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.
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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