Economic setbacks and political interference cited as reasons for EMC's failed target achievement
In the third quarter of 2012, EMC, a leading information intelligence group, reported a 2% decline in revenues to $158 million. This dip can be attributed to the prevailing economic and political uncertainties that are affecting business confidence and IT spending rates.
Despite the overall decline, EMC's storage division showed a 3% growth to $3.8 billion during the quarter. A significant portion of this growth can be credited to EMC's subsidiary VMware, whose sales surged 20% to $1.1 billion. However, it's worth noting that VMware's profit took a hit, as reported in a separate article ("VMware sales up 20% but profit drops").
The growth at VMware was a bright spot in an otherwise challenging quarter for EMC. The company's full-year revenue forecast for 2012 has been revised downwards to between $21.6 billion and $21.75 billion, from the previous forecast of $22 billion. EMC's Q3 2012 revenues were $5.3 billion, falling short of the expected $5.5 billion.
EMC's CEO, Joe Tucci, expressed disappointment about not meeting internal revenue expectations, but he attributed the revenue shortfall to economic and political uncertainties. Tucci reaffirmed EMC's commitment to the VCE Alliance, its partnership with Cisco, and also expressed support for VMware's acquisition of software-defined networking start-up Nicira.
Tucci stated that software-defined networking complements the network infrastructure, and EMC has no plans to drive deeper into networking by acquiring a network hardware company. The company also made headlines in the fourth quarter of 2012 with the acquisition of Iomega.
Politically, confidence in governments making productive decisions on deficit reductions and tax policies is low, contributing to the economic uncertainties. Economically, most major markets showed lower GDP growth rates in Q3.
For a more detailed analysis of EMC's Q3 2012 results, you can refer to the EMC Management Discussing Q3 2012 Results, available on SeekingAlpha.com.
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