EMC Profit Falls 32% Despite Revenue Increase -- Update

By Erin McCarthy 

EMC Corp. said Wednesday its first-quarter earnings fell 32% as a rise in some of the data-storage provider's costs offset revenue growth.

EMC has spent much of recent years benefiting from a prime position at the high end of the market for massive troves of computer data, but late last year management warned IT spending was under pressure.

In addition, the company is facing competition from numerous fronts, from Amazon.com Inc. to startups like Box Inc.

Data storage and management is increasingly shifting to the cloud, where such companies as Amazon promise cost savings and delivery of the latest technology faster than a company can update its data center--long EMC's domain.

"EMC is at the threshold of expansive opportunity. While planned business practice changes had a negative impact on year-over-year revenue and EPS growth in the quarter, we are very confident we are on the right track," said David Goulden, chief executive of EMC Information Infrastructure and EMC's chief financial officer.

EMC reported a profit of $392 million, or 19 cents a share, down from $580 million, or 26 cents a share, a year earlier. Excluding stock-based compensation and other items, per-share earnings were 35 cents in the latest period, down from 38.7 cents.

Revenue increased 1.7% to $5.48 billion.

The company had expected adjusted earnings of 34 cents a share, taking into account spinoff VMware Inc.'s acquisition of AirWatch. Analysts had forecast $5.48 billion in revenue.

Selling, general and administrative costs rose 8.1%, while cost of services jumped 14%.

EMC's information infrastructure revenue slipped 3%. The company's emerging storage business continued growing, with a 81% surge in revenue.

The company said adjusted earnings for the year should be $1.90 a share, reflecting a hit of five cents a share due to the AirWatch deal. It now expects revenue of $24.58 billion, compared with its prior forecast of $24.5 billion.

The company's board also raised its quarterly dividend by 15% cents to 11.5 cents a share.

The stock is up 6.4% so far this year.

Steven Rosenbush contributed to this article.

Write to Erin McCarthy at [e-mail]

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