EMC Corp. (NYSE:EMC)

The data reveals a general upward trend in the company's intangible assets and goodwill over the five-year period from 2011 to 2015. A detailed examination of each component provides insights into the underlying shifts and growth patterns.

Purchased technology

This asset category experienced significant growth, increasing from 1,621 million US dollars in 2011 to 3,272 million in 2015. The steady increase each year suggests ongoing investments or acquisitions related to technology assets, nearly doubling over the period.

Patents

The value remained constant at 225 million US dollars throughout the five years, indicating no new patents were capitalized, or existing patent values were maintained without notable additions or impairments.

Software licenses

A modest and steady increase is observed from 90 million in 2011 to 112 million in 2015, reflecting gradual investment or renewal in software-related assets.

Trademarks and tradenames

These assets showed a stable valuation in the initial years around 171-173 million, followed by a more substantial rise to 226 million in 2014 and 254 million in 2015. This increase may indicate new brand acquisitions or revaluation of existing trademarks.

Customer relationships and customer lists

A gradual increase from 1,330 million in 2011 to 1,523 million in 2015 was recorded, indicating sustained value in acquired customer-related intangible assets.

IPR&D (In-Process Research and Development)

This asset is reported only in 2011 at 44 million and not recognized in subsequent years, which may imply the completion, write-off, or reclassification of these projects after 2011.

Leasehold interest

The value remained relatively stable around 145-152 million throughout the period, indicating limited further capital expenditures or disposals related to leasehold assets.

Other intangible assets

Values in this category fluctuate but show a general increase from 30 million in 2011 to 46 million in 2015, possibly reflecting minor asset additions or adjustments.

Intangible assets, excluding goodwill, gross carrying amount

The aggregate gross carrying amount increased substantially from 3,660 million to 5,584 million over the five years, driven by the increases in purchased technology, trademarks, and customer-related assets.

Accumulated amortization

Amortization of intangible assets increased from -1,894 million in 2011 to -3,435 million in 2015, consistent with aging assets and amortization schedules.

Intangible assets, excluding goodwill, net book value

Net book value showed some variability; rising from 1,766 million in 2011 to a peak at 2,035 million in 2012, then declining to 1,780 million in 2013, before recovering to 2,149 million by 2015. This fluctuation likely reflects the balance between new acquisitions and amortization.

Goodwill

Goodwill increased steadily from 12,155 million in 2011 to 17,090 million in 2015, indicating ongoing acquisitions and the premium paid over net asset values during the period.

Total intangibles and goodwill

The combined intangible assets and goodwill grew from 13,921 million in 2011 to 19,239 million in 2015, showing the company's substantial investment in intangible resources, with growth driven predominantly by purchased technology and goodwill.

Overall, the financial data depicts a company actively investing in intangible assets, particularly technology and goodwill, indicating strategic acquisitions and asset capitalization to strengthen intellectual property and market position. The steady growth in accumulated amortization highlights the maturity of these assets over time, while the flat patent values and disappearance of IPR&D suggest stabilization in some traditional intangible categories.

The analysis of the reported and goodwill adjusted financial data over the five-year period reveals notable trends in both total assets and shareholders' equity.

Total Assets

Reported total assets increased consistently from US$34,268 million in 2011 to US$46,612 million in 2015, indicating overall growth of approximately 36%. This steady rise suggests expansion or acquisition activity contributing to asset accumulation.

In contrast, adjusted total assets, which exclude goodwill, also grew but at a different pace. They increased from US$22,113 million in 2011 to a peak of US$31,425 million in 2013, followed by a decline to US$29,522 million in 2015. This pattern might indicate that the goodwill component played a significant role in total asset growth beyond 2013.

Shareholders' Equity

The reported shareholders' equity displayed an increasing trend from US$18,959 million in 2011, reaching a maximum of US$22,357 million in 2012, then slightly declining to US$21,140 million by 2015. Despite minor fluctuations, the reported equity remained relatively stable, with a peak in the early years.

Adjusted shareholders' equity, after goodwill removal, shows a contrasting picture. Beginning at US$6,804 million in 2011, it rose to US$8,517 million in 2012 but then declined steadily each year to US$4,050 million in 2015. This marked reduction suggests impairment or write-downs related to non-goodwill assets, or increased liabilities affecting net equity when goodwill is excluded.

Overall, the disparity between reported and adjusted figures highlights the significance of goodwill on the balance sheet. While reported figures indicate asset and equity growth stabilizing in recent years, the adjusted numbers reveal a peak followed by a substantial decline, particularly in equity. This may imply that goodwill inflations mask underlying declines in tangible asset values and core equity strength.

The analysis of the financial data over the five-year period reveals distinct trends in both reported and goodwill-adjusted metrics across total asset turnover, financial leverage, return on equity (ROE), and return on assets (ROA).

