand: $3.7 billion.
  • EMC ended the quarter with $17.5 billion in cash and investments.

In the second quarter, EMC reported earnings of $0.42 on revenue of $5.6 billion, which proved to be the fourth quarter in a row of low single-digit growth -- and now, the third quarter has repeated the performance. The firm's non-GAAP net income in Q2 was $907 million with an operating cash flow of $2.9 billion. Emerging markets accounted for an increased revenue by 18 percent year-over-year.

The company expects revenues of $23.25 billion for 2013, and consolidated GAAP earnings per share are expected to be $1.33 for 2013 and consolidated non-GAAP earnings per weighted average diluted share are predicted to reach $1.80. Net cash is expected to be $6.8 billion for 2013 and free cash flow is expected to be $5.5 billion for 2013.

EMC expects to repurchase $3.5 billion of the company's common stock in 2013 and the first half of 2014.

Joe Tucci, EMC Chairman and Chief Executive Officer, said:

"The EMC federation across EMC Information Infrastructure, VMware and Pivotal continues to be well positioned in our target markets and very well received by customers and partners. We leveraged the unique power of our business model in the quarter to expand our technology portfolio, strengthen our partner ecosystem and extend our leadership in cloud computing, Big Data and trusted IT. Despite our disappointment with our quarterly results, our confidence in the success of our strategy over the long term has never been stronger."

In addition, David Goulden, EMC President and Chief Operating Officer said that Q3's financial results were "impacted by a decline in U.S. federal spending and a backend-loaded quarter."

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 Read the full earnings report here (.pdf).

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