Analysis of Reportable Segments
EMC Corp. operates in 5 segments: Information Storage; Enterprise Content Division; RSA Information Security; Pivotal; and VMware Virtual Infrastructure.
Segment Profit Margin
EMC Corp., profit margin by reportable segment
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Information Storage | 52.25% | 55.50% | 56.30% | 57.38% | 56.46% |
| Enterprise Content Division | 67.95% | 65.16% | 64.76% | 67.50% | 64.30% |
| RSA Information Security | 66.80% | 67.44% | 66.36% | 67.94% | 56.76% |
| Pivotal | 38.95% | 46.70% | 38.19% | 56.67% | 58.46% |
| VMware Virtual Infrastructure | 87.25% | 87.41% | 89.16% | 88.85% | 86.07% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The profit margins across the reportable segments exhibit divergent trends between 2011 and 2015, characterized by extreme stability in software-centric operations and significant volatility in newer or evolving business units.
- VMware Virtual Infrastructure
- This segment consistently maintains the highest profit margins of all divisions, remaining stable within a narrow range between 86.07% and 89.16%. The margins peaked in 2013 before settling at 87.25% by the end of 2015, indicating a highly resilient and efficient cost structure.
- Enterprise Content Division
- A general upward trajectory is observed, with margins increasing from 64.30% in 2011 to 67.95% in 2015. The growth was relatively steady, suggesting successful operational scaling or an increase in higher-margin service offerings.
- RSA Information Security
- A significant margin expansion occurred between 2011 and 2012, rising from 56.76% to 67.94%. Following this initial increase, the margins remained relatively plateaued, fluctuating slightly to end the period at 66.80%.
- Information Storage
- A gradual downward trend is evident in this segment. After peaking at 57.38% in 2012, margins declined steadily each year, reaching a period low of 52.25% in 2015, which suggests increasing competitive pressure or rising operational costs.
- Pivotal
- This segment demonstrates the highest level of volatility. After starting at 58.46% in 2011, margins dropped sharply to 38.19% by 2013. Despite a partial recovery to 46.70% in 2014, the margin fell again to 38.95% in 2015, reflecting instability in the segment's profitability.
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Segment Profit Margin: Information Storage
EMC Corp.; Information Storage; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Gross profit | 8,518) | 9,180) | 9,082) | 8,860) | 8,291) |
| Revenues | 16,301) | 16,542) | 16,132) | 15,440) | 14,684) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 52.25% | 55.50% | 56.30% | 57.38% | 56.46% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × Gross profit ÷ Revenues
= 100 × 8,518 ÷ 16,301 = 52.25%
The Information Storage segment exhibited a period of growth in scale followed by a contraction in both revenue and profitability toward the end of the analyzed period.
- Revenue and Gross Profit Trends
- Revenues demonstrated consistent growth from 2011 to 2014, rising from US$14,684 million to a peak of US$16,542 million. Gross profit followed a similar trajectory, increasing from US$8,291 million in 2011 to US$9,180 million in 2014. In 2015, both metrics declined, with revenues falling to US$16,301 million and gross profit decreasing to US$8,518 million.
- Segment Profit Margin Performance
- The segment profit margin peaked in 2012 at 57.38%, following an initial increase from 56.46% in 2011. Subsequent to this peak, a continuous downward trend is observed. The margin decreased to 56.30% in 2013 and 55.50% in 2014, before experiencing a more pronounced decline to 52.25% by December 31, 2015.
- Profitability Analysis
- A divergence occurred between 2012 and 2014, as revenues and gross profit continued to rise despite a gradual erosion of the profit margin. The most significant contraction was recorded in 2015, where the simultaneous drop in revenue and the sharpest margin decline of the period suggest a reduction in operational efficiency or an increase in the cost of sales relative to revenue.
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Segment Profit Margin: Enterprise Content Division
EMC Corp.; Enterprise Content Division; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Gross profit | 407) | 417) | 419) | 432) | 425) |
| Revenues | 599) | 640) | 647) | 640) | 661) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 67.95% | 65.16% | 64.76% | 67.50% | 64.30% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × Gross profit ÷ Revenues
= 100 × 407 ÷ 599 = 67.95%
The Enterprise Content Division exhibited a general contraction in absolute financial metrics between 2011 and 2015, characterized by a consistent decline in both total revenues and gross profit. Despite the reduction in scale, the division demonstrated a capacity to maintain and eventually expand its segment profit margin.
- Revenue and Gross Profit Trends
- Revenues decreased from 661 million US dollars in 2011 to 599 million US dollars in 2015, representing an overall decline of approximately 9.4%. Gross profit followed a similar downward trajectory; after peaking at 432 million US dollars in 2012, it declined steadily to 407 million US dollars by the end of 2015.
- Segment Profit Margin Analysis
- The segment profit margin remained resilient, fluctuating within a range of 64.30% to 67.95%. A notable divergence is observed in 2015, where the profit margin reached its five-year peak of 67.95% despite the division recording its lowest revenues and gross profit for the period. This suggests that the decline in revenue was more pronounced than the decline in gross profit, indicating an improvement in the proportion of profitable sales or a more efficient cost of goods sold structure in the final year.
