EMC Earnings: Weakness In Hardware Remains, Non-Core Businesses Drive Growth

April 21st, 2016 by Trefis Team
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EMC (NYSE:EMC) announced its first quarter results on April 20, reporting a 2% year-over-year decline in revenues to just under $5.5 billion. [1] The company has witnessed a slowdown in the hardware business over the years, leading to consistent year-over-year declines in product sales over the last few quarters. Comparatively, EMC-owned VMware (NYSE:VMW) has performed well over the last few years to offset the decline in core storage hardware sales. Below is a summary of Q1 financial results for EMC.

EMC_Q1Earnings1Top-line growth was driven by the two fast-growing segments within EMC – VMware and Pivotal. This trend has been consistent over the last couple of years. Similarly, services have grown at a faster pace than combined product sales across the company’s various divisions.

EMC_Q1Earnings2Solid demand for content management software and services through the quarter led the Enterprise Content division’s gross margin to expand by 280 basis points to 68%. Managed cloud services are likely to continue to be more profitable for IT service providers. [2]

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EMC_Q1Earnings3

The company has not provided any guidance for 2016 due to the pending acquisition by Dell, which is likely to be completed by Q3 this year. [3]

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  Our Full Analysis For EMC.

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Notes:
  1. EMC Reports First Quarter 2016 Results, EMC Press Release, April 2016 [↩]
  2. Cloud Managed Services Market worth $118.43 Billion by 2020, Markets and Markets, May 2015 [↩]
  3. EMC Q1 2016 Earnings Call Transcript, Seeking Alpha, April 2016 [↩]