Over 20% Upside For EMC
Chris DeMuth Jr. • 43 Comments
Chris DeMuth Jr. • 43 Comments
EMC: As Growth Begins To Accelerate, Shares Remain Undervalued
Helix Investment Research • 12 Comments
Helix Investment Research • 12 Comments
Jan. 12, 2015, 10:04 AM
- Jose Almeida, the CEO of medical device/supplies giant Coviden, and Donald Carty, the former CEO of American Airlines, are joining EMC's (EMC -1.8%) board, thereby increasing its size to 13. (PR)
- Activist Elliott Management, which has been aggressively lobbying EMC to spin off VMware (VMW +3.1%), is said to have "worked collaboratively with EMC to identify and review candidates." As part of the deal, Elliott has "agreed to certain limited standstill and voting provisions through September 2015, including voting in favor of the Company's proposed slate of directors at EMC's 2015 Annual Meeting."
- EMC is trading lower following the truce, thanks in part to a broader market selloff, while VMware is up strongly. With the opposite having typically happened in response to spinoff-related reports, the market is assuming the deal lowers odds of a spinoff, at least in the near-term.
Dec. 18, 2014, 2:04 PM
- With the help of stronger-than-expected hardware sales, Oracle (ORCL +9.2%) beat FQ2 estimates in spite of a 400 bps forex headwind (twice what was originally expected). FQ3 guidance was conservative after taking forex pressures into account.
- The numbers have been good enough for Oracle to surge to new highs and receive a slew of target hikes, and to lead many enterprise tech names to outperform amid a big market rally. The Nasdaq is up 1.9%.
- Microsoft (MSFT +3.2%), Cisco (CSCO +2.3%), EMC (EMC +3.7%), VMware (VMW +5.1%), and beaten-down IBM (IBM +2.8%) are among the enterprise tech names outperforming today. Others: SPLK +4.6%. CA +3.5%. RHT +3.4%. VRNS +6.3%. PCTY +5.8%. JIVE +4.6%. VMEM +5.2%. SAAS +4.7%. BRCD +3.8%.
- Oracle's healthy cloud software numbers are drawing attention: While traditional software license revenue fell 4% Y/Y, its SaaS/PaaS revenue rose 41%. SaaS/PaaS bookings totaled $170M, and are expected to be "well over" $1B in FY16 (ends May '16). Fusion cloud app bookings rose over 100%.
- On the CC (transcript), Oracle performed its customary trash-talking of cloud app rivals. "We are clearly growing faster than Salesforce (CRM +4%) and were more than three times the size of Workday (WDAY +3.2%)." Both firms are posting solid gains.
- Oracle's numbers come as Bloomberg reports the Chinese government is looking to "purge most foreign technology from banks, the military, state-owned enterprises and key government agencies by 2020." IBM, Cisco, and other U.S. firms have already seen their Chinese sales fall sharply following last year's NSA spying uproar.
Dec. 12, 2014, 8:33 AM
- EMC (NYSE:EMC) declares $0.12/share quarterly dividend, in line with previous.
- Forward yield 1.57%
- Payable Jan. 23; for shareholders of record Jan. 2; ex-div Dec. 30.
Nov. 26, 2014, 6:58 PM
- Pivotal, which EMC and VMware (NYSE:VMW) spun off from their core ops in late 2012, is laying off 60 employees, sources tell CRN. The company reportedly has 1,800 workers.
- Though EMC announced IPO plans for Pivotal back in March 2013, no offering appears to be on the horizon for now. The company's product line is headlined by its Greenplum analytics database and Cloud Foundry app platform (PaaS); each faces plenty of competition. A Big Data Suite featuring Greenplum and several other analytics-focused products was launched in April.
- Pivotal had Q3 revenue of $58M (+23% Y/Y), and an op. loss of $52M. GE paid $105M last year to buy a 10% stake.
Nov. 5, 2014, 12:56 PM
- Greenlight Capital made a new "medium-sized" investment in EMC (EMC +0.5%) in Q3, David Einhorn discloses in his quarterly letter. Greenlight took a 2.9M-share position in EMC back in Q4 2013.
- Much like Elliott Management (pushing for a VMware spinoff) and Barron's, Einhorn thinks EMC is undervalued on a sum-of-the-parts basis. He notes EMC's core storage ops are implicitly valued at less than 5x EBIT, and that management "acknowledges that the combined business trades at a discount and has recently committed to trying to address it in early 2015."
- He's much less kind to Amazon (AMZN -1.2%), asserting the company's latest numbers are especially disappointing since they suggest the growth used to justify a dearth of profits is slowing, and in doing so is yielding higher losses.
- Einhorn: "One of the principal bullish assumptions supporting many bubble stocks is, 'the company is growing too fast to be very profitable.' We think AMZN is just one of the many stocks for which this narrative will ultimately prove false."
