EMC: Fiscal 3Q14 Financial Results

EMC Corporation reported third-quarter 2014 financial results, including record third-quarter consolidated revenue of $6 billion, an increase of 9% year over year.

GAAP net income attributable to EMC was $587 million. GAAP earnings per weighted average diluted share was $0.28, up 4% year over year. Non-GAAP net income attributable to EMC was $903 million. Non-GAAP earnings per weighted average diluted share was $0.44, up 10% year over year.

EMC generated $1.7 billion in operating cash flow and $1.3 billion in free cash flow in the third quarter. It ended the quarter with $15.4 billion in cash and investments.

The company repurchased approximately $375 million worth of its common stock in the third quarter and returned approximately $240 million to shareholders via a quarterly dividend.

Joe Tucci, EMC chairman and CEO, said: “EMC’s continued momentum is evidence that our strategy and execution are working. Our strategically aligned businesses – EMC Information Infrastructure, VMware, Pivotal and RSA – are well positioned to capitalize on the massive IT market opportunity in front of us. From my conversations with customers, it’s clear that we have the right best-of-breed technologies in cloud, mobile, big data and security, and offer a level of choice and flexibility second-to-none. We are extremely well positioned to help customers maximize their existing IT platforms and build a 3rd IT platform to redefine their businesses with a whole generation of new applications.”

David Goulden, CEO of EMC Information Infrastructure, said: “EMC’s solid third-quarter performance was in line with our expectations, as customers continue to seek strong and well-equipped partners to help them achieve their new IT goals. EMC is growing faster than many of our peers because we continue to make the right strategic investments – assembling a leading portfolio of technology assets over several years – that enable customers to use cloud, mobile, big data and security technologies to create competitive advantage.”

Zane Rowe, EMC CFO, added: “These results demonstrate the soundness of EMC’s strategy, a formula combining industry-leading assets, talent, and a uniquely flexible business model that puts customer choice first. Following my first three weeks at EMC I can say, without hesitation, that I am excited to be part of a company that is central to this future-defining industry transformation, and look forward to being part of the team helping EMC create value for shareholders, customers and employees.“

Third-Quarter Highlights
EMC Information Infrastructure business revenue was up 6% year over year. Information Storage revenue growth accelerated to 6% year over year. The new VMAX high-end storage system became available towards the end of the third quarter; shipments of the new systems in the third quarter were in line with expectations. Unified and Backup and Recovery portfolios continued solid revenue growth of 6% year over year. Emerging Storage revenue grew 47% year over year, with notably strong growth for XtremIO, EMC ViPR and EMC ScaleIO. Isilon revenue growth accelerated in the third quarter, benefiting from newer growth vectors where Hadoop capabilities allow efficient analysis of big data. RSA grew revenue 4% year over year as security remains a priority for organizations building hybrid clouds.

VMware continued its rapid growth trajectory with revenue within EMC up 17% year over year as customers continue investing in software-defined data center, hybrid cloud solutions and end-user computing.
 
Pivotal grew revenue 24% year over year. Pivotal is the fastest growing of EMC’s federated businesses, benefiting from the transition to next-generation applications by organizations.

Global Highlights
EMC’s consolidated third-quarter revenue from North America grew 8% year over year, representing 55% of consolidated third-quarter revenue. Revenue from EMC’s Europe, Middle East and Africa region grew 15% year over year, AsiaPac and Japan grew 4% year over year and Latin America grew 1% year over year. Revenue from the BRIC+13 markets grew 9% year over year.

Business Outlook

• Consolidated revenues are expected to be $24.5 billion for 2014.
• Consolidated GAAP operating income is expected to be 16.5% of revenues for 2014 and consolidated non-GAAP4 operating income is expected to be 24.0% of revenues for 2014.
• Consolidated GAAP earnings per weighted average diluted share are expected to be $1.29 for 2014 and consolidated non-GAAP4 earnings per weighted average diluted share are expected to be $1.90 for 2014.
• The consolidated GAAP income tax rate is expected to be 23.0% and the consolidated non-GAAP4 income tax rate is expected to be 23.5% for 2014. This assumes that the U.S. R&D tax credit is extended during 2014.
• Consolidated net cash provided by operating activities is expected to be $6.80 billion for 2014 and free cash flow2 is expected to be $5.35 billion for 2014.
• The weighted average outstanding diluted shares are expected to be 2.06 billion for 2014.
• EMC expects to repurchase an aggregate of $3.0 billion of the company’s common stock in 2014.