EMC ticks higher after guiding in-line, upping buyback

|By:, SA News Editor

EMC (EMC +1%) is reiterating 2014 revenue guidance of $24.575B, and raising 2014 EPS guidance by a penny to $1.91; that roughly matches a consensus of $24.57B and $1.91.

With Elliott Management circling, the company now plans to buy back $3B worth of shares in 2014, up from a prior $2B. $600M was spent on buybacks in Q2, and $390M in Q1.

Not surprisingly, EMC rejects Elliott's call to divest VMware (VMW +1.8%), and uses its earnings slides (.pdf) to point to synergies yielded by a "federation" strategy that involves holding onto VMware and Pivotal.

Information Storage revenue (67% of total) rose 7% Y/Y in Q2 with the help of new products, a turnaround from Q1's 3% drop. High-end storage was still weak, declining 14% to $1.03B ahead of a VMAX refresh. But unified storage and backup/recovery (VNX, Data Domain) +6% to $1.57B, and emerging storage (flash and object storage, scale-out NAS) +52% to $470M. Other storage -6% to $900M.

RSA Security +6% to $240M, content management +4% to $160M, Pivotal +29% to $54M.

Product revenue only rose 2% Y/Y, while services revenue (more stable) rose 9%. Gross margin fell 50 bps Y/Y to 63.8%, and op. margin 160 bps to 22.6%, thanks partly to healthy increases in R&D and .SG&A spend.

VMware is moving higher, following an initially muted reaction to its Q2 beat and in-line guidance. CLSA has upgraded shares to Buy, citing the strength of new products and the potential for a spinoff.

Q2 results, PR