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EMC: Fiscal 4Q15 Financial Results

Information storage revenue down 4% Y/Y and up 17% Q/Q

(in $ million) 4Q14 4Q15 FY14 FY15
Revenue 7,048 7,014 24,440 24,704
Growth   -1%   1%
Net income (loss) 1,213 833 2,894 2,172

Highlights:

  • Full-year GAAP and non-GAAP revenue each up 1% year over year (up 5% on a constant currency basis); Full-year GAAP and non-GAAP EPS of $1.01 and $1.82, respectively
  • Q4 revenue flat year over year (up 3% on a constant currency basis); Q4 GAAP and non-GAAP EPS of $0.39 and $0.65, respectively

EMC Corporation reported fourth-quarter and full-year 2015 financial results.

Fourth-quarter consolidated revenue was $7 billion, flat year over year (up 3% on a constant currency basis). GAAP net income attributable to EMC was $771 million in the fourth quarter, and GAAP earnings per weighted average diluted share was $0.39 in the fourth quarter. Non-GAAP net income attributable to EMC was $1.3 billion in the fourth quarter, and non-GAAP earnings per weighted average diluted share in the fourth quarter was $0.65.

Full-year 2015 GAAP and non-GAAP revenue was $24.7 billion and $24.8 billion, respectively, up 1% year over year (up 5% on a constant currency basis2. GAAP net income attributable to EMC for 2015 was $2 billion, and GAAP earnings per weighted average diluted share was $1.01. Non-GAAP net income attributable to EMC for 2015 was $3.6 billion, and non-GAAP3 earnings per weighted average diluted share for 2015 was $1.82.

EMC generated $1.9 billion in operating cash flow and $1.5 billion in free cash flow4 in the fourth quarter, and ended the quarter with $14.8 billion in cash and investments. EMC returned approximately $229 million to shareholders via a quarterly dividend.

Joe Tucci, chairman and CEO, said: “The fourth quarter of 2015 follows 24 consecutive quarters of reported year-over-year top-line growth; an accomplishment very few of our peers have matched. 2015 brought geopolitical and other market-wide uncertainties, while secular technology trends continued to accelerate. EMC anticipated and focused on capturing the massive growth opportunity these trends will avail, and we are well equipped in 2016 with some of the most exciting technology advancements in our history.”

Tucci added: “Together, EMC and Dell will be better positioned in the market. We believe that the coming together of the companies is the best strategic option for all stakeholders. I’m pleased to report that progress on closing the transaction remains on track under the original terms and timeline.”

Zane Rowe, CFO, said: “As we work toward closing the transaction with Dell to build one of the world’s premier IT powerhouses, we continue to focus on synergies and operating efficiencies across our business. Our previously announced $850 million cost reduction and business transformation plan is on track and the initial $50 million cost reduction target was met in Q4. We are confident that we will exceed our goal, thanks to our unified team’s effort and focus.

David Goulden, CEO, information infrastructure, said: “Customers are buying ‘just enough’ and ‘just in time’ for their traditional environments. They are also transforming existing IT systems toward a hybrid cloud or building and deploying new digital applications. In some cases they are doing it all simultaneously. Against this market backdrop, our storage business revenue grew 3% in constant currency for the full year. Looking forward, I am excited about our position in 2016 as we further expand our industry-leading storage and converged infrastructure portfolio, which is built upon the architectural pillars of the modern data center – flash, scale-out, software defined, cloud enabled and trusted technologies.”

Fourth-Quarter and Full-Year 2015 Highlights
EMC Information Infrastructure business fourth-quarter revenue was down 4% year over year (down 1% on a constant currency basis2) and full-year 2015 revenue was down 2% year over year (up 2% on a constant currency basis2).

Information Storage fourth-quarter revenue was down 4% year over year (flat on a constant currency basis) and full-year 2015 revenue was down 1% year over year (up 3% on a constant currency basis).

