EMC Reports Record Revenue and 58% Profit Growth Third-Quarter Highlights

- All-time record consolidated revenue up 20% year over year

- Balanced, double-digit year-over-year revenue growth across U.S. and International geographies

- GAAP net income up 58% year over year

- Record third-quarter non-GAAP net income up 35% year over year

- Strong year-over-year increase in gross and operating margins

HOPKINTON, Mass., Oct. 19 /PRNewswire-FirstCall/ -- EMC Corporation (NYSE: EMC) today reported record financial results for the company’s third fiscal quarter of 2010.  Strong execution and continued healthy customer demand for the company’s storage, data protection, virtualization, and security products and services contributed to EMC achieving all-time record consolidated revenue and record third-quarter non-GAAP net income.  

For the third quarter, consolidated revenue was $4.21 billion, an increase of 20% compared with the year-ago quarter; GAAP net income attributable to EMC increased 58% year over year to $472.5 million; and GAAP diluted earnings per share were $0.22, up 57% year over year.  Non-GAAP(1) net income attributable to EMC for the third quarter was $649.4 million, an increase of 35% compared with the year-ago quarter, and non-GAAP(1) earnings per diluted share were $0.30, an increase of 30% year over year.  

During the quarter, EMC expanded gross and operating margins substantially on a year-over-year basis.  The company achieved all-time record year-to-date operating cash flow and free cash flow of $3.0 billion and $2.2 billion, which grew 31% and 22%, respectively, compared with the year-ago period.  The company completed the quarter with $10.5 billion in cash and investments.   

Joe Tucci, EMC’s Chairman and Chief Executive Officer, said, “Customers are embracing EMC in increasing numbers as a trusted partner for their cloud computing build-outs.  To lead this transformational IT wave, EMC remains focused on – and is taking share in – markets that are growing considerably faster than IT as a whole.  With our compelling technology and services portfolio, partner ecosystem, and strong product roadmap, we remain confident that we’ll continue to produce double-digit growth rates over the long term.”

David Goulden, EMC’s Executive Vice President and Chief Financial Officer, said, “For the third consecutive quarter EMC achieved our ‘triple play’ – we gained market share, invested aggressively to capitalize on the shift to cloud computing, and increased profitability.  Cloud computing is driving a fundamental change in the way IT is designed and managed, represents a massive opportunity, and is happening now in various phases across the globe.  Our strategy and business model remain strong, and our investments continue to pay off.  Moving forward, EMC has never been better positioned to deliver our ‘triple play’ results over the long term.”

Third-Quarter Highlights

Third-quarter highlights included strong customer demand and double-digit revenue growth for the company’s market-leading high-end EMC Symmetrix storage product portfolio, which increased 23% compared with the year-ago quarter, and EMC’s mid-tier storage product portfolio(2), which grew revenue 22% year over year.  Revenue from EMC’s RSA information security business grew 22% year over year, and VMware (NYSE: VMW), which is majority-owned by EMC, increased revenue 46% compared with the year-ago quarter.  Additional third-quarter highlights included strong customer demand for EMC’s backup and recovery solutions as part of the company’s fast-growing Backup and Recovery Systems Division, and a number of significant new customer wins with EMC’s Information Intelligence solutions.  Also in the third quarter, EMC completed its acquisition of data warehousing and business analytics pioneer Greenplum, forming the foundation of the company’s new Data Computing Products Division.  The new division is focused on helping customers rapidly deploy and generate disruptive competitive advantage from “big data” clouds and self-service analytics.

EMC consolidated third-quarter revenue from the United States reached $2.3 billion, an increase of 21% year over year, representing 54% of consolidated third-quarter revenue.  Revenue from EMC’s business operations outside of the United States reached $1.9 billion, an increase of 19% year over year, representing 46% of consolidated third-quarter revenue. Within this, revenue increased 14%, 28% and 23% year over year, respectively, in EMC’s Europe, Middle East and Africa; Asia Pacific and Japan; and Latin America regions.

Business Outlook

The following statements are based on current expectations.  These statements are forward-looking, and actual results may differ materially.  These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof.  These statements supersede all prior statements regarding 2010 financial results set forth in prior EMC news releases.

All dollar amounts and percentages set forth below should be considered to be approximations.

  • For 2010, EMC expects consolidated revenues of $16.9 billion, $0.91 in consolidated GAAP diluted earnings per share, and $1.25 in consolidated non-GAAP diluted earnings per share, which excludes the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization.
  • For 2010, consolidated restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization are expected to be $0.02, $0.23 and $0.09 per diluted share, respectively.
  • GAAP operating income is expected to be 15% to 16% of revenues for 2010, and non-GAAP operating income is expected to be 21% to 22% of revenues for 2010.  Excluded from non-GAAP operating income are restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization, which account for less than 1%, 4% and less than 2% of revenues, respectively.  
  • The consolidated GAAP income tax rate is expected to be 20% for 2010.  Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization, which collectively impact the tax rate by 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2010.  The expected annual GAAP and non-GAAP income tax rates assume that the U.S. research and development tax credit will be re-enacted in 2010 which is expected to favorably impact both the GAAP and non-GAAP income tax expense by $45 million to $50 million.  The R&D credit is expected to favorably impact the GAAP tax rate by 2% and the non-GAAP tax rate by 1%.
  • Total non-operating expense, which includes investment income, interest expense, and other expense, is expected to be $80 million in 2010.
  • The total weighted average diluted outstanding shares for 2010 are expected to be 2.14 billion.
  • EMC expects to repurchase up to $1.0 billion of the company’s common stock in 2010.

Supporting Resources

About EMC

EMC Corporation (NYSE: EMC) is the world’s leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC’s products and services can be found at www.EMC.com.

(1) Items excluded from the non-GAAP results are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization for the third quarters of 2010 and 2009.  In addition, for the third quarter of 2009, gains on Data Domain and SpringSource common stock were also excluded. See attached schedules for reconciliation of GAAP to non-GAAP.

(2) Mid-tier platform products include hardware and software products from EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Avamar and EMC Atmos.

EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, RSA and Symmetrix are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other countries. All other trademarks used are the property of their respective owners.

Forward-Looking Statements

This release contains “forward-looking statements” as defined under the Federal Securities Laws.  Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) our ability to protect our proprietary technology; (iv) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (v) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vi) competitive factors, including but not limited to pricing pressures and new product introductions; (vii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (viii) component and product quality and availability; (ix) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (x) insufficient, excess or obsolete inventory; (xi) war or acts of terrorism; (xii) the ability to attract and retain highly qualified employees; (xiii) fluctuating currency exchange rates; and (xiv) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission.  EMC disclaims any obligation to update any such forward-looking statements after the date of this release.

Use of Non-GAAP Financial Measures

This release, the accompanying schedules and the additional content that is available on EMC’s website contain non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.

Where specified in the accompanying schedules for various periods entitled “Reconciliation of GAAP to Non-GAAP,” certain items noted on each such specific schedule (including, where noted, amounts relating to restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and amounts relating to gains on Data Domain and SpringSource common stock) are excluded from the non-GAAP financial measures.  

EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.

This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.