By Angela Chen and Don Clark
EMC Corp. posted a 12% rise in fourth-quarter net income,
reaping demand for new data-storage hardware while leaving recent
questions about the company's structure unanswered.
Revenue, however, missed expectations, and shares edged down
less than 1% in premarket trading.
EMC, like many others in the tech sector, has been affected by
shifts in exchange rates that reduce the dollar value of sales
abroad completed in other currencies. The company expects that
currency impacts will continue into future quarters.
EMC, besides selling systems used to store corporate business
information, maintains an unusual federation of related companies
that collaborate as well as compete at times. The biggest is VMware
Inc., the Silicon Valley software company that EMC bought in 2004
and later took public, retaining an ownership stake that currently
stands at about 80%.
The federation structure has been under attack since last summer
by Elliott Management Corp. The activist hedge fund has pressed EMC
management to spin off its remaining stake in VMware and pursue
other strategic opportunities to help boost EMC's share price.
The Wall Street Journal in September reported that EMC has
discussed merger possibilities with other companies, including
Hewlett-Packard Co., and later reported that those talks appear to
have ended. Neither company has commented on the topic.
Mr. Tucci has defended the EMC structure but also acknowledged
the need to make some adjustments, amid factors such as growing
competition with VMware. He didn't spell any changes in Thursday's
news release.
Pressure to make immediate changes eased on Jan. 12, when EMC
announced it was appointing two new directors that had been
approved by Elliott. The investor also agreed to certain standstill
provisions and other concessions through September, including
voting in favor of EMC's proposed slate of directors.
EMC folds a portion of VMware's financial results into its own
income statement. VMware on Tuesday reported that fourth-quarter
net income declined 3% on revenues that rose 15%.
Another part of the federation, Pivotal Software, posted an 18%
revenue increase in the fourth quarter, EMC said Thursday.
EMC said revenue in its core "information infrastructure
business," which includes large data-storage systems that use disk
drives, posted a 2% increase.
In all, EMC reported fourth-quarter net income of $1.15 billion,
or 56 cents a share, up from a profit in the year-earlier period of
$1 billion, or 48 cents a share. Revenues rose 5% to $7.05
billion.
Excluding stock-based compensation and other items, EMC said it
posted earnings of 69 cents per share, compared with 60 cents a
year earlier. Analysts had expected earnings on that basis of 68
cents a share on $7.1 billion in revenue, according to Thomson
First Call.
EMC stresses annual financial projections over figures for
individual quarters. On Thursday, the company predicted earnings
this year of $1.98 per share on $26.1 billion in revenue.
Analysts had projected $2.13 a share on $26.21 billion in
revenue.
Write to Angela Chen at angela.chen@dowjones.com and Don Clark
at don.clark@wsj.com
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