EMC Shares Fall on Weak Outlook; Job Cuts Planned
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Shares of enterprise storage and IT company EMC are falling this morning after the company reported earnings that beat the expectations of analysts but that included a weaker outlook than had been expected. The company also said it will cut jobs this year.
EMC shares fell by 35 cents, or more than 1.3 percent, to $25.03 a share in morning trading.
The company reported fourth-quarter earnings per share of 60 cents, slightly higher than the 59 cents analysts had forecast. Sales were $6.7 billion, also slightly higher than the consensus forecast of $6.63 billion.
For the year ahead, the company said it expects to earn about $1.95 a share on sales of about $24.5 billion. That’s well below the consensus view of analysts, who had forecast a $2.04 per-share profit on sales of $25 billion.
Rob Cihra, an analyst with Evercore Partners, said in a note to clients following the announcement that the outlook doesn’t include any benefit from VMware’s acquisition of AirWatch last week, which he said is likely to add $75 million to 2014 revenue but may trim earnings per share by another five cents to $1.90. EMC owns a controlling stake in VMware. “We had already expected enterprise IT spend to only slowly improve, public cloud infrastructure building to weigh on growth and for EMC’s gross margin expansion to slow, but EMC’s updated guide appears to be even more conservative on all factors,” he said.
EMC also said in a filing with the U.S. Securities and Exchange Commission that it plans to take a charge of about $120 million for the costs of a restructuring plan that will include job cuts. The plan should be completed by the end of 2014. It would be the second round of job cuts at EMC since it said it would cut about 1,000 jobs in May.