EMC Tops Wall Street Forecasts, Predicts Cloudy Future
EMC (NYSE: EMC) reported quarterly results this morning that topped Wall Street forecasts, and the data storage giant predicted a modest rebound in IT spending for 2010.
EMC's third-quarter revenues were down 5.3 percent from the year-ago quarter to $3.52 billion, $70 million more than the Thomson Reuters forecast, and the company's non-GAAP earnings of $480.3 million, or 23 cents a share, were also better than expected.
The company said its fourth-quarter sales will be flat with the year-ago quarter at $4 billion also better than anticipated before growth returns in 2010.
EMC CEO Joe Tucci and CFO David Goulden said customers are becoming "more comfortable" about spending their IT budgets.
"Throughout Q3, the predicted stability of our business was very good," Tucci said on the company's conference call. "The timing of order flows throughout the quarter was very close to our historical patterns."
He forecast modest growth in IT spending for 2010 while predicting that EMC's core markets of data storage, virtualization, security, compliance, backup, recovery and archiving will outperform the broader IT market.
"In 2010, we expect IT spending to return to growth, albeit somewhat below the historical growth levels we saw in 2004 to 2007," said Tucci.
EMC Plans Cloud Services
Tucci placed a heavy emphasis on EMC's vision for cloud computing, both inside and outside corporate firewalls.
"We will work with our telco and service provider partners to establish external clouds that are fully compatible with the internal clouds that enterprise customers will build out," Tucci said.
He added that with EMC partners, the company "will enable our customers to establish their own federated clouds. These clouds will allow our customers to distribute their IT workloads across their own unified internal cloud data centers and the external cloud data centers their chosen service provider partners will deploy, providing our customers with another level of flexibility and efficiency."
EMC plans SaaS-based solutions that will operate on top of those cloud infrastructures, starting with the Mozy online backup service, and Tucci added that the company plans services to unify desktop and mobile devices.
Tucci also pledged "open and equal access" for all partners to the company's VMware (NYSE: VMW) subsidiary.
Strong areas for EMC in the quarter included the new Symmetrix V-Max, Celerra unified storage systems, Data Domain and Avamar deduplication products, solid state drives (SSDs), Mozy and Iomega small business and consumer offerings, said Goulden.
Goulden said the introduction of fully automated storage tiering (FAST) later this quarter should boost SSD sales even further.
Dell's (NASDAQ: DELL) contribution to midrange Clariion sales fell by 15 percent, as the two focus their long-time partnership more on OEM sales than reseller sales, said Goulden. Dell, which accounts for a quarter of Clariion sales, has been moving aggressively into the data storage space with its own EqualLogic line. Still, overall Clariion sales managed a 1 percent sequential gain, as EMC looked to direct channel sales to offset the decline in the Dell reseller business.
EMC's strongest geographical market in the third quarter was the U.S., with sales up 13 percent sequentially, while revenue elsewhere rose 3 percent. Goulden also noted stability in financial services IT spending.
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