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Segment Profit Margin: RSA Information Security
EMC Corp.; RSA Information Security; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Gross profit | 660) | 698) | 655) | 604) | 470) |
| Revenues | 988) | 1,035) | 987) | 889) | 828) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 66.80% | 67.44% | 66.36% | 67.94% | 56.76% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × Gross profit ÷ Revenues
= 100 × 660 ÷ 988 = 66.80%
The RSA Information Security segment experienced a period of growth in both revenues and gross profit from 2011 through 2014, followed by a moderate contraction in 2015. A significant improvement in operational efficiency occurred early in the analyzed period, leading to a sustained high-margin profile.
- Revenue and Gross Profit Trends
- Revenues grew steadily from US$ 828 million in 2011 to a peak of US$ 1,035 million in 2014, before declining to US$ 988 million in 2015. Gross profit followed a similar trajectory, increasing from US$ 470 million in 2011 to a peak of US$ 698 million in 2014, then decreasing to US$ 660 million in 2015.
- Segment Profit Margin Analysis
- A substantial increase in the segment profit margin is observed between 2011 and 2012, rising from 56.76% to 67.94%. Following this initial expansion, the margin entered a phase of stabilization, remaining within a narrow range between 66.36% and 67.94% for the remainder of the period.
- Operational Performance Insights
- The correlation between the growth in gross profit and the sharp rise in profit margins between 2011 and 2012 suggests a successful optimization of the cost of goods sold or an increase in the average selling price of services. The stability of the margin through 2015, despite the decline in overall revenue in the final year, indicates that the segment maintained its pricing discipline and cost structure during the downturn.
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Segment Profit Margin: Pivotal
EMC Corp.; Pivotal; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Gross profit | 104) | 106) | 118) | 153) | 76) |
| Revenues | 267) | 227) | 309) | 270) | 130) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 38.95% | 46.70% | 38.19% | 56.67% | 58.46% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × Gross profit ÷ Revenues
= 100 × 104 ÷ 267 = 38.95%
The financial performance of the Pivotal segment between 2011 and 2015 is characterized by inconsistent revenue growth and a general contraction in profitability margins.
- Revenue Trajectory
- Revenues exhibited an initial upward trend, rising from US$ 130 million in 2011 to a peak of US$ 309 million in 2013. This growth was followed by a decline to US$ 227 million in 2014 and a moderate recovery to US$ 267 million by the end of 2015.
- Gross Profit Trends
- Gross profit peaked early in the period at US$ 153 million in 2012. Subsequently, a steady decline is observed from 2013 through 2015, with gross profit falling from US$ 118 million to US$ 104 million, regardless of the fluctuations in total revenue.
- Segment Profit Margin Analysis
- The segment profit margin demonstrates significant volatility and an overall downward trend. The margin began at a high of 58.46% in 2011 and remained strong at 56.67% in 2012, before experiencing a sharp decrease to 38.19% in 2013. While a partial recovery to 46.70% was achieved in 2014, the margin retreated to 38.95% in 2015.
The divergence between increasing revenues and decreasing gross profits observed between 2012 and 2013 suggests a significant increase in the cost of sales or a change in the pricing strategy. Furthermore, the decline in profit margin in 2015, occurring simultaneously with a revenue increase, indicates a reduction in operational efficiency or a shift toward lower-margin revenue streams.
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Segment Profit Margin: VMware Virtual Infrastructure
EMC Corp.; VMware Virtual Infrastructure; segment profit margin calculation
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Gross profit | 5,780) | 5,241) | 4,589) | 3,976) | 3,189) |
| Revenues | 6,625) | 5,996) | 5,147) | 4,475) | 3,705) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 87.25% | 87.41% | 89.16% | 88.85% | 86.07% |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Segment profit margin = 100 × Gross profit ÷ Revenues
= 100 × 5,780 ÷ 6,625 = 87.25%
The VMware Virtual Infrastructure segment exhibited consistent growth in both revenue and gross profit from 2011 through 2015, maintaining high profitability margins throughout the observed period.
- Revenue Growth
- Annual revenues increased steadily each year, rising from 3,705 million US dollars in 2011 to 6,625 million US dollars by 2015. This represents a sustained upward trend in the segment's scale of operations.
- Gross Profit Expansion
- Gross profit followed a similar trajectory, increasing from 3,189 million US dollars in 2011 to 5,780 million US dollars in 2015. The consistent rise in gross profit aligns with the growth in revenue, indicating a stable cost structure relative to sales expansion.
- Segment Profit Margin Dynamics
- The segment profit margin experienced an initial period of expansion, rising from 86.07% in 2011 to a peak of 89.16% in 2013. Following this peak, a slight downward trend was observed, with the margin moderating to 87.41% in 2014 and ending at 87.25% in 2015. Despite this marginal decline in later years, the margin remained significantly high, suggesting strong pricing power and efficient delivery of services within the segment.
