Fri, Jul. 31, 8:40 AM
Thu, Jul. 23, 10:01 AM
- Four months after downgrading EMC (EMC +2.1%) to Market Perform in the wake of its investor meeting - a lack of near-term catalysts was cited - Wells Fargo's Maynard Um has upgraded back to Outperform in the wake of the storage giant's Q2 report, while setting a $29-$31 valuation range.
- This time, Um cites the potential for positive strategic moves by year's end, including (curiously, given many others have argued a full spinoff would be a positive) a buy-in of the ~20% of VMware EMC doesn't own.
- Meanwhile, during yesterday's earnings call (transcript), CEO Joe Tucci stated EMC has launched a program to lower its cost base by $850M/year by the end of 2016. Only $50M worth of cost savings are expected this year.
- Tucci also mentioned EMC's board is "deeply engaged in a smart navigation" of its CEO succession process. Three years ago, Tucci suggested he would retire by Feb. 2015.
- Shares +4.2% since EMC posted a Q2 EPS beat and offered light guidance on Wednesday morning.
Wed, Jul. 22, 10:22 AM
- With expectations low going in - a raft of downgrades have arrived in recent months, EMC is higher in spite of guiding for 2015 revenue of $25.3B and EPS of $1.87, below a consensus of $25.6B and $1.90. Full-year free cash flow guidance has been cut by $100M to $4B.
- Product revenue remained under pressure in Q2, falling 3% Y/Y to $3.22B. Services revenue (driven by past product sales) rose 8% to $2.77B. Gross margin fell 190 bps Y/Y to 61.9%, and op. margin fell 320 bps to 19.4%.
- EMC's core Information Storage ops saw revenue rise 1% Y/Y to $4.03B. High-end storage sales fell 13% to $892M and unified & backup/recovery sales (mid-range) fell 9% to $1.43B, but emerging storage (flash, scale-out NAS, object storage) rose 49% to $718M, "other" storage (includes VCE's converged systems) rose 18% to $496M.
- VMware (up 3.6%) saw revenue rise 10% Y/Y to $1.6B, with license revenue rising 4% to $638M; guidance was in-line. End-user computing (PC virtualization/enterprise mobility), NSX (networking virtualization/SDN), and VSAN (storage virtualization) were strong points for VMware, while traditional vSphere server virtualization licenses were soft. RSA Security revenue fell 2% to $238M, and ECD (content management software) revenue fell 3% to $155M.
- $718M was spent on buybacks. EMC still plans to buy back $3B worth of shares in 2015.
- Q2 results, PR, earnings slides (.pdf)
Wed, Jul. 22, 7:01 AM
Tue, Jul. 21, 9:35 PM
- After posting a Q2 beat, VMware (NYSE:VMW) guided on its CC for Q3 revenue of $1.645B-$1.665B (+9%-10% Y/Y) and EPS of $0.98-$1.00, in-line with a consensus of $1.66B and $1.00. Likewise, full-year guidance is for revenue of $6.575B-$6.685B (+9%-11% Y/Y) and EPS of $3.97-$4.03 vs. a consensus of $6.65B and $3.99.
- License revenue (drives future services revenue) rose 4% Y/Y in Q2 to $638M, at the high end of a 3%-4% guidance range. VMware forecasts 6%-7% Q3 license growth, and 5%-7% full-year growth (prior guidance was 4%-7%). Services revenue (fueled by past deals) rose 14% in Q2 to $959M.
- Notably, VMware's costly enterprise license agreements (ELAs) made up 39% of bookings, up from Q1's 30% and matching seasonally strong Q4's 39%. Seven $10M+ deals helped out.
- The NSX networking virtualization/SDN platform now has 700+ paid customers, up from 400+ at the beginning of the year. VSAN storage virtualization customers have doubled over the same time to 2K+.
- End-user computing (EUC) license bookings rose over 30% Y/Y; desktop and AirWatch (enterprise mobility) license bookings respectively rose over 15% and 60% Y/Y in constant currency. When contrasted with VMware's total license growth, the EUC, NSX, and VSAN numbers suggest traditional vSphere server virtualization license sales remain under pressure.
- The unearned revenue balance rose 10% Y/Y to $4.8B. $412M was spent on buybacks; VMware expects to buy back $1.25B in 2015. Forex had a 4% impact on revenue growth.
- VMW +0.7% AH to $83.75. Parent EMC reports Wednesday morning.
- Q2 results, PR, earnings slides (.pdf)
Tue, Jul. 21, 5:30 PM
Tue, Jul. 14, 11:05 AM
- Summit Research has downgraded EMC (EMC -1.4%) to Hold ahead of the storage giant/VMware owner's July 22 Q2 report, and cut its target by $8 to $26. OTR Global has downgraded from Mixed to Positive.
- Shares are less than $0.60 removed from a 52-week low of $25.07. They now trade for 12x a 2016 EPS consensus of $2.12.
- Yesterday: Einhorn exits EMC position in Q2
- Update: EMC closed down 3.2%.
