Acquisitions Help Drive EMC’s Q2 Profit

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With the help of strong revenues from its VMware, Documentum and Legato subsidiaries, EMC pulled in a profit of $193 million in the second quarter, more than double its profit in the second quarter of 2003.

Net income for the quarter was $193 million, or 8 cents per diluted share, which was 136 percent higher than the $82 million, or 4 cents per diluted share, of the year-ago period.

The Hopkinton, Mass., maker of information systems posted total revenue of $1.97 billion, up 33 percent compared to its revenues of $1.48 billion in 2Q 2003.

Its purchase of key software companies made a big difference. Revenues of its VMware subsidiary were up 200 percent year-over-year to $47 million, while Documentum sales were up 14 percent from Q2 2003 to $78 million. Revenues of its Legato division grew by 13 percent year-over-year to $86 million.

All three divisions helped EMC’s software revenue grow 64 percent to $715 million.

But EMC’s other assets performed well too. During a conference call, company officials said core revenue, which excludes revenue from its subsidiaries, grew 19 percent compared with the second quarter of 2003.

EMC President and CEO Joseph Tucci pointed to the company’s information lifecycle management strategy, which aims to manage information from its inception until its disposal, as a leading driver of the vendor’s success in Q2.

“EMC had one of the fastest if not the fastest growth rates of major IT companies,” Tucci said on the call. “The main driver of this growth was strong execution of our information lifecycle management strategy and solutions, which are enjoying an excellent reception from our customers and the overall IT marketplace.”

Tucci also noted that that EMC is on track to reach its mid-teens operating margin goal by year’s end after guiding operating income to more than 12 percent of revenues.

While EMC is known for competing fiercely with IBM and Hitachi Data Systems in high-end storage systems, there is also evidence that its mid-range market share is improving.

The vendor posted sales of $326 million for its mid-range Clariion systems, which was 43 percent greater than the Q2 2003. In contrast, revenues for its high-end Symmetrix line grew only 5 percent over the same period. Total storage systems growth was 16 percent.

EMC’s services revenue grew 45 percent from the year-ago quarter on the strength of increased software maintenance revenue.

Going forward, EMC said it expects revenues for the third quarter of 2004 to top $2 billion, with EPS between 8 and 9 cents.

Article courtesy of

Clint Boulton
Clint Boulton
Clint Boulton is an Enterprise Storage Forum contributor and a senior writer for covering IT leadership, the CIO role, and digital transformation.

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