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EMC: Fiscal 4Q07 Financial Results

Revenues +19% year-to-year for the quarter, and +19% for the year at a record $13 billion; systems revenue grew "only" 12% during the year to $5.76 billion, representing 44% of total sales.

EMC
Corporation announced all-time record fourth-quarter and full-year
revenue and strong year-over-year growth in profit, earnings per share
and operating cash flow. 

EMC’s 18th consecutive quarter of
double-digit year-over-year revenue growth was highlighted by balanced,
double-digit revenue growth across the company’s Information Storage,
Content Management & Archiving, RSA Information Security, and
VMware Virtual Infrastructure business lines and its four major
geographies.

Total consolidated revenue for
the fourth quarter of 2007 was a record $3.83 billion, an increase of
19% over the $3.21 billion reported for the fourth quarter of 2006.
GAAP net income for the fourth quarter of 2007 was $525.7 million or
$0.24 per diluted share, 33% higher than the GAAP $0.18 earnings per
diluted share reported for the year-ago period. During the quarter,
EMC generated operating cash flow of $979 million, an increase of 50%
compared with the same period a year ago and free cash flow of $712
million, an increase of 78% year-over-year.

Total
consolidated revenue for EMC’s full 2007 fiscal year was a record
$13.23 billion, 19% higher than the $11.16 billion reported for the
full 2006 fiscal year. GAAP net income for 2007 was $1.67 billion or
$0.77 per diluted share, 43% higher than the GAAP earnings per diluted
share of $0.54 reported for 2006. 

Joe
Tucci, EMC Chairman, President and Chief Executive Officer, said, “2007
was truly a breakout year for EMC.  We exceeded all of the aggressive
financial targets we set out to achieve at the beginning of the year. 
The highly successful partial IPO of VMware clearly met its key goals.
And we further organized around our ‘One EMC’ initiative to interlock
and drive more technology and product integrations across our
Information Storage, Content Management and Archiving, and RSA
Information Security business units, making it much easier for our
customers and partners to do business with EMC.

Commenting
further, Tucci said, “Looking forward, EMC has never been better
positioned to continue to grow and gain market share.  We have the best
product line-up in our history with a very favorable product cycle, and
our proven go-to-market model is firmly in place. EMC is well
positioned in the areas where IT spending will grow the fastest this
year. Finally, our focus on innovation and R&D is enabling us to
tackle emerging customer priorities such as Web 2.0, virtualization,
compliance and new online methods for purchasing and consuming
software
.”

During the fourth quarter, EMC
systems revenue increased 15% compared with the same period a year ago
and represented 44% of total fourth-quarter revenue. Software license
and maintenance revenue increased 20% year-over-year and accounted for
40% of total fourth-quarter revenue. Professional services, systems
maintenance and other services revenue grew by 27% year-over-year and
represented 16% of total fourth-quarter revenue. Revenue from North
America increased 16% compared with the same period a year ago and
represented 55% of total fourth-quarter revenue. Revenue from
operations outside of North America grew 23% year-over-year, driven by
double-digit revenue growth in EMC’s Europe, Middle East and Africa
(EMEA), Asia-Pacific and Japan (APJ) and Latin America regions. 

David
Goulden, EMC Executive Vice President and Chief Financial Officer,
said, “We exceeded our growth, profitability and free cash flow targets
for the fourth quarter and for the year.  By investing in our
go-to-market model and worldwide market presence, strengthening our
product portfolio, and expanding our strategic partnerships around the
world, we enter 2008 with an even stronger foundation for continued
financial success and market share gains
.”

Fourth-Quarter Highlights

EMC’s
Information Storage business, which includes revenue from storage
systems, storage software and related customer and professional
services, reached $3.03 billion, an increase of 14% compared with the
year-ago period. Growth in the Information Storage business reflects
continued global demand for EMC Symmetrix, EMC CLARiiON, and EMC
Celerra networked storage systems. Strong customer demand for IP
storage solutions, next-generation backup and recovery capabilities,
file-based virtualization, and model-based resource management also
helped to drive strong year-over-year information storage revenue
growth.  

EMC’s Content Management and
Archiving business posted double-digit revenue growth, increasing
fourth-quarter revenue 17% year-over-year to $238 million. On a
year-over-year basis, new license revenue increased 8% and maintenance
and professional services revenue was up 25%. Growth in the Content
Management and Archiving business reflects strong global demand for
EMC’s enterprise content management and archiving solutions to drive
business efficiency, compliance and risk mitigation across the
information infrastructure, and demand for EMC’s Documentum 6 platform,
which gives organizations of various sizes and across industries a
robust, unified repository for managing, storing, securing, and
delivering increasing amounts of unstructured content.  

