Data storage products maker EMC Corp, under pressure from activist investor Elliott Management to boost shareholder returns, accelerated its share buyback plan and raised its current-year profit forecast. The company raised its share buyback plan to $3 billion from $2 billion for 2014 and said it expects to return more than $7 billion to shareholders over the course of 2013 and 2014 in the form of buybacks and dividends.
The Wall Street Journal reported on Monday that Elliott Management Corp had taken a $1 billion stake in EMC with the aim of pushing it to spin off its VMware Inc virtualization software unit. "The share buyback increase is a positive, although I would have expected the full year EPS to be raised further given the EPS beat by 1c (1 cent) in Q2 and the reduction in shares due to the buyback," Macquarie Securities analyst Rajesh Ghai told Reuters.
EMC raised its full-year adjusted profit forecast to $1.91 per share from $1.90. The company also reaffirmed its full-year revenue outlook of $24.575 billion. Analysts were expecting an adjusted profit of $1.90 per share on revenue of $24.57 billion, according to Thomson Reuters I/B/E/S. "Although guidance was essentially in line with the Street, we would characterize the company's 2Q results as respectable for EMC," FBR Capital Markets analyst Daniel Ives said.
"(Results) should give investors some optimism that the company's next-generation datacenter vision is starting to play out in the field." Net income fell to $589 million, or 28 cents per share, in the second quarter ended June 30, from $701 million, or 32 cents per share, a year earlier, the company said on Wednesday.
Excluding items, the company earned 43 cents per share, in line with analysts' average estimate. Revenue rose about 5 percent to $5.88 billion, helped by higher sales of newer flash storage products. Analysts had expected revenue of $5.83 billion. FBR Capital's Ives called the company's results "a victory and a step in the right direction." Excluding the company's slow-growing high-end storage business, information storage revenue rose 7 percent. Sales at its emerging storage unit, which makes network-attached, cloud and all-flash storage products, jumped 52 percent.
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