Midrange Drives EMC’s Growth

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EMC on Wednesday reported a third-quarter profit of $422 million, thanks to a $106 million tax benefit and flourishing sales of the company’s midrange systems, software and services.

The Hopkinton, Mass., information management systems vendor said its third-quarter revenue was $2.37 billion, 17 percent higher than the $2.03 billion reported for the same quarter in 2004. Earnings per share were 17 cents, compared to 9 cents per share reported for the year-ago quarter.

Excluding the tax-related benefit, earnings per diluted share were 13 cents, up 44 percent from the year-ago quarter, beating Wall Street estimates by a penny.

Systems revenue, long EMC’s bread and butter revenue driver, grew 15 percent from the year-ago quarter to $1.09 billion. Meanwhile, the storage provider’s software license and maintenance revenues continue to blossom, growing 16 percent to $865 million, or 37 percent of EMC’s revenues. Services sales grew 25 percent to $402 million.

EMC’s hardware sales were again led by the company’s popular Clariion, Centera and Celerra midrange storage systems. However, Clariion sales only grew 20 percent in the third quarter, compared to 56 percent for the year-ago quarter.

EMC President and CEO Joseph Tucci said this was not up to par and vowed to do better. He noted that EMC’s CX300 and CX500 machines sold well but that sales of CX700 machines were disappointing.

The company said sales for its backup, recovery and archive software increased 39 percent from the quarter a year ago, as EMC again saw strong demand for Legato NetWorker, EmailXtender and Replication Manager. Customers craved these types of software to shore up their information in the wake of major compliance regulations.

EMC’s VMware business continue to eclipse growth projections, exceeding $100 million for the first time in its history. The company earlier this week upgraded its enterprise server virtualization software.

EMC said growth in its services business was propelled by projects for data classification, migration and consolidation, along with business continuity.

Tucci said the company’s information lifecycle management strategy carried the company to its 17 percent growth despite the fact that its flagship Symmetrix sales had a decline. This is partly due to the fact that customers required additional testing time, he said.

“That demonstrates the real power of our business model,” Tucci said on a conference call.

Tucci said he expects new Symmetrix systems to spur strong sales in the fourth quarter when they become available.

Looking forward, EMC expects revenues for the fourth quarter to be between $2.67 billion and $2.69 billion, with earnings per share between 16 cents and 17 cents. Revenues for 2005 are expected to grow 17 percent.

Tucci said the company expects to buy back an additional $400 million of its own stock in the fourth quarter, building on the $603 million in shares EMC has tucked in this year, and bringing the total stock buyback to a $1 billion for the year.

“Why? In short, we are confident about our future,” Tucci said.

Shares of EMC rose 2% in early trade Wednesday.

Article courtesy of InternetNews.com

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

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