RSA
Information Security revenues for the fourth quarter of 2007 grew 30%
year-over-year, reaching $148 million.  This growth was primarily
driven by RSA’s key management and its consumer-facing applications, as
well as its compliance and security information and event management
(SIEM) solutions. During the quarter, the division continued to see
success with its holistic, information-centric approach to information
security and risk management and its unparalleled breadth of solutions
that address customers’ key areas of information security and its
management across the information infrastructure. 

VMware, which is majority-owned by EMC, had fourth-quarter
revenues of $412 million, an increase of approximately 80% compared to
the year-ago quarter. More than 100,000
customers rely on VMware to reduce capital and operating expenses,
ensure business continuity, strengthen security and go green.

2007 Highlights

EMC
had double-digit revenue growth across its systems, software and
services offerings in 2007.  Systems revenue grew 12% during the year
to $5.76 billion, driven by the introduction of new models and
enhancements to EMC’s entire line of networked storage platforms.
Software license and maintenance revenue grew 25% to $5.33 billion,
and professional services, systems maintenance and other services
revenue grew 23% in 2007 to $2.13 billion. For the year, systems
revenue represented 44% of EMC’s annual revenue, software license and
maintenance represented 40% and professional services and systems
maintenance represented 16% of annual revenue.

EMC’s
Information Infrastructure business revenues, which comprise EMC’s
Information Storage, Content Management and Archiving and RSA
Information Security business revenues, were $11.9 billion and grew 14%
in 2007. EMC’s Information Storage business annual revenue increased
10% in 2007 to $10.61 billion compared to 2006. Annual revenue for
EMC’s Content Management and Archiving business grew 13% year-over-year
to $773 million and, on a comparable basis, annual revenue for the RSA
Information Security division grew 24% to $525 million.

Total
consolidated revenue for EMC’s full 2007 fiscal year, which includes
EMC’s Information Infrastructure and VMware Virtual Infrastructure
businesses, was a record $13.23 billion, 19% higher than the $11.16
billion reported for the full 2006 fiscal year.

For
the year, revenue from EMC’s North America geography increased 17%
compared with 2006 and represented 57% of total annual revenue. Revenue from operations outside of North America grew 22%
year-over-year. All four of EMC’s major geographies posted
double-digit year-over-year revenue growth, including EMC’s Asia
Pacific and Japan geography which emerged as the company’s
fastest-growing geography for 2007.  

Business Outlook

  • Consolidated EMC revenues are expected to grow 13% to $15 billion in 2008. Within the consolidated revenues:

    • EMC’s Information Infrastructure’s revenues are expected to grow 9% to $13 billion in 2008.
    • VMware’s revenues are expected to grow 50% in 2008.  
  • Consolidated GAAP diluted earnings per share are expected to be $0.78 in 2008.

    • EMC Information Infrastructure’s contribution to diluted earnings per share is expected to be $0.68 in 2008.
    • VMware’s contribution to diluted earnings per share is expected to be $0.10 in 2008.
  • Consolidated non-GAAP diluted earnings per share
    are expected to grow 14% to $1.04 in 2008. Non-GAAP diluted earnings
    per share exclude the impact of stock-based compensation and intangible
    asset amortization.

    • EMC Information Infrastructure’s contribution to non-GAAP diluted earnings per share is expected to grow 11% to $0.88 in 2008.
    • VMware’s contribution to non-GAAP diluted earnings per share is expected to grow 33% to $0.16 in 2008.
  • Consolidated stock-based compensation expense is expected to be $0.18 per diluted share in 2008 and the amortization of intangible assets is expected to be $0.08 per diluted share in 2008. Within these consolidated expenses:

    • EMC
      Information Infrastructure’s stock-based compensation expense is
      expected to be $0.12 per diluted share in 2008 and amortization of
      intangible assets is expected to be $.08 per diluted share in 2008.
    • VMware’s
      stock-based compensation expense is expected to be $0.06 per diluted
      share in 2008 and amortization of intangible assets to be less than
      $0.01 per diluted share in 2008
  • Consolidated GAAP tax rate
    for 2008 is expected to be 20% and the non-GAAP tax rate to be 22%. The
    tax impact of stock-based compensation and intangible asset
    amortization is expected to be 2% on the 2008 tax rate.

 

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