EMC: Fiscal 3Q10 Financial Results

EMC Corporation reported record financial results for the company’s third fiscal quarter of 2010.  Strong execution and continued healthy customer demand for the company’s storage, data protection, virtualization, and security products and services contributed to EMC achieving all-time record consolidated revenue and record third-quarter non-GAAP net income. 

Third-Quarter Highlights

• All-time record consolidated revenue up 20% year over year
• Balanced, double-digit year-over-year revenue growth across U.S. and International geographies
• GAAP net income up 58% year over year
• Record third-quarter non-GAAP net income up 35% year over year
• Strong year-over-year increase in gross and operating margins

For the third quarter, consolidated revenue was $4.21 billion, an increase of 20% compared with the year-ago quarter; GAAP net income attributable to EMC increased 58% year over year to $472.5 million; and GAAP diluted earnings per share were $0.22, up 57% year over year. Non-GAAP net income attributable to EMC for the third quarter was $649.4 million, an increase of 35% compared with the year-ago quarter, and non-GAAP earnings per diluted share were $0.30, an increase of 30% year over year. 

During the quarter, EMC expanded gross and operating margins substantially on a year-over-year basis. The company achieved all-time record year-to-date operating cash flow and free cash flow of $3.0 billion and $2.2 billion, which grew 31% and 22%, respectively, compared with the year-ago period. The company completed the quarter with $10.5 billion in cash and investments.  

Joe Tucci, EMC’s Chairman and Chief Executive Officer, said: "Customers are embracing EMC in increasing numbers as a trusted partner for their cloud computing build-outs. To lead this transformational IT wave, EMC remains focused on – and is taking share in – markets that are growing considerably faster than IT as a whole. With our compelling technology and services portfolio, partner ecosystem, and strong product roadmap, we remain confident that we’ll continue to produce double-digit growth rates over the long term."

David Goulden, EMC’s Executive Vice President and Chief Financial Officer, said: "For the third consecutive quarter EMC achieved our ‘triple play’ – we gained market share, invested aggressively to capitalize on the shift to cloud computing, and increased profitability. Cloud computing is driving a fundamental change in the way IT is designed and managed, represents a massive opportunity, and is happening now in various phases across the globe. Our strategy and business model remain strong, and our investments continue to pay off.  oving forward, EMC has never been better positioned to deliver our ‘triple play’ results over the long term."

Third-Quarter Highlights
Third-quarter highlights included strong customer demand and double-digit revenue growth for the company’s market-leading high-end EMC Symmetrix storage product portfolio, which increased 23% compared with the year-ago quarter, and EMC’s mid-tier storage product portfolio, which grew revenue 22% year over year.

Revenue from EMC’s RSA information security business grew 22% year over year, and VMware, which is majority-owned by EMC, increased revenue 46% compared with the year-ago quarter.

Additional third-quarter highlights included strong customer demand for EMC’s backup and recovery solutions as part of the company’s fast-growing Backup and Recovery Systems Division, and a number of significant new customer wins with EMC’s Information Intelligence solutions.

Also in the third quarter, EMC completed its acquisition of data warehousing and business analytics pioneer Greenplum, forming the foundation of the company’s new Data Computing Products Division. The new division is focused on helping customers rapidly deploy and generate disruptive competitive advantage from ‘big data’ clouds and self-service analytics.

EMC consolidated third-quarter revenue from the United States reached $2.3 billion, an increase of 21% year over year, representing 54% of consolidated third-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $1.9 billion, an increase of 19% year over year, representing 46% of consolidated third-quarter revenue. Within this, revenue increased 14%, 28% and 23% year over year, respectively, in EMC’s Europe, Middle East and Africa; Asia Pacific and Japan; and Latin America regions.

                                               
EMC Storage Revenues

Business Outlook

• For 2010, EMC expects consolidated revenues of $16.9 billion, $0.91 in consolidated GAAP diluted earnings per share, and $1.25 in consolidated non-GAAP diluted earnings per share, which excludes the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization.
• For 2010, consolidated restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization are expected to be $0.02, $0.23 and $0.09 per diluted share, respectively.
• GAAP operating income is expected to be 15% to 16% of revenues for 2010, and non-GAAP operating income is expected to be 21% to 22% of revenues for 2010. Excluded from non-GAAP operating income are restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization, which account for less than 1%, 4% and less than 2% of revenues, respectively. 
• The consolidated GAAP income tax rate is expected to be 20% for 2010. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization, which collectively impact the tax rate by 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2010. The expected annual GAAP and non-GAAP income tax rates assume that the U.S. research and development tax credit will be re-enacted in 2010 which is expected to favorably impact both the GAAP and non-GAAP income tax expense by $45 million to $50 million. The R&D credit is expected to favorably impact the GAAP tax rate by 2% and the non-GAAP tax rate by 1%.
• Total non-operating expense, which includes investment income, interest expense, and other expense, is expected to be $80 million in 2010.
• The total weighted average diluted outstanding shares for 2010 are expected to be 2.14 billion.
• EMC expects to repurchase up to $1.0 billion of the company’s common stock in 2010.