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Revenues
EMC Corp., revenues by reportable segment
US$ in millions
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Information Storage | 16,301) | 16,542) | 16,132) | 15,440) | 14,684) |
| Enterprise Content Division | 599) | 640) | 647) | 640) | 661) |
| RSA Information Security | 988) | 1,035) | 987) | 889) | 828) |
| EMC Information Infrastructure | 17,888) | 18,217) | 17,766) | 16,969) | 16,173) |
| Pivotal | 267) | 227) | 309) | 270) | 130) |
| EMC Information Infrastructure plus Pivotal | 18,155) | 18,444) | 18,075) | 17,239) | 16,303) |
| VMware Virtual Infrastructure | 6,625) | 5,996) | 5,147) | 4,475) | 3,705) |
| Corp Reconciling Items | (76) | —) | —) | —) | —) |
| Consolidated | 24,704) | 24,440) | 23,222) | 21,714) | 20,008) |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
Consolidated revenues increased steadily from $20,008 million in 2011 to $24,704 million in 2015. The growth pattern indicates a period of robust expansion between 2011 and 2014, followed by a relative plateau in 2015 where the year-over-year increase was marginal.
- VMware Virtual Infrastructure
- This segment represents the primary engine of growth, demonstrating a continuous and significant upward trend. Revenues rose from $3,705 million in 2011 to $6,625 million in 2015, nearly doubling over the five-year period without experiencing any annual contractions.
- EMC Information Infrastructure
- As the largest revenue contributor, this segment grew from $16,173 million in 2011 to a peak of $18,217 million in 2014. However, a reversal occurred in 2015, with revenues declining to $17,888 million, suggesting a saturation or contraction in the core infrastructure market.
- RSA Information Security
- Revenues in the security segment followed a trajectory similar to the infrastructure business, increasing from $828 million in 2011 to a peak of $1,035 million in 2014, before decreasing to $988 million in 2015.
- Enterprise Content Division
- A consistent downward trend is observed in this segment, with revenues falling from $661 million in 2011 to $599 million in 2015, indicating a steady decline in performance relative to other divisions.
- Pivotal
- This segment exhibited the highest degree of volatility. While revenues increased from $130 million in 2011 to $267 million in 2015, the growth was non-linear, characterized by a sharp increase through 2013 and a subsequent contraction in 2014 prior to a recovery in 2015.
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Gross profit
EMC Corp., gross profit by reportable segment
US$ in millions
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | |
|---|---|---|---|---|---|
| Information Storage | 8,518) | 9,180) | 9,082) | 8,860) | 8,291) |
| Enterprise Content Division | 407) | 417) | 419) | 432) | 425) |
| RSA Information Security | 660) | 698) | 655) | 604) | 470) |
| EMC Information Infrastructure | 9,585) | 10,295) | 10,156) | 9,896) | 9,186) |
| Pivotal | 104) | 106) | 118) | 153) | 76) |
| EMC Information Infrastructure plus Pivotal | 9,689) | 10,401) | 10,274) | 10,049) | 9,262) |
| VMware Virtual Infrastructure | 5,780) | 5,241) | 4,589) | 3,976) | 3,189) |
| Corp Reconciling Items | (478) | (393) | (390) | (387) | (282) |
| Consolidated | 14,991) | 15,249) | 14,473) | 13,638) | 12,169) |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
Consolidated gross profit exhibited a steady upward trajectory from 2011 through 2014, increasing from 12,169 million US dollars to a peak of 15,249 million US dollars. However, a reversal occurred in 2015, with consolidated gross profit declining to 14,991 million US dollars. This overall trend was primarily driven by the performance of the core infrastructure and virtualization segments, which offset stagnation in smaller divisions.
- Virtualization Growth
- VMware Virtual Infrastructure demonstrated the most consistent and robust growth throughout the period. Gross profit for this segment rose every year, starting at 3,189 million US dollars in 2011 and reaching 5,780 million US dollars by 2015. This represents a sustained expansion that continued even when other segments experienced declines.
- Core Infrastructure Performance
- The EMC Information Infrastructure segment, including Information Storage, followed a growth pattern similar to the consolidated totals. Gross profit increased from 9,186 million US dollars in 2011 to a peak of 10,295 million US dollars in 2014, before dropping to 9,585 million US dollars in 2015. The Information Storage component mirrored this movement, peaking in 2014 at 9,180 million US dollars before retreating in 2015.
- Specialized Segment Volatility
- RSA Information Security showed a general growth trend from 2011 to 2014, rising from 470 million US dollars to 698 million US dollars, followed by a slight decrease to 660 million US dollars in 2015. In contrast, the Enterprise Content Division remained relatively stagnant, with gross profit hovering between 407 million and 432 million US dollars. Pivotal experienced an initial surge in 2012 to 153 million US dollars but trended downward in subsequent years, ending at 104 million US dollars in 2015.
- Corporate Reconciling Items
- Corporate reconciling items exerted a consistent negative impact on the consolidated gross profit. These negative values widened over the five-year period, moving from -282 million US dollars in 2011 to -478 million US dollars in 2015, indicating an increase in corporate-level adjustments or costs.
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