EMC Financials: Hardware, Software Businesses Show Strong Growth

Overall revenue for the quarter ending June 30 was $2 billion, up 33 percent compared with the second quarter of 2003. The Hopkinton, Mass-based company earned $193 million, or 8 cents per share, up more than 130 percent compared with earnings of $82 million, or 4 cents per share, last year.

Some of that growth came from EMC's acquisitions of Documentum, Legato and VMware, revenue and earnings of which were included in last year's figures. However, even accounting for the impact of those acquisitions, EMC's core revenue grew 20 percent year to year.

Bill Teuber, executive vice president and CFO of EMC, said the company's platform software license revenue, which is related to Symmetrix and Clariion sales, hit $463 million for the quarter, up 24 percent over the same period last year.

Even more important, he said, EMC's multiplatform software license revenue grew 139 percent to hit $262 million, including $148 million from the recent acquisitions. "This is the first time our multiplatform software revenue matched our platform software revenue," he said.

EMC's Legato revenue grew 13 percent vs. last year to reach $86 million, while VMware's revenue grew by high double digits to reach $47 million, Teuber said.

While Documentum's revenue also grew 14 percent year to year to $78 million, that figure was down $3 million, said Teuber, due to the spending slowdown and a slippage of orders into the current quarter.

Hardware and software related to EMC's Symmetrix platform was up 5 percent compared with last year at $650 million. However, that was eclipsed by the growth of its Clariion platform, revenue of which hit $326 million, up 43 percent, said Teuber.

While EMC does not break out the channel's contribution to most of its business, Teuber said Clariion sales, including hardware and software, remain about evenly split between direct sales, Dell and the rest of the channel. In addition, Legato is sold primarily through the channel. "We're very happy with our momentum in the [channel] space," he said. "We expect it to continue. It will be an important part of achieving our goals for the year."

Looking forward, EMC expects third-quarter results to reflect the typical flat to slight rise in sales, with revenue for the quarter expected to hit $2 billion and earnings to be about 8 cents or 9 cents per share, said Teuber.

For the entire fiscal year 2004, Teuber said revenue should be about $8.1 billion, with earnings expected to be $850 million. This compares with 2003 revenue of $6.2 billion and earnings of $496 million.

Joe Tucci, president and CEO of EMC, said the second-quarter results mean "EMC has among the fastest, if not the fastest, growth in the IT sector."

Underpinning that growth, said Tucci, is the company's information life-cycle management strategy and its related solutions, including a wide range of entry-level to enterprise-class hardware and software products.

The fastest-growing part of EMC's business is VMware, which Tucci said enjoyed a doubling of sales since the second quarter of 2003.

Such growth shows that VMware is being well-received by system vendors that otherwise compete with EMC for storage sales because of EMC's commitment to keeping VMware a separate, open business, Tucci said. "And [those vendors] have my firm commitment to operate VMware in this fashion," he said.