- Einhorn doesn't explicitly state he's short Amazon, though he does say Greenlight increased its exposure to "bubble basket" shorts in Q3.
Oct. 28, 2014, 1:41 PM
- Art Coviello is being replaced as the operational head of EMC's (EMC +0.4%) RSA security hardware/software unit by product SVP Amit Yoran. Coviello will remain the unit's executive chairman.
- Separately, the storage giant has created a new cloud management/orchestration unit that (in-line with EMC's recent software investments and acquisitions) will create products for managing workloads spread out between many different cloud platforms.
- Brian Gallagher, the head of the new unit: "If you buy into the idea of hundreds and thousands of clouds, like we do, then you buy into the idea of a need for software to broker the movement of workloads between them ... Analysts tell us this will be a $2 billion opportunity in two years."
- RSA had Q3 revenue of $261M (+4% Y/Y). Its gross margin was 66.3%.
Oct. 28, 2014, 1:26 PM
- EMC (EMC +0.5%) has acquired Maginatics, provider of a software platform built from the ground up to jointly manage public and private cloud storage. It has also acquired Spanning, provider of a data backup/recovery service for cloud business apps. Terms are undisclosed.
- EMC touts Maginatics' ability to provide a global namespace (enabled by its Virtual Filer file system) for far-flung cloud storage resources, thereby simplifying data management and protection. Its platform also uses client software that optimize storage delivery based on device type.
- "This would provide EMC with the industry’s most capable cloud and on-premise software defined storage platform," said industry analyst Ben Woo ahead of the deal (rumors existed). Woo added EMC could integrate Maginatics' offerings with its ViPR platform for managing on-premise storage.
- The purchases follow the acquisitions of cloud infrastructure (IaaS) software firm Cloudscaling and cloud storage software firm TwinStrata, and mesh with a broader EMC effort to deliver storage platforms that work with both EMC and non-EMC hardware; the 2013 ScaleIO acquisition also fits with this goal.
- In tandem with the acquisitions, EMC has unveiled its Enterprise Hybrid Cloud platform, which the storage giant claims can allow a hybrid cloud to be set up in 28 days.
- The solution relies on several VMware (VMW +1.5%) products, including its virtualization, IT self-service, and cloud/data center management software. It also features EMC storage hardware (VMAX, VNX, Vblock, and Avamar) and software (ViPR, VPLEX), and integrates with VMware's vCloud AIR IaaS platform.
- Microsoft is already a major player in the hybrid cloud software/services space (via Azure), and various supporters of the OpenStack IaaS platform (IBM, H-P, Cisco, Red Hat, etc.) have their own efforts underway.
Oct. 22, 2014, 9:28 AM
- Confirming yesterday's Bloomberg report, Cisco (NASDAQ:CSCO) and EMC state the latter will take control of the companies' VCE JV. Cisco's stake will be cut to 10% from 35%, VMware (currently has a sub-10% stake) will maintain an interest, and the business will be included in EMC's income statement after the deal closes in Q4.
- The companies add VCE was on a $2B/year run rate for its Vblock converged server/storage/networking systems exiting Q3, and that the quarter was its sixth consecutive one of 50%+ Y/Y growth. VCE previously forecast 2014 sales of $1.8B. Gartner and IDC have ranked VCE the leader in a converged infrastructure market that also features Oracle, H-P, IBM, and Dell.
- The Vblock like makes use of Cisco's servers and data center switches, EMC's storage systems, and VMware's virtualization and systems management software. Cisco, EMC, and VCE have "existing and renewed multi-year engineering, resell and support agreements" between them.
- Nonetheless, Cisco's decision to cut its VCE stake could pave the way for it to directly compete against Vblock through its UCS server ops, particularly given the recent launch of the UCS Mini (less powerful than Vblock hardware, but also a converged system).
- Separately, EMC has issued nearly in-line guidance to go with its its mixed Q3 results: The company expects 2014 revenue of $24.5B and EPS of $1.90 vs. a consensus of $24.54B and $1.91.
- EMC +0.7% premarket. CSCO +0.3%.
Oct. 22, 2014, 7:05 AM
- EMC (NYSE:EMC): Q3 EPS of $0.44 misses by $0.02.
- Revenue of $6.03B (+8.8% Y/Y) beats by $30M.
- Shares +0.62% PM.
Oct. 21, 2014, 7:48 PM
- Bloomberg reports EMC plans to announce tomorrow it's buying out much of Cisco's (NASDAQ:CSCO) stake in the companies' VCE JV, which sells high-end integrated server/storage/networking systems (the Vblock line). EMC owns 58% of VCE, and Cisco 35%.
- The report shortly follows a statement from EMC that the company will be announcing a "new business development" tomorrow, to go with its Q3 report.
