Boston, MA 04/25/2014 (wallstreetpr) – EMC Corporation (NYSE:EMC)’s shares were down by 3.8% and closed at $25.73 on April 23, 2014 despite a solid performance in the first quarter (1Q2014) ended March 31, 2014. VMWare shares were down 8.7% and traded at $96.02 on the same day.
Declining factor
Factors like lower sales of High-end storage business, slow growth in bookings and delays in conversion few larger contracts of VMware creates sales pressure. In addition, the increasing SG&A and R&D costs further compress EMC’s operating margin and net profit. During 1Q2014, adjusted operating income decreased by 10% to $1.1 billion (20.5% of revenue) and adjusted EPS was $0.35, down by 10% compared to prior year period.
Core business drive strong growth
In 1Q2014, EMC Corporation (NYSE:EMC)’s revenues were up by 2.0% to $5.5 billion due to double-digit growth in both Pivotal and VMware that offset the declining revenues of Information storage. The decline resulted from lower sales of High-end Storage products; however, the incurring losses were compensated by significant increase in Emerging Storage business.
In addition, EMC’s partner VMware also reported positive growth of 16% during 1Q2014 compared to prior year period. EMC owns 80% of the stake in VMware to provide services in cloud computing. So, slow growth and delay will have a significant impact over EMC’s performance.
Moving forward
EMC continues to report accelerating growth in foreseeable years with increasing capacity in storage business, especially Emerging Storage business. In addition, EMC Corporation (NYSE:EMC) will take the advantage of its leadership position in enterprise flash storage and continues to sell more flash storage products.
Moreover, the growing enterprise customers for Pivotal, acquisition of AirWatch by VMware will further boost the revenue. As a result, EMC also expects revenue of $24.58 billion, adjusted operating income at a range of 24-24.5% of revenue and adjusted profit of $1.90 per share in FY2014.
