EMC Corp. (NYSE: EMC) was already indicated higher due to reports that activist investors were going after the company to unlock value. Now the stock is up marginally after its earnings report.
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The storage and memory giant reported earnings per share (EPS) of $0.43 and $5.9 billion in revenues, versus $0.43 EPS and $5.83 billion expected by Thomson Reuters. EMC also gave annual guidance of $24.575 billion for 2014 revenue, generating adjusted earnings of $1.91 per share. Thomson Reuters has estimates at $1.91 EPS and $25.57 billion in revenues.
The real issue is just what activist investor ambitions would be here. The company noted a strong position in VMware and has increased and accelerated a stock buyback program.
EMC generated $1.3 billion in operating cash flow and $930 million in free cash flow in its second quarter. It also ended the quarter with $14.6 billion in cash and investments.
As far as VMware Inc. (NYSE: VMW), EMC said that the leader in virtualization continues to see growth with revenue up 17% year over year. EMC further said, “VMware remains focused on delivering virtualization technologies to propel its three strategic initiatives including Software-Defined Data Centers, hybrid cloud and end-user computing.”
On the activist effort, the company said that it repurchased approximately $600 million worth of its common stock as well as delivered approximately $200 million to shareholders from its dividend. Here is the effort to rebuff activists now: EMC further announced that it has approved an accelerated stock buyback plan for 2014 — up to $3 billion from $2 billion, and it plans to have completed that amount by year-end.
EMC shares closed at $28.52 and the stock was indicated up around $28.65 in early trading indications. Its shares were trading at $26.98 before the activist effort news leak occurred, and the new 52-week high is $28.86. The Thomson Reuters consensus analyst price target is up at $30.25 as of now.
VMware earnings were out on Tuesday, and that stock was indicated up over 15 at $97.10, after closing at $96.03. VMware has traded in a range of $76.51 to $112.89, and the consensus analyst price target is $110.84.
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