EMC XtremIO ended the year with over $1 billion in revenue. VCE exited 2015 with an annualized demand run rate exceeding $3 billion. Virtustream ended the fourth quarter with the strongest quarterly bookings in its history.

VMware fourth-quarter and full-year GAAP revenue within EMC was up 10% and 9% year over year, respectively. Fourth-quarter and full-year non-GAAP3 revenue within EMC were both up 10% year over year (both up 13% on a constant currency basis). VMware customers continue to invest in software-defined data centers, hybrid cloud solutions and end-user computing.

Pivotal continues to gain momentum as it helps the world’s largest enterprises successfully expand their digital capabilities, with fourth-quarter revenue up 25% year over year. Pivotal continues its transition to a subscription business model, with annual recurring revenue6 up 40% compared to the previous quarter with strong performance in all geographies and product areas, while continuing to expand its customer base across many industries including automotive, financial services, insurance, retail and telecommunications.

Global Highlights
Consolidated fourth-quarter revenue from North America was flat year over year. Fourth-quarter revenue from the Europe, Middle East and Africa region was down 1% year over year (up 7% on a constant currency basis). AsiaPac and Japan fourth-quarter revenue was flat year over year (up 4% on a constant currency basis). Latin America fourth-quarter revenue was down 16% year over year (down 5% on a constant currency basis).

Given the announcement made on October 12, 2015 regarding EMC’s entry into a definitive merger agreement, the company will not be providing outlook for its 2016 financial results.

Comments

Q4 consolidated revenue totaled $7 billion, slightly decreasing Y/Y, and up 3% on a constant currency basis. However, it follows 24 consecutive quarters of Y/Y growth.

Information storage revenue is down 4% Y/Y (flat in constant currency) and up 17% Q/Q, the third quarter of the year being traditionally a flat period for EMC.

Yearly Revenue of EMC Information Storage

 in $ million 2013 2014 2015 Y/Y growth
product revenue 10,738 10,785 10,200 -5%
service revenue 5,524 5,757 6,101 6%
total 16,262 16,542 16,301 -2%

Quarterly Revenue of EMC Information Storage

 in $ million Products Services Total Q/Q growth
1Q13 2,472 1,326 3,798 -11%
2Q13 2,577 1,377 3,954 4%
3Q13 2,430 1,376 3,806 -4%
4Q13 3,260 1,445 4,705 24%
1Q14 2,302 1,378 3,680 -22%
2Q14 2,551 1,425 3,976 8%
3Q14 2,595 1,456 4,051 2%
4Q14 3,338 1,497 4,835 19%
1Q15 2,179 1,484 3,663 -24%
2Q15 2,509 1,519 4,028 10%
3Q15 2,424 1,537 3,961 -2%
4Q15 3,087 1,562 4,649 -4%

Within storage, as usual emerging storage is going well and became EMC's second largest product related bucket in Q4.

XtremIO achieved over $1 billion in revenue in 2015

The company has embarked on an initiative to re-architect their VMAX and VNX product families to use the next generation of flash technology optimally.

"These efforts take time and as a result we saw declines in these products in Q4 as customers anticipated these new products' introductions," said CEO Joe Tucci.

According to Dave Goulden, CEO, information infrastructure, "this quarter we will also introduce a new flash-optimized or flash VMAX that will significantly change the way flash is deployed in high-end primary storage. And in Q2, we will introduce a new flash-optimized mid-tier storage family which will change the used cases for flash in the mid-tier."

VCE exited the year with an annualized demand run rate of $3 billion.

Once more EMC didn't reveal outlook for next quarter and year. Six month ago the company was expected global GAAP revenue of $25.2 billion for 2015, the result being finally $24.7 billion.

Concerning the Dell acquisition, Tucci commented: "I am pleased to report that progress on closing the transaction remains on track on the original terms and timeline."
 
To read the earnings call transcript

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