--EMC reports better-than-expected earnings
--1Q revenue is less than analysts projected
--Storage company reiterates guidance for full year but says results could top its estimates
(Updates throughout with additional details and analyst comments.)
By Shara Tibken
EMC Corp.'s (EMC) first-quarter earnings rose 23% amid strong demand for its mid-range storage products, but revenue fell slightly short of expectations.
EMC's revenue topped analysts' projections throughout 2011 as the company benefited from increased demand for its data center products, such as storage. But the first quarter's revenue of $5.09 billion was a little weaker than the $5.12 billion expected by analysts, according to Thomson Reuters.
FBR Capital Markets analyst Daniel Ives said sales of EMC's high-end storage line likely were softer than in the past few years as EMC increases focus on its mid-range products.
The Hopkinton, Mass., company didn't disclose sales from such products in its earnings report. However, EMC said mid-tier storage revenue jumped 26% from the previous year.
"To some extent, they're going through a natural transition where more growth is coming from the mid-tier as well as from acquisitions," Ives said. "But we can't just look at a one quarter miss by a hair and say that puts a dent in the story."
Shares, up 35% in the year-to-date through Wednesday's close, slid 2.5% to $28.40 in premarket trading.
EMC--which sells data-center products such as storage security--has posted strong results of late as customers seek efficient ways to store and access massive amounts of documents and media. The company largely has avoided softness in tech spending in part because of its exposure to cloud computing and virtualization, which make data centers more efficient.
The first-quarter results from EMC echo those from data center giant International Business Machines Corp. (IBM) earlier this week. The company on Tuesday reported its quarterly profit rose 7.1%, but a 6.7% decline in hardware sales continued to drag down revenue growth. The company blamed the second straight quarterly hardware sales decline on a difficult year-ago comparison.
While EMC's first-quarter revenue wasn't as strong as some analysts hoped, the company reiterated its guidance for the full year. The company, however, noted its results could be stronger than its current estimates.
"Based upon our strong start to the year and our opportunity, we now have greater confidence in our ability to meet and potentially exceed our 2012 financial goals for consolidated revenue, non-GAAP EPS and free cash flow," Chief Financial Officer David Goulden said.
EMC reported a profit of $586.8 million, or 27 cents a share, up from $477.1 million, or 21 cents, a year earlier. Excluding items such as stock-based compensation, amortization, restructuring and acquisition charges, per-share earnings rose to 37 cents from 31 cents.
Analysts expected adjusted earnings of 36 cents a share.
Operating margin rose to 16.7% from 14.6%.
Product sales increased 4.7%, while services revenue soared 21%.
EMC reported revenue from its key information-infrastructure business rose 7.3% to $4.04 billion, with its with its information-storage sales up 7.3% and the RSA information-security business growing 19% from the previous year.
Along with its strength in its traditional data-storage business, EMC has benefited from its majority ownership of VMware Inc. (VMW). The company dominates the market for virtualization software, which allows users to run multiple computers' operations on a single machine. On Wednesday, VMware reported its first-quarter earnings rose 52% and revenue climbed 25% to $1.06 billion.
Stifel Nicolaus analyst Aaron Rakers noted it was "clear that VMware's strong results represented the driver of EMC's bottom-line upside."
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; [email protected]
--Melodie Warner contributed to this report.