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Press Release

EMC Reports First-Quarter 2009 Financial Results

, April 23, 2009 - 
  • Consolidated revenue - $3.15 billion
  • GAAP net income attributable to EMC - $194.1 million
  • Strong operating cash flow - $864 million
  • Record cash and investments - $9.8 billion

Contacts

Dave Farmer
508-293-7206
farmer_dave@emc.com

 

HOPKINTON, Mass. — April 23, 2009 — EMC Corporation (NYSE:EMC), the world leader in information infrastructure solutions, today reported first-quarter 2009 revenue of $3.15 billion, reflecting solid revenue results in a challenging global economic environment. Through its continued emphasis on operational efficiency, in the first quarter EMC generated operating cash flow of $864 million and free cash flow of $681 million, all contributing to record cash and investments of $9.8 billion.

First-quarter consolidated revenue of $3.15 billion declined 9.2% compared with the year-ago period, or 5.7%, adjusting for the impact from currency. First-quarter 2009 GAAP net income attributable to EMC was $194.1 million or $0.10 per diluted share, compared with $251.6 million or $0.12 per diluted share for the first quarter of 2008. First-quarter 2009 non-GAAP1 net income attributable to EMC was $323.7 million or $0.16 per diluted share, compared with $460.1 million or $0.22 per diluted share for the first quarter of 2008.⊃2;

Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “Within a very tough economy, EMC executed soundly in the first quarter, leveraging the unique power of our highly complementary information infrastructure and virtual infrastructure strategies. As we look to the balance of 2009, we believe the global IT spending environment has reached - or is very near - the bottom. We expect IT spending to improve in the second half of 2009 as customers will have better budget visibility, be further through their own restructuring programs and broader stimulus packages should be underway.”

Tucci continued, “Looking ahead, EMC will advance our place among our customers’ most strategic IT providers as they take advantage of trends shaping the future of IT such as the virtual data center and cloud computing. As a technology-driven company, we will continue to use our financial strength to remain aggressive with R&D, extend our technology leadership, forge even tighter and deeper strategic alliances and deliver customers even more advanced solutions and services for their most strategic IT initiatives.”

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “EMC’s first-quarter results reflect the resiliency of our business in a very challenging global economy. We executed well on our cost reduction plans during the quarter and maintained disciplined expense control, which resulted in decent profitability and excellent free cash flow, while continuing investments to further enhance our product and services offerings and expand our customer reach.”

Goulden continued, “We are taking additional near-term cost reduction actions that will save EMC an additional $100 million in 2009. We now expect to reduce EMC’s 2009 Information Infrastructure costs by approximately $450 million from our 2008 spend, increasing to approximately $500 million in 2010. We believe these near- and longer-term actions to improve our effectiveness and efficiency will help EMC ride out this period of economic uncertainty and put us in a position of even greater strength when conditions improve.”

EMC’s best estimate is that 2009 global IT spending will decline as a percentage in the very-high-single-digit to very-low-double-digit range compared with 2008. EMC also expects second-quarter 2009 global IT spending will probably be flat compared with the first quarter of 2009, and the second half of 2009 will be stronger than the first half of the year.

First-Quarter Highlights

EMC’s Information Infrastructure business revenue for the first quarter – comprising Information Storage, RSA Security, and Content Management & Archiving – was $2.7 billion. During the quarter, the business benefited from new, industry-leading products, the quality and breadth of EMC’s global services portfolio, technology integrations and product enhancements from across EMC’s information infrastructure portfolio. First-quarter Information Infrastructure business highlights included customer demand for EMC’s:

  • Industry-leading networked storage solutions, in particular EMC's unified storage systems that connect to a variety of networks and the company's high-end and midrange storage systems with solid state drives that use flash memory.
  • Expansive portfolio of industry-leading backup, recovery and archive solutions that leverage data deduplication to meet their data protection requirements, reduce cost and mitigate risk.
  • RSA security solutions helping customers solve their most complex information security challenges, with particular strength in the quarter from the RSA security information and event management solutions, and the RSA identity protection and verification suite.
  • Broad consulting and professional services portfolio helping customers meet their near-term cost containment requirements while supporting their longer-term objectives, such as consolidation and virtualization.
  • Solutions for effective content management that advance collaboration, business process and IT efficiency and compliance.

VMware (NYSE: VMW), which is majority-owned by EMC, contributed first-quarter revenue of $470.4 million, an increase of 7.4% compared with the year-ago quarter.

EMC consolidated first-quarter revenue from the United States was $1.64 billion and represented 52% of total first-quarter revenue. Revenue from EMC’s operations outside of the United States was $1.51 billion and represented 48% of total first-quarter revenue.

Certain Items Impacting 2009

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. The items set forth under “Certain Items Impacting 2009” in EMC’s news release dated January 27, 2009 still represent EMC’s current expectations unless specifically superseded by these statements.

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

The following items are expected to impact EMC’s 2009 results:

  • In 2009, savings from cost reduction actions are expected to reduce the company’s 2008 cost base by $450 million, up $100 million from the company’s previous estimate of $350 million. The savings are expected to be weighted toward the latter half of 2009.
  • Due to pressure on IT spending, EMC anticipates lower gross and operating margins for 2009 compared with 2008.
  • Operating profitability should show signs of improvement from first-quarter 2009 levels in the second half of 2009.
  • VMware’s contributions to consolidated diluted earnings per share are expected to be $0.02 lower in the second quarter of 2009 compared with the first quarter of 2009.

Due to the current macro-economic conditions and limited visibility, EMC is not offering revenue, EPS or other financial outlook at this time.

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 stock-based compensation and intangible asset amortization for the first quarters of 2009 and 2008, a restructuring charge for the first quarter of 2009 and an in-process research and development charge for the first quarter of 2008. See attached schedules for reconciliation of GAAP to non-GAAP.

⊃2;The results for 2008 have been adjusted to give effect to the adoption of Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements-An Amendment of ARB No. 51” and FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”.

EMC is a registered trademark of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. 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; (xiv) litigation that we may be involved in; and (xv) 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. Statements in this release regarding market conditions are based on current expectations. These statements are forward-looking, and actual results may differ materially. EMC disclaims any obligation to update any forward-looking statements in this release after the date of this release.

Use of Non-GAAP Financial Measures

This release contains 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 stock-based compensation expense, intangible asset amortization, restructuring charges and IPR&D charges) 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.

All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.

See attached schedules for reconciliation of GAAP to non-GAAP.

EMC is a registered trademark of EMC Corporation.  RSA is a registered trademark of RSA Security Inc.  VMware is a registered trademark of VMware, Inc.  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; (xiv) the impact of any expense reduction initiatives; and (xv) 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.  Statements in this release regarding market conditions are based on current expectations.  These statements are forward-looking, and actual results may differ materially.  EMC disclaims any obligation to update any forward-looking statements in this release after the date of this release.

Use of Non-GAAP Financial Measures

This release contains 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 stock-based compensation expense, intangible amortization, special income tax benefits, restructuring charges, IPR&D charges and net gains on investments) 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.

All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.

Notes:
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