NEW YORK (TheStreet) -- Shares of EMC Corp. (EMC) are down 0.58% to $25.53 in early market trading on Monday after the company announced plans to layoff an unspecified number of people ahead of its acquisition by Dell.
The data storage company is looking to cut annual costs by $850 million, although it will take a charge of $250 million and make cash payments of $220 million as part of the restructuring.
The bulk of the job cuts are expected to take place by the end of the first quarter with the full plan to be implemented by the end of the year.
Dell, which went private in 2013, acquired EMC for $67 billion in October.
Putting negative pressure on EMC today is the decline of Chinese stocks. Tensions between Saudi Arabia and Iran as well as weak manufacturing surveys in China have caused the Dow to drop over 300 points this morning.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate EMC CORP/MA as a Hold with a ratings score of C+. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EMC's revenue growth trails the industry average of 25.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- The gross profit margin for EMC CORP/MA is rather high; currently it is at 68.23%. Regardless of EMC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EMC's net profit margin of 7.89% is significantly lower than the industry average.
- Net operating cash flow has decreased to $1,403.00 million or 17.47% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, EMC has underperformed the S&P 500 Index, declining 14.70% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full analysis from the report here: EMC