Mon, Jul. 13, 4:32 PM
- "When the company announced a confusing merger with Alcatel-Lucent ... we used the opportunity to exit with a healthy gain," writes David Einhorn in his Q2 letter, explaining Greenlight Capital's unloading of its Nokia (NYSE:NOK) position.
- Regarding his decision to exit EMC, Einhorn cites "the reduced odds of any favorable change to the corporate structure and increasing concerns about a lack of growth in the storage business." EMC is 4 months removed from formally stating it doesn't plan to spin off its 80% VMware stake.
- Regarding Marvell (NASDAQ:MRVL), a position held for years, Einhorn cites weak PC demand as a reason for exiting following a 15% compounded annual return. His disclosure comes on a day Marvell rose 5.4% thanks to a report of buyout interest from a Chinese investment firm.
- Echoing the bullish arguments he has made for rival Lam Research (NASDAQ:LRCX), Einhorn says he took a small position in Applied Materials (NASDAQ:AMAT) out of a belief AMAT's core etch/deposition equipment markets will outgrow the broader chip equipment industry "due to the increased use of 'multi-patterning' to produce chips at geometries below [20nm]." He predicts results will improve as management turns its attention from the abandoned Tokyo Electron merger towards "growth and cost savings opportunities." With Einhorn's help, AMAT rose 2.9% today.
- "It's a cyclical business and, regrettably, we missed the turn of the cycle," says Einhorn about Micron (NASDAQ:MU), Greenlight's biggest Q2 loser. However, he still thinks the DRAM industry is acting more rationally following consolidation, notes shares trade at "less than 12x annualized trough earnings and less than 5x prior peak earnings," and predicts future cycles will have higher peaks and troughs.
- Over the long run, Einhorn expects Micron ($19.1B market cap) to be worth more than Netflix (NFLX - $42.9B market cap), whose recent surge he considers quite unjustified. "In today's market, the best performing stocks are companies with exciting stories where accountability is in the distant future." He adds Season 3 of House of Cards "appeared to be scripted to compete with Ambien,"
- Worth noting: While Einhorn has a good track record going long, his short picks have been more hit-and-miss.
Tue, Jul. 7, 1:45 PM
- Skyview Capital is acquiring EMC's (EMC - unchanged) Syncplicity enterprise cloud storage, file-sharing, and collaboration platform for an undisclosed sum. EMC will maintain a stake in the business.
- EMC bought Syncplicity back in 2012. The business has faced competition from Box (generally seen as a market leader), Dropbox, Microsoft, Google, and Citrix, among others.
- Separately, a bio page for an M&A lawyer (uncovered by The Register) indicates EMC paid $1B last year to buy high-end flash storage array startup DSSD. EMC hasn't disclosed a purchase price for DSSD, which has been working on arrays aimed at I/O-intensive workloads such as in-memory databases and big data/analytics projects.
Tue, Jun. 16, 6:07 PM
- Identity Manager, offered either as a cloud service or through on-premise deployments, allows enterprise users to sign on to popular Web, PC, and mobile apps with a common ID. It's offered as a part of VMware's (NYSE:VMW) AirWatch enterprise mobility management (EMM) platform.
- Many other companies have already launched single sign-on offerings; rival Microsoft includes one in its Enterprise Mobility Suite. VMware asserts Identity Manager is set apart by its AirWatch integration (said to enable stronger/simpler authentication), a customizable app portal, and conditional access controls allowing IT admins to decide whether a device should be managed or not.
- Meanwhile, Longbow's Joe Wittine has defended VMware parent EMC a day after FBR downgraded to Market Perform. Following checks with European IT resellers, Wittine reports "favorable commentary on EMC's converged offerings (VCE, VSpex, and new products) is widespread, and more bullish than we were expecting."
- He also thinks demand for EMC's mid-range VNX storage systems is steady (aided by U.S. price discounts), and that projects delayed at the end of Q1 closed in Q2. Converged systems are seen driving potential upside.
Mon, Jun. 15, 9:27 AM
- FBR's Daniel Ives: "We are downgrading [EMC] from Outperform to Market Perform and lowering our price target from $31 to $28 (~13x our FY16 pro forma EPS estimate) in light of the company's weakening fundamentals, management's dogmatic view around VMware (NYSE:VMW), and execution issues that lower our confidence in management’s ability to steer this company back to normalized growth and margins over the coming quarters."
- He adds EMC's core storage ops have performed inconsistently in recent quarters - the company is counting on a May refresh unveiled at the EMC World conference to provide a lift - and sees "lackluster growth prospects in 2H15/ FY16."
- Large buybacks, new product lines (XtremIO, ViPR, ScaleIO, VMware's NSX and AirWatch platforms), and the Virtustream acquisition are still viewed favorably, and Ives thinks activists (Elliott Management?) could potentially "put a floor on EMC's shares." However, he also believes "the company will need more M&A to help find its next growth act, as its core business remains very mature and may have inherent challenges ahead given the shift to the next-generation datacenter and the evolving role of storage capabilities/needs for enterprises going forward in a virtualized world."
