EMC, in transition mode while awaiting the final fiscal and legal determinations of its acquisition by Dell, reported Q1 2016 sales and profit numbers April 20 that didn't stack up to analysts' estimates in an enterprise storage market that has leveled off after nearly two decades of growth.
The Hopkinton, Mass.-based storage giant has performed as the world's most successful independent storage and data protection provider for more than 15 years. However, its business of selling high-end, hard-disk-dominated enterprise storage has slowed during the past three years as smaller, faster and more economical solid-state flash systems surpass it in the market.
First-quarter net income was $268 million, while revenue was flat from a year earlier at $5.48 billion. Analysts on average had projected profit of $272 million and sales of $5.63 billion, according to data compiled by Bloomberg analysts.
EMC generated $932 million in operating cash flow and $588 million in free cash flow in the first quarter and ended the quarter with $15 billion in cash and investments. The company returned $227 million to shareholders via a quarterly dividend.
"We had a solid first quarter, generally in line with our expectations when adjusted for an excess of unfulfilled orders at the end of the quarter," President and CEO Joe Tucci said on the conference call. "The broad secular IT trends reshaping our industry continue playing out as we expected. Our investments in growth platforms are increasingly gaining momentum, and we are confident in the depth and breadth of our product portfolio."
EMC's older and more expensive storage machines are seeing slowing demand, and the company's newer ones using flash aren't selling briskly enough to offset competition by a list of smaller vendors, such as Pure Storage, Nimble and SanDisk's Fusion-io.
But even more its hardware competitors, EMC is also being hamstrung as more and more of its old-line customers size down their own data centers and move data storage to cloud vendors such as Amazon Web Services, Seagate CommVault, Google and Microsoft.
The red tape apparently is thinning out in the Dell acquisition.
"We continue to make progress on our combination with Dell," Tucci said. "Integration planning has accelerated to ensure we begin at full speed upon closing, the leadership team has been established, and we've received the vast majority of anti-trust approvals required."
EMC stock was selling at $26.30, up 3 percent, on April 20.
Tucci also said that China remains the only country that has yet to provide regulatory approval for the merger. Nonetheless, he said, the $67 billion deal should be competed within the projected time frame, meaning by July.