- The SEC is conducting an ongoing enforcement proceeding against EMC.
- EMC and VMware have a history of undisclosed proceedings with the SEC.
- EMC stock price is near its 52-week lows today.
About The VMware EMC SEC Probe
Probes Reporter, an investment research firm, released a report on Thursday stating that EMC (NYSE:EMC) and VMWare (NYSE:VMW) are "hiding an array of undisclosed SEC probes." Probes Reporter has confirmed "at least one" undisclosed and ongoing SEC probe involving EMC. Undisclosed SEC probes at VMWare were found "dating back to November 2013." On August 3, 2015, the SEC re-confirmed EMC's involvement in ongoing enforcement proceedings that remain undisclosed. The SEC also confirmed enforcement proceedings with EMC's partner, VMware, that remain undisclosed. One probe opened in 2011 involved the CEO's personal use of the company's private jet. This probe was closed in 2012.
The Probe Reporter believes EMC made a special effort to hide a probe from 2012-2013 that is now closed. This probe contained over 2000 pages of documents that EMC claims is confidential during the 2012-2013 timeline.
EMC's and VMware's history of undisclosed SEC probes and a current investigation is disturbing. Investors have a right to know what is going on at a company they share ownership in. Punishment of the company in the event of wrongdoing should not just be an undisclosed fine or proceeding behind closed doors. Investors can only guess what is going on internally and how much impact hidden criminal behavior could have on their investment.
EMC Financials & Stock Price
Now, on to what we do know. EMC's revenues have been climbing at a year-over-year rate of 13% in 2013 and 16% in 2014. Earnings increased 36% from $746 million in 2012 to $1.014 billion in 2013. However, in spite of higher annual revenue, earnings fell to $886 million in 2014.
Revenue for EMC's storage division, the lion's share of EMC's revenues, grew at a lethargic 1% year-over-year pace. Competitors from the cloud computing sector, like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), are eating into EMC's storage division revenues. CEO Joe Tucci recently said that the company continues to "see declines in traditional storage products." This is a bad development for EMC and its partnership companies -- and it has the potential to get worse.
Over the past two years, EMC stock has been volatile. In December 2013, it fell to $23/share. A year later in December 2014, the stock reached its two-year high at $30.92. It has since fallen back to its two-year lows. It closed on Friday at $24.09, just $1 above the low set in December 2013.
Between the repeated secret SEC probes, the current SEC investigation, the volatile stock price, and the company's poor growth rate and unstable earnings, EMC is not a good long-term investment. This stock is not the kind of stock that you want to buy and forget about. On the contrary, this is a stock that investors should watch on a daily basis. There are just too many things that can go from bad to worse with EMC unless they are corrected soon.