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Press Release

EMC Reports Fourth-Quarter and Full-Year 2013 Financial Results

Story Highlights

  • Q4 revenue growth up 11% year over year
  • Q4 GAAP EPS and non-GAAP EPS growth up 23% and 11% year over year, respectively
  • Double-digit year-over-year revenue growth across U.S., EMEA and Latin America, with strong revenue growth from BRIC+13 markets
  • Q4 revenue from the Emerging Storage business up 73% year over year
  • Strong year-over-year increase in operating and free cash flow
HOPKINTON, Mass. , January 29, 2014 - 

EMC Corporation (NYSE:EMC) today reported fourth-quarter and full-year 2013 financial results .

Fourth-quarter revenue was $6.7 billion, an increase of 11% compared with the year-ago quarter.  Fourth-quarter GAAP net income attributable to EMC increased 17% year over year to $1.0 billion.  Fourth-quarter GAAP earnings per weighted average diluted share increased 23% year over year to $0.48.  Non-GAAP1 net income attributable to EMC was $1.3 billion, an increase of 7% compared with the year-ago quarter.  Fourth-quarter non-GAAP1 earnings per weighted average diluted share were $0.60, an increase of 11% year over year. 

Full-year 2013 revenue was $23.2 billion, an increase of 7% year over year. This result was highlighted by 5% year-over-year revenue growth for EMC's Information Infrastructure business, and 15% year-over-year revenue growth each for VMware and Pivotal. GAAP net income attributable to EMC for 2013 increased 6% year over year to $2.9 billion, and GAAP earnings per weighted average diluted share were $1.33, up 8% year over year.  Non-GAAP2 net income attributable to EMC for 2013 was $3.9 billion, an increase of 4% year over year, and non-GAAP2 earnings per weighted average diluted share were $1.80, an increase of 6% year over year.

For 2013, EMC generated operating cash flow of $6.9 billion and free cash flow3 of $5.5 billion, increases of 11% and 10% year over year, respectively. The company ended the year with $17.6 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “Our fourth-quarter results are further evidence that our federation strategy across EMC Information Infrastructure, VMware and Pivotal is on target. There's no doubt that the move from the second platform to the third platform of IT, underpinned by the mega trends of mobile, cloud, Big Data and social, is having a profound impact on business and transforming the way we work and live. Customers and partners have these transformations in their sights and are embracing EMC's vision, strategy and best-of-breed portfolio to capitalize on them.”

David Goulden, CEO of EMC Information Infrastructure and EMC's Chief Financial Officer, said, “Despite 2013 IT spend growth that was lower than we expected, EMC achieved strong revenue and profit growth. This outperformance relative to our industry speaks to the power of the EMC portfolio, solid operational and financial model and consistent execution against our strategy. We entered 2014 exceptionally well positioned to grow faster this year than our IT spending growth projection while also gaining share in the markets we serve.”

Fourth-Quarter Highlights

For the fourth quarter, EMC's Information Storage business accelerated revenue growth to 10% year over year. EMC's Emerging Storage business4 accelerated revenue to 73% year over year , propelled by the very successful launch of EMC XtremIO and continued strong growth of EMC Isilon, EMC Atmos and EMC VPLEX products. The company's Unified and Backup Recovery business5 increased revenue 11% year over year, benefitting from the recent product launches of the next-generation EMC VNX and EMC Data Domain product lines. Revenue from EMC's High-end Storage business6 returned to growth in the fourth quarter as customers continued to turn to the company's popular VMAX family. Revenue growth from EMC's RSA Information Security business and EMC's Information Intelligence business accelerated to 17% and 3% year over year, respectively.

VCE had an excellent fourth quarter as demand for Vblock systems showed strong year-over-year growth. EMC's VSPEX reference architecture portfolio continued to extend its market leadership with rapid adoption and increasing popularity among customers and partners. Additionally, EMC's Cloud Service Provider Partner program continued in the quarter as the company's fastest-growing vertical market segment.

In the fourth quarter, VMware (NYSE: VMW) continued to excel because it is uniquely positioned to help customers move from the client-server era to the mobile-cloud era of computing. As VMware helps customers bridge to this new world and lays the foundation for the build out of the software-defined data center, it is enabling them to achieve new levels of efficiency, control and agility.

Pivotal continued to make progress during the quarter. In the nine months since its formation, Pivotal has met the objectives it set out to accomplish in 2013: meeting its financial goals, establishing a strong executive leadership team and launching Pivotal One, a comprehensive, multi-cloud Enterprise PaaS comprised of a set of application and data services that run on top of Pivotal CF, the leading enterprise distribution of the Cloud Foundry platform.

EMC's consolidated fourth-quarter revenue from the United States increased 11% year over year to $3.5 billion, representing 52% of consolidated fourth-quarter revenue.  Revenue from EMC's business operations outside of the United States increased 11% year over year to $3.2 billion and represented 48% of consolidated fourth-quarter revenue. Within this, on a year-over-year basis, revenue from EMC's Europe, Middle East and Africa region grew 15%, revenue from EMC's Asia Pacific and Japan region increased 1%, and revenue from EMC's Latin America region grew 12%.  Revenue from EMC's BRIC+13 markets increased 17% year over year.

