Greenlight Capital's fourth quarter positions (Part 2 of 8)
Greenlight Capital and EMC
Greenlight disclosed a 1% new position in storage and data provider EMC Corp (EMC) in 4Q 2013.
EMC’s 4Q results beat analyst expectations, but the company announced a restructuring plan in an SEC filing prior to the day of the results. The filing stated that EMC management approved a restructuring plan, consisting of a reduction in force, which will be substantially completed by the end of the first quarter of 2014 and fully completed by the end of 2014. The total charge resulting from this plan is expected to be approximately $100 million to $120 million, with total cash payments associated with the plan expected to be in the range of $95 million to $114 million.
EMC’s fourth-quarter revenue was $6.7 billion, up 11% compared to a year ago, and net income was up 17%, to $1 billion. Earnings per share increased 11% year-over-year, to $0.60 per share. Revenue was up 11% year-over-year, to $6.7 billion. Although EMC’s core storage market saw a slowdown, the Emerging Storage business accelerated revenue to 73% year-over-year. In the fourth quarter, EMC’s majority-owned VMware (VMW), which provides virtualization and cloud infrastructure solutions, posted revenue of $1.48 billion, an increase of 15% from the fourth quarter of 2012. VMware, in January, entered into a definitive to acquire AirWatch for around $1.54 billion. AirWatch provides enterprise solutions for mobile device management, mobile application management, and mobile content management. Pivotal, which is a spinoff of EMC and VMware’s cloud computing and big-data businesses, posted revenue of $91.0 million, a 6.2% decline from the same quarter the previous year but a 13.8% increase sequentially.
Full-year 2013 revenue was $23.2 billion, an increase of 7% year-over-year. This result was highlighted by 5% year-over-year revenue growth for EMC’s Information Infrastructure business, and 15% year-over-year revenue growth each for VMware and Pivotal.
- “Our fourth-quarter results are further evidence that our federation strategy across EMC Information Infrastructure, VMware and Pivotal is on target. There’s no doubt that the move from the second platform to the third platform of IT, underpinned by the mega trends of mobile, cloud, Big Data and social, is having a profound impact on business and transforming the way we work and live.”
The company’s guidance was below street estimates. EMC’s outlook for 2014 includes revenue growth to $24.5 billion and adjusted EPS is targeted at $1.95.
Analysts are bullish about the stock on the back of a robust outlook for the company’s emerging storage, VMware, and Pivotal businesses.
Browse this series on Market Realist:
- Part 1 - Assessing David Einhorn and Greenlight Capital’s 4Q13 positions
- Part 3 - Why Greenlight Capital bought stake in Take-Two Interactive
- Part 4 - Why Greenlight Capital opened a new position in McDermott
- Company Earnings
- Information Technology
- Greenlight Capital
- EMC Corp