Why EMC Was Impacted by Dollar Appreciation
EMC Posts Subdued 1Q15 Results (Part 2 of 5)
Strong dollar impacted fiscal 1Q15 revenue
In fiscal 1Q15, EMC (EMC) generated ~44% of its revenue from Asia-Pacific and Japan (EWJ), EMEA (Europe, Middle East and Africa), and Latin America. The strengthening US dollar (UUP) impacted EMC’s growth. The strengthening dollar also impacted Microsoft (MSFT) and IBM (IBM) in the technology sector.
Microsoft’s GAAP (generally accepted accounting principles) revenue growth increased 9% YoY (year-over-year) in constant currency terms, while in actual dollar terms it only grew by 6% on a YoY basis. In its latest quarterly earnings, IBM blamed the dollar for the 8% reduction in its revenue.
The dollar increased ~9% against a basket of currencies in the first three months of 2015. Also, the dollar is expected to strengthen in the near future—due to QE (quantitative easing) by the ECB (European Central Bank) and the BoJ (Bank of Japan). China (FXI) also joined this route.
The above graph shows the dollar index since July 2014. To learn more about the dollar’s moves, read Why the US Dollar Could Strengthen Further.
Geographical performance
In fiscal 1Q15, revenue from North America and Latin America stood at $3.13 billion and $192 million, respectively. They grew by 5% and 8% on a YoY basis, respectively. Revenue from Asia-Pacific and Japan stood at $729 million—an increase of 1% on a YoY basis. Revenue from all of the geographies posted positive growth except revenue from the EMEA region—its revenue stood at $1.56 billion. This was a decline of 2% on a YoY basis.
Geopolitical issues also contributed to the decline in revenue growth
According to Joe Tucci, EMC’s CEO, in fiscal 1Q15, data-storage equipment revenue was hurt due to the weaknesses in China and Russia (RSX). The government and financial clients increased the inspection of US technology purchases—this impacted revenue in China. Revenue in Russia was hit by its economic woes and currency conditions.
To learn more about Russia’s economic woes, read Russian Woes Deepen as Reserves, Employment, and Retail Sales Fall and Industrial Production Plummets, Adding to Russia’s Woes.
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