- Taking a larger stake in VCE would allow EMC to recognize the fast-growing unit's sales in its quarterly results at a time when its standalone storage hardware sales remain pressured by high-end weakness. In May, VCE predicted its sales would rise 80% in 2014 to $1.8B.
- Cisco stated in July it had invested $716M in VCE, and recorded $644M in losses related to it, since the JV's 2010 founding. CRN reported two weeks ago Cisco is thinking of "ending further financial investment in VCE."
- Letting EMC take control of VCE would leave Cisco's server efforts focused on its UCS blade/rack server line (leveraged by VCE), which has been growing quickly itself and is now on a $3B/year run rate. Cisco recently added an integrated system to its UCS lineup (the UCS Mini), albeit one less powerful than VCE's systems.
- EMC is now only up 1.1% AH. Shares were previously higher on hopes the "new business development" would be a VMware (NYSE:VMW) spinoff. VMware, meanwhile, is now only down 1.4% AH after providing light Q4 guidance.
Oct. 21, 2014, 6:13 PM
- VMware (NYSE:VMW) has guided in its Q3 earnings CC slides (.pdf) for Q4 revenue of $1.67B-$1.71B, mostly below a $1.71B consensus. License revenue is expected to grow 11%-14% Y/Y; it was up 13% in Q3, and 16% in Q2.
- Meanwhile, parent EMC, which is set to report tomorrow morning, says it plans to disclose a "new business development." That appears to be fueling hopes a full VMware spinoff will be announced.
- EMC has already been reported to be thinking of fully unloading its VMware stake, as sought by Elliott Management.
- Earlier: VMware beats Q3 estimates
Oct. 21, 2014, 5:30 PM
Oct. 20, 2014, 9:19 AM
- IBM missed Q3 estimates, pulled its $20 2015 EPS forecast, and respectively reported 15% and 7% Y/Y drops in hardware revenue and services backlog.
- Big Blue also stated it "saw a marked slowdown in September in client buying behavior," and declared its numbers "also point to the unprecedented pace of change in our industry" (at least partially a reference to cloud services adoption).
- SAP missed Q3 revenue estimates (while posting in-line EPS), reported a 3% Y/Y drop in traditional software license revenue, and (citing the cloud transition) cut its full-year op. profit outlook.
- Microsoft (NASDAQ:MSFT) -0.8% premarket. H-P (NYSE:HPQ) -2% premarket. Oracle (NYSE:ORCL) -1.8%. EMC -0.8%. There's a good chance other enterprise IT names will trade lower as well.
Oct. 15, 2014, 3:52 AM
- Hewlett-Packard's (NYSE:HPQ) on-off merger talks with EMC (NYSE:EMC) are dead after months of negotiations, Reuters reports, adding that H-P could disclose the news today.
- The companies were still trying to forge a deal last week but couldn't agree on price.
- The development is unlikely to please activist investor Elliott Management, which wants EMC to pursue merger or spinoff opportunities.
Oct. 13, 2014, 5:51 PM
- Cloudscaling provides software for operating private and hybrid clouds based on the increasingly popular OpenStack cloud infrastructure (IaaS) platform. The startup argues its offerings are differentiated by more efficient virtual machine usage and strong interoperability (via APIs) with various public cloud services.
- Bloomberg reports EMC bought Cloudscaling for less than $50M. The purchase comes on the heels of the July acquisition of cloud storage management software vendor TwinStrata, and is the latest example of the storage giant's efforts to grow its arsenal of software that can manage both EMC and non-EMC hardware.
- Cisco, H-P, and Red Hat have also bought OpenStack startups in recent months, as enterprises and service providers give their support to a platform pitched as an open-source alternative to Amazon, Google, and Microsoft's proprietary offerings. GigaOm sees a consolidation wave afoot, and notes Cloudscaling founder Randy Bias "is well-regarded in OpenStack circles."
- Subsidiary VMware might have mixed feelings about the purchase, given its vCloud platform competes against OpenStack. However, VMware (perhaps simply out of necessity) has been gradually warming up to OpenStack itself.
Oct. 9, 2014, 2:07 PM
- After previously following equity markets lower, VMware (VMW +0.2%) has spiked towards breakeven. dealReporter states (citing sources) several suitors have expressed interest. EMC (EMC -1%) has also ticked higher, but remains down on the day.
- Elliott Management continues to push hard for EMC to fully spin off VMware. Though EMC has been reported to be mulling the idea, the company hasn't publicly signaled it's willing to make such a move. H-P's reported merger talks with EMC are said to have been driven by an interest in acquiring VMware.
- VMware's size - its market cap is currently $40B - limits the number of companies that can digest it, especially after an M&A premium is baked in.
EMC Corp. is an information technology company, which develops, delivers and supports a range of information infrastructure and virtual infrastructure technologies, solutions and services. It enables businesses and service providers to transform their operations and deliver information... More
Industry: Data Storage Devices
Country: United States
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