Total Asset Turnover

The reported total asset turnover ratio exhibits a gradual decline from 0.58 in 2011 to 0.53 in 2015, indicating a slight decrease in efficiency in generating sales from assets. The adjusted total asset turnover, which excludes goodwill, is consistently higher than the reported figure but also follows a downward trend from 0.90 in 2011 and 2012 to a low of 0.74 in 2013, before partially recovering to 0.84 by 2015. This suggests that when goodwill is removed, the company’s asset efficiency appears stronger but similarly experiences some fluctuation, with a notable dip in 2013.

Financial Leverage

Reported financial leverage shows a moderate increase from 1.81 in 2011 to 2.20 in 2015, reflecting a gradual increase in the use of debt relative to equity. The adjusted financial leverage, in contrast, is significantly higher and rises sharply from 3.25 in 2011 to 7.29 in 2015, indicating that the exclusion of goodwill reveals much higher leverage levels. This sharp increase suggests increasing reliance on debt financing or lower equity base when goodwill is adjusted, which could point to elevated financial risk in later years.

Return on Equity (ROE)

The reported ROE declines over the period from 12.98% in 2011 to 9.41% in 2015, signaling diminished profitability from shareholder’s equity. Conversely, the adjusted ROE is substantially higher throughout the period, rising from 36.17% in 2011 to 49.14% in 2015. This divergence indicates that the company’s profitability, excluding goodwill, is much stronger and improving over time, potentially due to better operational efficiency or lower equity base after adjustment.

Return on Assets (ROA)

Reported ROA decreases from 7.18% in 2011 and 2012 to 4.27% in 2015, showing a reduction in overall asset profitability. Adjusted ROA, while higher than the reported figure, also declines from 11.28% in 2012 to 6.74% in 2015. The downward trend in both reported and adjusted ROA reflects a consistent decrease in the company’s ability to generate returns from its assets, despite the adjustment for goodwill.

In summary, the data indicates that the company’s operational efficiency and asset profitability are declining when viewed through both reported and adjusted metrics. The stark differences between reported and goodwill-adjusted figures highlight the significant impact that goodwill has on the financial structure, particularly on leverage and profitability ratios. Financial leverage, especially on an adjusted basis, has increased markedly, implying elevated risk. Meanwhile, adjusted returns show improved equity profitability despite decreasing asset returns, suggesting that changes in capital structure and asset base composition may be influencing performance metrics distinctly.

The data presents both reported and goodwill adjusted financial metrics for a series of five consecutive years. An examination of total assets and the total asset turnover ratios reveals distinct trends and operational insights.

Total Assets

Reported total assets show a consistent increase over the period, growing from 34,268 million US dollars at the end of 2011 to 46,612 million US dollars at the end of 2015. This represents a significant accumulation of assets, with the largest annual increase occurring between 2012 and 2013.

Adjusted total assets, which exclude certain goodwill values, also demonstrate an overall upward trend from 22,113 million US dollars to a peak of 31,425 million in 2013, followed by a decline to 29,522 million in 2015. The initial growth phase is notable, but the subsequent decrease suggests some asset base restructuring or goodwill impairments affecting the adjusted figures.

Total Asset Turnover

The reported total asset turnover ratio decreases from 0.58 in 2011 to 0.53 by 2015, indicating a slight reduction in efficiency regarding how reported assets are generating revenue. The most pronounced decline occurs between 2012 and 2013, after which the ratio stabilizes around 0.53.

In contrast, the adjusted total asset turnover ratio starts higher at 0.9 in 2011 and maintains this level through 2012, but then experiences a significant drop in 2013 to 0.74. Subsequently, the ratio recovers somewhat, rising to 0.84 by 2015. This pattern suggests an improvement in asset utilization efficiency after adjusting for goodwill-related items, especially in the latter years of the period.

Insights

The divergence between reported and adjusted total assets indicates that goodwill constitutes a considerable portion of the reported asset base. The adjusted figures provide a more conservative view of asset volume, which aligns with the higher turnover ratios, implying a more effective use of tangible and non-goodwill assets.

The declining trend in reported asset turnover, despite asset growth, could reflect the challenges in generating proportional revenue increases from the larger asset base. Meanwhile, the rebound in adjusted asset turnover after 2013 points to possible operational improvements or asset optimization when excluding goodwill influences.

The financial data reveals notable distinctions between reported figures and those adjusted for goodwill over the five-year period ending December 31, 2015. A comparative analysis indicates contrasting trends in both asset base and equity levels, with further insights drawn from their respective leverage ratios.

Total Assets

Reported total assets have shown a steady increase from US$34,268 million in 2011 to US$46,612 million in 2015, reflecting a cumulative growth of approximately 36%. In contrast, the goodwill-adjusted total assets start at a lower base of US$22,113 million in 2011 and peak at US$31,425 million in 2013 before declining to US$29,522 million in 2015. This indicates a more volatile asset base when goodwill is excluded, with a maximum recorded in 2013 and a downward adjustment in subsequent years.

Shareholders’ Equity

Reported shareholders’ equity records a moderate increase in 2012 to US$22,357 million from US$18,959 million in 2011, but then demonstrates a gradual decline each year to reach US$21,140 million by 2015. Conversely, the adjusted equity figures, which eliminate goodwill effects, depict a significant decrease over the period: starting at US$6,804 million in 2011, rising marginally in 2012 but then persistently reducing to US$4,050 million in 2015. The diminishing adjusted equity indicates possible erosion of shareholder value when goodwill is removed from the balance sheet.

