By Don Clark and Angela Chen
EMC Corp. posted a 12% rise in fourth-quarter profit, aided by
measures to rein in expenses, while growth at the big data-storage
hardware company was held down by currency-exchange rates.
The company, which has faced pressure from an activist investor,
also scheduled a forum on March 10 to discuss its strategy. But EMC
Chief Executive Joe Tucci said the meeting won't discuss structural
changes that have been on the minds of shareholders.
EMC also disclosed that it would reduce its workforce by an
unspecified amount, a move expected to be largely completed in the
first quarter and to trigger restructuring charges between $130
million and $150 million. The company, which employs about 68,000
people, would eliminate certain positions to create openings to
bring in new skills, a company spokesman said, adding that EMC
might end 2015 with more workers than it has now.
The company said fourth-quarter revenue rose 5%, a bit less than
Wall Street expected. EMC shares declined less than 1% to $26.40
during regular trading.
Like many in the tech sector, EMC has been hurt by a
strengthening U.S. dollar, which reduces the value of sales
completed in other currencies. The company said currency effects
reduced its fourth-quarter revenue by about $115 million, or about
two percentage points.
The Hopkinton, Mass., company forecast the annual cost of
currency effects in 2015 at about $550 million, or two percentage
points. Still, Mr. Tucci expressed confidence the company would hit
a target for revenue growth of about 7% for the year.
Besides selling systems used to store corporate business
information, EMC maintains an unusual federation of related
companies that collaborate but also compete at times. The biggest
is VMware Inc., the Silicon Valley software venture that EMC bought
in 2004 and later took public, retaining an ownership stake of
about 80%.
The federation structure has been under attack by Elliott
Management Corp. since last summer. The activist investor has urged
the company to spin off its remaining stake in VMware or pursue
other strategic opportunities to help boost EMC's share price.
The Wall Street Journal reported in September that EMC had
discussed merger possibilities with other companies, including
Hewlett-Packard Co., and later reported that those talks appeared
to have ended. Neither company has commented on the topic.
Pressure to make immediate changes eased on Jan. 12, when EMC
said 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.
Mr. Tucci has defended the EMC structure but also acknowledged
the need to make adjustments. He said Thursday that he has had
"constructive dialogue" with corporate shareholders, and that EMC
would provide new information about the company's direction at the
March 10 event.
"We're not going to talk about structure," Mr. Tucci said during
a conference call. "We are going to talk a lot about the options we
have, our strategies, our products, why we can win and some of the
actions we will take,"
Daniel Ives, an analyst at FBR Capital Markets, expressed
disappointment that EMC won't use the event to address the
"elephant in the room" of whether to spin off VMware. "Patience is
wearing thin among EMC investors," he wrote in an email. "We hope
there will be more transparency on this strategic situation over
the coming months as EMC (and its board) try to turn this ship back
around in the right direction."
Mr. Tucci is nearing the end of his expected tenure as CEO. He
provided no further timing details Thursday, but said he and the
board are working on plans for a "smooth" succession.
EMC folds a portion of VMware's financial results into its own
income statement. VMware reported Tuesday that fourth-quarter net
income declined 3% on revenue 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 data-storage hardware business
increased 2%. Within that unit, the company said revenue declined
7% for high-end storage systems that use disk drives, its biggest
hardware category.
But EMC said orders more than doubled to nearly $300 million for
a newer product line that stores data on flash memory chips, called
XtremIO, which EMC said was the fastest-growing product in its
history.
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. Revenue rose 5% to $7.05
billion.
On an adjusted basis that excludes stock-based compensation and
other items, EMC said it posted earnings of 69 cents a 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 predicted adjusted earnings this year of $1.98 a share on
$26.1 billion in revenue. Analysts had projected $2.13 a share on
$26.21 billion in revenue.
Write to Don Clark at don.clark@wsj.com and Angela Chen at
angela.chen@dowjones.com
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