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 VMware's pending acquisition of AirWatch which was announced on January 22, 2014, or any other merger, acquisition, divestiture or business combination that may be announced or closed after the date hereof.  These statements supersede all prior statements made by EMC regarding 2014 financial results.

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

  • Consolidated revenues are expected to be $24.5 billion for 2014. Consolidated revenues for the three months ended March 31, 2014 are expected to be 22% of the full-year revenue.
  • Consolidated GAAP operating income is expected to be 18% of revenues for 2014 and consolidated non-GAAP7 operating income is expected to be 25% of revenues for 2014.
  • Consolidated GAAP earnings per weighted average diluted share are expected to be $1.38 for 2014 and consolidated non-GAAP7 earnings per weighted average diluted share are expected to be $1.95 for 2014.
  • Consolidated GAAP earnings per weighted average diluted share are expected to be $0.19 for the three months ended March 31, 2014 and consolidated non-GAAP7 earnings per weighted average diluted share are expected to be $0.35 for the three months ended March 31, 2014. 
  • The consolidated GAAP income tax rate is expected to be 23% for 2014 and the consolidated non-GAAP7 income tax rate is expected to be 23.5% for 2014. This assumes that the U.S. research and development tax credit for 2014 is extended in the fourth quarter 2014.
  • The weighted average outstanding diluted shares are expected to be 2.06 billion for 2014.
  • EMC expects to repurchase an aggregate of $2.0 billion of the company's common stock in 2014.

Supporting Resources

About EMC

EMC Corporation is a global leader in enabling businesses and service providers to transform their operations and deliver IT as a service. Fundamental to this transformation is cloud computing. Through innovative products and services, EMC accelerates the journey to cloud computing, helping IT departments to store, manage, protect and analyze their most valuable asset — information — in a more agile, trusted and cost-efficient way. Additional information about EMC can be found at www.EMC.com.

Press Contacts

Lesley Ogrodnick
508-293-6961
lesley.ogrodnick@emc.com

1 Items excluded from the non-GAAP results for the fourth quarters of 2013 and 2012 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods and special tax items. The benefit of the U.S. research and development (“R&D”) tax credit for 2012 is included in the non-GAAP results for the fourth quarter 2012. See attached schedules for GAAP to non-GAAP reconciliations.

2 Items excluded from the non-GAAP results for the full years 2013 and 2012 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition - related charges, the amortization of VMware's capitalized software from prior periods, a net gain on the disposition of certain lines of business and other, an RSA special charge (release), a loss on interest rate swaps, a gain on strategic investment and special tax items. The benefit of the R&D tax credit for 2012 is included in the non-GAAP results for the full year 2012 and excluded in the non-GAAP results for the full year 2013. See attached schedules for GAAP to non-GAAP reconciliations.

3 Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free cash flow for the three and twelve months ended December 31, 2013 and December 31, 2012.

4 EMC's Emerging Storage business primarily includes product and maintenance revenues from EMC Isilon, EMC Atmos, EMC VPLEX, EMC RecoverPoint, ASD Suites and EMC vFlash and EMC XtremIO families.

5 EMC's Unified and Backup Recovery business primarily includes product and maintenance revenues from EMC VNX, EMC CLARiiON, EMC Celerra, EMC Avamar, EMC Data Domain, EMC NetWorker, EMC Disk Library, EMC Data Protection Advisor and EMC Mozy.

6 EMC's High-end Storage business primarily includes product and maintenance revenues from EMC Symmetrix.

7 Items excluded from the non-GAAP business outlook for the full year and first quarter 2014 are amounts relating to stock-based compensation expense, intangible asset amortization and restructuring and acquisition related charges. The benefit of the R&D tax credit for 2014 is included in the GAAP and non-GAAP business outlook for the full year 2014. The benefit of the R&D tax credit for 2014 is excluded from the GAAP business outlook and included in the non-GAAP business outlook for the first quarter of 2014. See attached schedules for GAAP to non-GAAP reconciliations.

EMC, Atmos, Avamar, Celerra, CLARiiON, Data Domain, EMC RecoverPoint, Isilon, Mozy, RSA, Symmetrix, VMAX, VPLEX, VSPEX, Vblock, VNX , and XtremIO are either registered trademarks or trademarks of EMC Corporation 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) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) component and product quality and availability; (vi) fluctuations in VMware, Inc.'s operating results and risks associated with trading of VMware stock; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) 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; (ix) the ability to attract and retain highly qualified employees; (x) insufficient, excess or obsolete inventory; (xi) fluctuating currency exchange rates; (xii) threats and other disruptions to our secure data centers or networks; (xiii) our ability to protect our proprietary technology; (xiv) war or acts of terrorism; 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. 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," (a) certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods beginning in 2012, a net gain on disposition of certain lines of business and other, an RSA special charge, a loss on interest rate swaps, a gain on strategic investment and special tax items) are excluded from the non-GAAP financial measures and (b) the benefit of the R&D tax credit for 2012 is included in the non-GAAP financial measures for the full year 2012 and excluded in the non-GAAP results for the full year 2013.

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 includes the benefit of the R&D tax credit in, 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, pay dividends, 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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