Data storage company EMC gives muted outlook, to cut jobs
(Reuters) – Data storage equipment maker EMC Corp, which has been under pressure from activist investor Elliott Management Corp, forecast a lower-than-expected profit for the year and said it would cut jobs.
Elliott, led by Paul Singer, has urged the company to spin off its virtualization software unit VMware and pursue merger opportunities to “maximize long-term value”.
The company reached a standstill agreement with Elliott this month, under which the investor agreed to refrain from agitating the company until September.
EMC company said on Thursday it expected to take a charge of about $130 million-$150 million in the first quarter ending March related to the restructuring charges.
The company did not specify the number of jobs it would cut.
EMC, which owns 80 percent of VMware Inc, also said it expected to buy back up to $3 billion in shares this year.
“Buybacks, restructuring, that’s all bread … The meat and potatoes of what investors want to see is major change around the ownership structure with VMware,” FBR Capital Markets analyst Daniel Ives said.
EMC comprises four main businesses – its core data-storage unit, VMware, enterprise security business RSA and cloud-computing software maker Pivotal.
The company, which cited a stronger dollar for its muted outlook, said it expected 2015 adjusted profit of $1.98 per share on revenue of $26.1 billion.
Analysts on average were expecting a profit of $2.13 per share on revenue of $26.21 billion, according to Thomson Reuters I/B/E/S.
Up to Wednesday’s close, the dollar had risen more than 17 percent in the past 12 months. EMC earns nearly half of its revenue from international markets.
The company said it expects spending growth on IT and storage in constant currency this year to be a little stronger than in 2014.
For the December quarter, net income attributable to EMC shareholders rose slightly to $1.14 billion, or 56 cents per share, from $1.02 billion, or 48 cents per share, a year earlier.
On an adjusted basis, the company earned 69 cents per share.
Revenue rose 5.5 percent to $7.04 billion.
Analysts on average had expected a profit of 68 cents per share or revenue of $7.10 billion.
EMC shares were down marginally in early trading on the New York Stock Exchange on Thursday.
(Reporting by Abhirup Roy in Bengaluru; Editing by Joyjeet Das and Saumyadeb Chakrabarty)