- EMC -1.4% premarket to $26.68. Piper, FBN, and Pac Crest downgraded EMC in March/April, often while citing competitive and secular growth concerns. Bernstein upgraded, citing weak sentiment and multiple value-creation levers.
Tue, Jun. 9, 1:42 PM
- Summit Research's Srini Nandury thinks Nimble Storage's (NYSE:NMBL) recent rally has been fueled by M&A hopes ... and considers them justified. He believes Cisco (NASDAQ:CSCO), EMC, and NetApp (NASDAQ:NTAP) could be among the larger OEMs willing to bid for the hybrid storage array upstart.
- Nandury: "Given that Nimble is one of the best Hybrid storage assets in the market, any buyout offer for Nimble will likely trigger a bidding war as we had seen previously with both Data Domain and 3Par. And, given that Nimble is executing solidly in both SMB and enterprise storage environments, and is expected to roll out both NAS and Object storage in the near-term (12-18 months) and will most likely get acquired, we reiterate our BUY rating on the stock and maintain our $40 PT."
- EMC has bought flash array vendors XtremIO and DSSD; Cisco has bought flash vendor Whiptail; and hard drive giants Seagate and Western Digital have also used M&A to expand their flash offerings. NetApp has relied more on internal R&D to flesh out its product line, but the company's recent top-line woes and CEO change have fueled speculation it could turn to M&A.
- Of note: With a market cap of $2.2B (a deal premium could bring it near $3B), Nimble would be digestible for larger industry players, but not cheap.
Thu, Jun. 4, 4:30 PM
- HP (NYSE:HPQ) was "nearing a deal to acquire Computer Sciences Corp. (NYSE:CSC) last month until the talks broke down," Bloomberg reports. According to one source, HP "doesn’t intend to revisit" deal talks.
- With a current market cap of $9.7B (an M&A premium could have pushed its valuation above $11B), CSC would at least have been HP's biggest acquisition since the ill-fated 2011 Autonomy purchase. CSC, which has reportedly tried to sell itself in prior years as well, is 2 weeks removed from announcing it's breaking up into a commercial IT services firm and a U.S. public sector services firm.
- HP, whose own breakup takes effect in 5 months, has suggested its enterprise ops (to be known as Hewlett-Packard Enterprise post-breakup) could make big purchases - the company recently closed a $3B deal to buy Wi-Fi hardware/software vendor Aruba Networks. Raymond James speculated today HP will buy EMC (current market cap of $52.4B), in part to get hold of VMware (NYSE:VMW).
- Separately, HP says it will show off a prototype of its cutting-edge Machine computer architecture next year; the system will pack 2,500 CPU cores and 320TB of DRAM within a single server rack. By 2020, HP wants to offer Machine servers relying on Memristors, a next-gen memory format that would replace both DRAM and hard drives/NAND flash.
Tue, May 26, 8:16 AM
- When the deal closes (expected in Q3), Virtustream will form EMC's new managed cloud services business. "The acquisition represents a transformational element of EMC's strategy to help customers move all applications to cloud-based IT environments," says the company.
- Virtusteam will operate as a separate EMC Federation business, with current CEO Rodney Rogers reporting to EMC chief Joe Tucci.
- The all-cash deal is expected to have no material impact to EMC's 2015 results, but should be additive to revenues and accretive to EPS in 2016.
- Source: Press Release
Fri, May 22, 9:24 AM
Fri, May 15, 12:40 PM
- Dan Loeb's Third Point LLC exited its 10M-share Alibaba (BABA - unchanged) position in Q1, after having upped its stake in the Chinese e-commerce giant in Q4. (13F filing)
- The firm also unloaded its 7M-share position in EMC (EMC -0.1%), which confirmed during the quarter it doesn't plan to spin off VMware, and a 4M-share stake in Williams (WMB +1.3%).
- A 3.3M-share stake was taken in Yum Brands (YUM +3.6%), a 900K-share stake in FedEx (FDX +0.7%), a 1.15M-share stake in J.M. Smucker (SJM -0.1%), and a 626K-share stake in McKesson (MCK). Loeb also respectively took 1.6M-share and 3.5M-share stakes in chipmakers NXP (NXPI +0.2%) and Maxim (MXIM +0.4%).
- Stakes were increased in Delta Air Lines, Actavis, FleetCor, and Roper Technologies, and decreased in Amgen, Ally Financial, eBay, Phillips 66, and Anheuser Busch. Interestingly, a modest 90K-share position was taken in top Alibaba rival JD.com (JD -0.8%).
- Meb Faber observes someone tracking Loeb's top 10 picks since 2000 would have obtained a 12.4% annual return since 2000 (504.8% overall), soundly beating the S&P 500's 4.4% (95.4% overall).
EMC Corp supports the businesses and service providers to transform information technology (IT) operations to an as a service model (ITaaS). It operates in three segments: EMC Information Infrastructure, Pivotal and VMware Virtual Infrastructure.
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