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Press Release

20061017-4664.xml

Record Quarterly Revenues Driven by Growth of New EMC Storage Platforms, VMware Infrastructure

Hopkinton, Mass., Tuesday, October 17, 2006 - 

 

EMC Corporation (NYSE:EMC), the world leader in information management and storage, today reported financial results for the third quarter of 2006. The company's 13th consecutive quarter of double-digit revenue growth was highlighted by strong demand for new EMC® Symmetrix® DMX-3 and EMC CLARiiON® CX3 networked storage systems and VMware® Infrastructure.

 

Total consolidated revenue for the third quarter of 2006 was a record $2.82 billion, 19% higher than the $2.37 billion reported for the third quarter of 2005. The September 2006 acquisitions of RSA Security and Network Intelligence, which form the foundation of EMC's new security division, contributed $37.8 million to EMC's third quarter 2006 revenue. Excluding revenue related to these acquisitions, revenue for the quarter was $2.78 billion, also a record for EMC and 17% higher than the third quarter of 2005.

 

Net income for the third quarter of 2006 was $283.7 million or $0.13 per diluted share. Excluding the impact of the September acquisitions, diluted earnings per share were also $0.13. Reported third quarter 2005 diluted earnings per share were $0.17, which included a $0.04 tax-related benefit and excluded $0.03 related to stock option expense. Adjusting for these third-quarter 2005 items, diluted earnings per share for the third quarter of 2006 were up 30% compared with the year-ago third quarter.

 

EMC also announced plans to implement consolidation efforts designed to deliver a more unified experience to customers through the further integration of EMC and most of the 21 acquisitions made over the past three years and by improving efficiencies across the company's business. The actions are expected to result in the departure of approximately 1,250 employees worldwide by the end of 2007. As a result, EMC estimates that it will record a pre-tax charge of between $150 million and $175 million or $0.06 per diluted share in the fourth quarter of 2006 to cover the cost of these consolidation efforts. VMware will continue to operate as an independent subsidiary of EMC and is not part of these actions.

 

Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, "EMC had a very solid quarter. We delivered the highest quarterly revenues in our 27-year history, even before including revenues from the newly acquired RSA Security and Network Intelligence businesses. We also achieved higher-than-expected earnings per share. We continue to grow significantly faster than the markets we serve, and we are clearly gaining a larger share of our growing worldwide market opportunity.

 

"Information storage, VMware and our EMC Smarts® resource management software were among the standouts during the quarter," continued Tucci. "Our storage business benefited from strong customer response to the new Symmetrix DMX-3 and CLARiiON CX-3 systems introduced in the first half of the year. Outstanding execution from VMware delivered accelerated revenue growth for the second consecutive quarter as the new VMware Infrastructure 3 began to be deployed in data centers around the world. License revenue from our EMC Smarts products more than doubled as customers took advantage of our model-based approach to resource management, deploying it not only within their networks, but also across application and storage environments.

 

"At EMC our focus is on information," Tucci continued. "Over the past three years we have invested nearly $10 billion to bring innovative technologies to our customers through our own R&D and acquisitions. Today we have the world's best solutions for storing information, protecting and securing information, managing and moving information, and optimizing information infrastructures. Our greatest opportunity and competitive advantages lie in the value realized by our customers when these capabilities come together in a unified information infrastructure."

 

Commenting further on the planned consolidation efforts, Tucci said, "These actions, while difficult, are necessary. Customers are asking us to approach them more as a single, integrated partner, and to streamline some of our processes in order to bring innovation to them even faster, more simply and more cost-effectively than we do today. The time is right for us to accelerate the integration of EMC and most of the companies we have acquired over the past three years, create more efficient, centralized corporate functions, reduce management layers, and take greater advantage of opportunities to improve our overall cost structure."

 

Quarterly Results

 

Systems revenue in the third quarter was $1.3 billion, a 19% increase over the year-ago quarter. Software license and maintenance revenue grew 25% to $1.1 billion, and professional services, systems maintenance and other services revenue grew 7% year-over-year to $432 million.

 

EMC completed the third quarter with $5.5 billion in cash and investments. During the third quarter, EMC borrowed $2.2 billion on a short-term, unsecured credit facility to finance the acquisition of RSA Security. Year-to-date the company has spent approximately $2.6 billion to purchase 208 million EMC shares in the open market and to redeem $125 million in convertible debt.

 

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, "With overall revenues up 14% year-to-date, EMC is one of the fastest-growing large-cap technology companies in the world. We accelerated our stock buyback during the quarter, buying nearly a third more shares than we purchased during the second quarter and placing us on target to invest at least $3 billion repurchasing EMC shares during 2006."

 

Quarterly Highlights

 

EMC information storage revenues increased 14% compared with the year-ago quarter. EMC Symmetrix sales grew 21%, as customers continue to consolidate information and capitalize on the performance, scalability and flexibility of these market-leading, high-end platforms. In the mid-tier, EMC CLARiiON revenues grew 18% over the year-ago quarter, driven by widespread customer and partner adoption of the easy-to-use and flexible new CLARiiON CX3 UltraScale™ systems. EMC Smarts model-based resource management software license revenues grew more than 100% during the quarter, highlighting the importance customers place on quickly gaining actionable management intelligence to minimize the impact of failures or congestion across the information infrastructure. EMC NetWorker™ software had double-digit, year-over-year revenue growth as organizations continued to invest in backup-to-disk and recovery management.

 

The EMC Content Management software business grew 25% compared with the year-ago quarter. During the quarter, EMC reached a significant milestone with the announcement of its 15,000th content management customer, reflecting EMC's strong share gains and leadership in this rapidly growing market.

 

Security revenues for the full quarter, including the period in which EMC did not own RSA Security or Network Intelligence, grew 30% compared with the year-ago period, with both companies having record revenue during the quarter. New customer acquisitions grew to over 1,500 during the quarter, reflecting, in part, the ongoing success of the recently-introduced RSA SecurWorld™ Channel Program and increasing traction with consumer-facing applications in financial services. Additional third quarter factors included positive momentum from Network Intelligence, as well as customer enthusiasm for RSA Security's acquisition by EMC.

 

VMware, an independent EMC subsidiary, had another record quarter and grew total revenues 86% year-over-year to $188.5 million. VMware delivered its highest year-over-year growth rate in five quarters and the second consecutive quarter of sequential quarterly growth of 20%. VMware's exceptional performance, which now places the company's revenue on an annualized run rate of $750 million, was fueled by broad adoption of VMware Infrastructure 3, which began shipping in June. VMware's third quarter momentum and expanding customer base were driven in part by the release of the free VMware Server, which includes the option to purchase enterprise-class support, and the announcement of a new product for Apple Mac users.

 

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 after the date hereof. These statements supersede all prior statements regarding business outlook set forth in prior EMC news releases.

  • Consolidated revenues for the fourth quarter are expected to be at or exceed $3.16 billion, which includes at least $110 million from the new security division.
  • Diluted earnings per share for the fourth quarter are expected to be $0.09, including a $0.06 charge related to the aforementioned consolidation efforts and a loss of $0.01 from the security division, primarily due to loan interest for the acquisition of RSA Security. Excluding the consolidation efforts and the loss related to the security division, diluted earnings per share for the fourth quarter are expected to be $0.16.

 

About EMC

 

EMC Corporation (NYSE: EMC) is the world leader in products, services and solutions for information management and storage that help organizations extract the maximum value from their information, at the lowest total cost, across every point in the information lifecycle. Information about EMC's products and services can be found at www.EMC.com.

Press Contacts

Greg Eden
EMC Corporation
508-293-7195
eden_greg@emc.com

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