EMC Predicts Slower Growth In 2008
"The SMB market is the fastest growing segment of the information infrastructure market," Tucci said during a phone conference to announce the company's 2008 fourth-quarter and year-end earnings. "We are now focused on it. And we have new products that address the needs of customers in that segment of the market. We will get to these customers ourselves and with our channel partners. Our partner ecosystem is strong and getting stronger every day," he said.
Tucci's comments came as EMC wrapped up a strong 2007. Sales in the fourth quarter ended Dec. 31 were $3.83 billion, up 19 percent from the same period one year earlier, while net income increased 35 percent to $525.7 million. For all of 2008 sales increased 19 percent to $13.23 billion and net income grew 36 percent to $1.67 billion.
EMC is projecting that sales will grow only about 13 percent in 2008 to $15 billion. And with the economy struggling, Tucci acknowledged that achieving even that modest goal won't be easy. "The economic environment will, for sure, be more challenging and more uncertain," he said. "But there will be opportunities for EMC to grow. As I look at 2008, I truly believe that EMC has never been better positioned."
EMC's product line in 2001 was heavily weighted toward its high-end Symmetrix data storage systems. And a big chunk of the company's sales were to Internet startup companies that vanished in the dot-com crash. Tucci compared EMC's standing then with the vendor's current position in a number of fast-growing IT markets including data storage, virtualization, security and risk management, business continuity, compliance and energy efficiency. "This is where EMC is positioned and focused," Tucci said.
For the new year EMC is projecting to grow faster than the markets in which it competes. It plans to exceed 5 percent revenue growth in its core information storage business which accounted for $10.6 billion in sales in 2007, up 10 percent from the previous year. Unlike the days when EMC's emphasis was on high-end data storage, its product line now includes storage systems for small, mid-size and large businesses. At the Consumer Electronics Show earlier this month EMC debuted its LifeLine data storage and backup software for consumers and small businesses. Last week the company ventured into the software-as-a-service arena with the debut of its MozyEnterprise online backup service.
Sales of EMC's content management and archiving products were $773 million in 2007, up 13 percent from the previous year, and the company is projecting sales growth of more than 8 percent this year. Sales of information security products grew 24 percent to $525 million in 2007 and EMC is forecasting sales growth to exceed 16 percent this year.
The company is expecting sales of virtualization technology from its VMware business unit to grow in the range of 50 percent this year, although not all of that growth will translate to EMC's bottom line given that EMC sold a portion of VMware to the public in an IPO earlier this year. VMware sales reached $412 million in the fourth quarter, up 78 percent from one year earlier. That fell short of Wall Street's expectations of $417 million in sales and VMware's stock plunged 26 percent.
During the fourth quarter, 12.5 percent of EMC's sales were made through Dell Computer under the two companies' long-time alliance.
EMC reported 17 percent growth year-over-year in North America in 2007. The Asia/Pacific region was EMC's fastest growing last year with 24 percent sales growth, followed by Latin America with 23 percent sales growth and 21 percent sales growth in Europe, the Middle East and Africa.