EMC's Tucci: No Excuses For Q1 Storage Sales Shortfall

EMC CEO Joe Tucci told Wall Street analysts Wednesday that there simply is no excuse for the company's slight storage sales shortfall in the first quarter.

"We could have, and should have, made this revenue plan, and we offer no excuses," Tucci said during a conference call with investors Wednesday morning. "We didn't execute."

The blunt assessment came after the Hopkinton, Mass.-based company reported sales of $5.61 billion in the first quarter, just 2 percent off the consensus estimate of $5.74 billion from analysts surveyed by Zacks Investment Research.

[Related: EMC Acquires Hybrid Cloud Encryption Company]

EMC Information Infrastructure sales for the first quarter were $4.04 billion compared with $4.07 billion in the year-ago period.

EMC cut some 1,500 workers from the Information Infrastructure business during the quarter, which also impacted storage sales, EMC Information Infrastructure CEO David Goulden told investors.

EMC reported a 35 percent decline in net income in the first quarter to $252 million from $392 million a year earlier.

Earnings adjusted for restructuring charges and stock options were 35 cents per share, 4 cents below the Wall Street analyst consensus of 31 cents per share, according to Zacks Investment Research.

EMC shares, which fell 14 percent in the first quarter to $25.56, were up 2 percent in midmorning trading Wednesday to $26.98.

Calling the first-quarter results "mixed," Tucci said in a prepared statement that the company fell a "bit short" on storage sales because of "geo-political factors in Russia and China and not executing as crisply as we had expected" in the quarter.

Tucci, however, said in the statement he remains confident that the company will meet its business outlook for the year. In fact, he said, EMC's investments in high-growth areas are "bearing fruit." And, according to Tucci, the "scale and strength" of the company's federated businesses is paying off.

Among the bright spots in the quarter was a more than 30 percent sales increase in VCE's Vblock converged infrastructure business compared with the year-ago quarter.

EMC is in the midst of what Tucci said on the earnings call was "the biggest shift in the history of IT" as customers move away from traditional hardware infrastructure and toward lower-cost digital solutions.

EMC has had success with some of those new businesses, including big data software maker Pivotal, which posted an 8 percent increase in sales in the quarter to $54 million.

As a result of the continued negative impact on sales from foreign currency exchange rates, EMC cut its full-year forecast to $25.7 billion in revenue and earnings of $1.91 a share. Previously, the 2015 forecast was for $25.9 billion and $1.97 a share.

Tucci said on the earnings call that EMC would consider merger and acquisition opportunities as long as they can immediately contribute to the bottom line.

As for his role as CEO, Tucci, who once noted that he expected to retire in or near February 2015, said he is committed to remaining CEO as long as EMC's board of directors will keep him.

"I'm here, I'm engaged, I'm working hard," he said. "My job is to do my job until the board comes with a new CEO."

PUBLISHED APRIL 22, 2015