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EMC falls after Q3 miss caused by storage weakness; NetApp also lower

  • Even as 80%-owned VMware flies higher thanks to its Q3 beat and guidance/CC remarks, EMC (EMC -4.8%) is lower after missing Q3 estimates thanks to a rough quarter for its core storage business. Full-year EPS guidance has been lowered to $1.80 from $1.85 (consensus is $1.86). NetApp (NTAP -2.2%) is off in sympathy.
  • EMC's core Information Storage unit had 1% Y/Y sales growth vs. 4% in Q2. Product sales were down slightly, services +3%. While emerging storage sales (inc. Isilon, Atmos, flash storage) rose 66% Y/Y to $380M, high-end storage sales (Symmetrix) -8% to $1.05B, unified & backup/recovery (inc. mid-range hardware) +3% to $1.47B, other storage -6% to $880M.
  • The RSA security unit was a bright spot, sales +11% to $250M. EMC and VMware's Pivotal spinoff, set to go public, had revenue of $80M (+21% Y/Y).
  • Thanks in part to VMware, North American sales +3%, EMEA +8%, Asia-Pac +8%, Latin America +13%. EPS was boosted by $1B in buybacks. Gross margin was 63.9%, -20 bps Y/Y.
  • A major question likely on investors' minds: how much of the storage weakness is due to a demand shift towards cloud infrastructure providers and Internet giants relying on some combo of commodity and flash hardware?
  • Q3 results, PR, slides
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