EMC rises on strong VMware results, despite slashing forecast

By Sai Sachin R

(Reuters) - Data storage products maker EMC Corp slashed its full-year revenue and profit forecasts, blaming a strong dollar, and reported quarterly results that missed market expectations.

However, the company's stock rose as much as 4.7 percent on Wednesday as investors focused on the strong results posted a day earlier by VMware Inc, in which EMC holds an 80 percent stake.

Activist investor Elliott Management Corp has been pressuring EMC to spin off virtualization software maker VMware. Reuters reported in February that EMC had decided not to spin off the business.

"What's implied by the prices right now is that there's less pressure on EMC to spin off VMware," FBN Securities analyst Shebly Seyrafi said.

Macquarie Research analyst Rajesh Ghai, however, attributed the spike in EMC's shares to "pure arithmetic".

"One asset (VMware) goes up in value and that's contributing to the parent's valuation," he said.

EMC's first-quarter results were also better than some investors had expected, Ghai added, as some of the company's cost-cutting measures came as welcome news.

EMC said it cut 1,500 jobs in the first quarter ended March 31.

The company cut its full-year revenue forecast by about $400 million to $25.7 billion and its adjusted profit forecast by 7 cents per share to $1.91. (http://1.usa.gov/1Hk28Kr)

Analysts on average were expecting a profit of $1.97 per share and revenue of $25.90 billion, according to Thomson Reuters I/B/E/S.

EMC generated more than 44 percent of its quarterly revenue outside North America, and took a hit from the stronger dollar, which rose about 9 percent against a basket of currencies in the first three months of the year.

The company's so-called "federated business model" comprises its main data-storage unit, enterprise security business RSA, cloud-computing software maker Pivotal, and VMware.

Geo-political factors in Russia and China hurt storage revenue in the quarter, EMC said.

Still, total revenue rose to $5.61 billion in the quarter from $5.48 billion a year earlier.

Net income attributable to EMC fell to $252 million, or 13 cents per share, from $392 million, or 19 cents.

Excluding items, the company earned 31 cents per share.

Analysts on average had expected a profit of 36 cents and revenue of $5.73 billion.

EMC's shares were up 2.5 percent at $26.99 on the New York Stock Exchange on Wednesday. VMware's shares were up more than 5 percent at $89.99.

(Editing by Savio D'Souza and Simon Jennings)