Financial Leverage

Reported financial leverage, defined as the ratio of total assets to shareholders’ equity, remains relatively stable and moderate, fluctuating between 1.7 and 2.2 across the five years. It starts at 1.81 in 2011, dips slightly in 2012, then increases to 2.2 by 2015. Adjusted financial leverage values are markedly higher, beginning at 3.25 in 2011 and escalating significantly to 7.29 by 2015. This steep rise reflects the compounded effect of declining adjusted equity combined with fluctuating adjusted assets, suggesting increasing reliance on debt or liabilities relative to equity when goodwill is excluded.

In summary, the goodwill adjustment materially affects the perception of the company’s financial position. While reported figures portray steady asset growth and relatively stable equity, adjusted figures highlight asset volatility, decreasing equity, and rising leverage. The divergence underscores the impact of goodwill on balance sheet strength and suggests careful consideration when evaluating underlying financial health without intangible asset influences.

Shareholders’ Equity (Reported)

The reported shareholders’ equity exhibited a general upward trend from 2011 to 2012, increasing from 18,959 million US dollars to 22,357 million US dollars. It then experienced a marginal decline in 2013 to 22,301 million US dollars, followed by a further slight reduction to 21,896 million US dollars in 2014 and 21,140 million US dollars in 2015. Overall, the reported equity peaked in 2012 before gradually decreasing over the subsequent three years.

Shareholders’ Equity (Adjusted)

The adjusted shareholders’ equity, which accounts for goodwill adjustments, showed a different pattern. Starting at 6,804 million US dollars in 2011, it increased to 8,517 million US dollars in 2012, then decreased to 7,877 million US dollars in 2013. A significant decline occurred in the next two years, falling sharply to 5,762 million US dollars in 2014 and further to 4,050 million US dollars in 2015. The adjusted equity highlights a considerable reduction over the period, especially in the latter years.

Return on Equity (Reported)

The reported return on equity (ROE) maintained relative stability from 2011 through 2014, ranging between approximately 12.22% and 12.98%. However, in 2015, there was a notable decrease, with ROE dropping to 9.41%. This indicates a decline in profitability relative to reported shareholders’ equity in the final year.

Return on Equity (Adjusted)

The adjusted ROE, reflecting the impact of goodwill adjustments, was significantly higher than the reported ROE across all years. Starting at 36.17% in 2011, it decreased slightly to 32.08% in 2012, then increased to 36.68% in 2013. Subsequently, it rose substantially to 47.1% in 2014 and further to 49.14% in 2015. This upward trend points to improving returns when goodwill is excluded, despite the overall decline in adjusted equity.

Overall Insights

The disparity between reported and adjusted figures suggests that goodwill constitutes a considerable component of the reported equity base. The adjusted data reflect a shrinking equity base that has led to significantly higher adjusted ROE ratios, implying enhanced profitability relative to the tangible equity. Conversely, reported figures indicate a decline in both equity and profitability in the final year under review. These contrasting trends underscore the importance of goodwill considerations in evaluating the company’s financial performance and capital structure over the analyzed period.

Total Assets

The reported total assets have shown a consistent upward trajectory from 34,268 million US dollars at the end of 2011 to 46,612 million US dollars by the end of 2015. This represents an overall increase of approximately 36% over the five-year period. However, when assets are adjusted for goodwill, there is also evidence of growth though less pronounced, rising from 22,113 million US dollars in 2011 to a peak of 31,425 million US dollars in 2013, followed by a slight decline to 29,522 million US dollars in 2015. This suggests that the goodwill adjustment accounts for a significant portion of the reported asset increases, particularly evident after 2013 where adjusted assets decline even as reported assets remain stable or grow.

Return on Assets (ROA)

The reported ROA demonstrates a clear downward trend over the five-year period, declining from 7.18% in both 2011 and 2012 to 4.27% in 2015. This decline indicates a reduction in the efficiency with which the company is using its assets to generate profit, despite growth in reported total assets. The adjusted ROA, which excludes goodwill effects, also shows a declining pattern, starting from a higher base of 11.13% in 2011 and decreasing to 6.74% in 2015. The adjusted ROA consistently remains above the reported ROA during this period, which further underscores the material impact of goodwill on asset returns. The sharper decline in adjusted ROA between 2012 and 2015 suggests that the core operational profitability of the company is weakening over time independent of intangible asset effects.

Insights

The divergence between reported and adjusted total assets highlights the significant role of goodwill in the company’s reported asset base. The increase in reported total assets with a simultaneous decrease in adjusted total assets after 2013 may reflect impairments or write-downs of goodwill or other intangible assets. Additionally, the consistent decline in both reported and adjusted ROA points to a declining trend in profitability efficiency, which could raise concerns about future earnings potential and operational effectiveness. Overall, the data indicates that while the company’s asset base has grown, particularly when including goodwill, its ability to generate returns on these assets is diminishing.