Delivers 15th Consecutive Quarter of Double-Digit Revenue Growth, Q1 EPS increase of 36%
EMC Corporation (NYSE:EMC), the world leader in information infrastructure solutions, today reported record first-quarter revenue and strong profit growth. Highlights of the quarter included increased demand for VMware virtual infrastructure solutions and RSA information security software and accelerating growth in the company's Asia-Pacific and Japan operations.
Total consolidated revenue for the first quarter of 2007 was $2.98 billion, 17% higher than the $2.55 billion reported for the first quarter of 2006.
GAAP net income for the first quarter of 2007 was $312.6 million or $0.15 per diluted share, which included a $0.01 per diluted share tax benefit. GAAP earnings per diluted share for the first quarter was 36% higher than the GAAP earnings per diluted share of $0.11 reported for the year-ago period.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, "EMC is off to a solid start in 2007. Customers around the globe continue to embrace our information infrastructure solutions to help store, protect, optimize and leverage their corporate information. We have an established leadership position in the areas of the IT market that CIOs prioritize most. Our first-quarter performance and our focus on integration and execution place us firmly on track to meet our financial targets for 2007."
Tucci continued, "For more than two decades, EMC has been the trusted caretaker of information, partnering with the world's largest companies and government institutions. Our greatest opportunity and competitive advantages lie in the value realized by our customers when our products come together in a unified information infrastructure to solve today's information management issues, better leverage information's value and reduce the costs associated with its explosive growth."
Compared with the first quarter of 2006, EMC systems revenue, which represents 44% of total first-quarter revenue, increased 6%; software license and maintenance revenue, which represents 40% of total revenue, increased 29%; and professional services, systems maintenance and other services revenue, which represents 16% of total revenue, grew by 21%. First-quarter revenue from North America increased 16% compared with the same period a year ago and represents 58% of total reported revenue. First-quarter revenue from customers outside of North America grew 18% year-over-year, driven by strong double-digit revenue growth in Europe, Middle East and Africa, and across the Asia-Pacific region.
Tucci continued, "I am pleased with the improvements in our Asia-Pacific and Japan operations. After strengthening our executive management team in the region about a year ago, our business in that part of the world is back on track, delivering first-quarter revenue growth of nearly 30%. A strong focus on execution and a reinvigorated partner strategy have helped our business in the APJ region expand significantly faster than the overall market and re-emerge as our fastest-growing geography."
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, "Looking across EMC's lines of business and major geographies, we are pleased with our first-quarter performance and our balanced systems, software and services revenue mix. The breadth, quality and diversity of our information infrastructure portfolio is differentiating EMC in the marketplace and strengthening our financial model. We are on pace to grow as fast or faster than the major markets we serve and to gain share of our expanding $60 billion worldwide market opportunity."
Goulden added, "During the quarter, EMC generated strong operating cash flow of $809 million, an increase of 27%, and strong free cash flow of $586 million, an increase of 37%, compared with the same period last year. We continue to believe share buybacks are an effective way to deploy our growing cash balance and return value to our shareholders. During the first quarter, we spent $489 million to buy back approximately 35 million EMC shares."
EMC's Information Storage business, which includes revenue from storage systems, information management, information protection and resource management software, and related customer and professional services, reached $2.4 billion, an increase of 8% compared with the year-ago quarter. Growth in the Information Storage business reflects continued global demand for EMC's networked storage products and related professional services, for EMC's industry-leading resource management and file virtualization software, and for EMC's comprehensive approach to information protection and recovery management.
VMware, an EMC subsidiary, again achieved record quarterly revenue, growing sales 95% year-over-year to $256 million during the first quarter and placing the company's revenue on an annualized run rate of more than $1 billion. VMware showed continued growth as organizations of various sizes and across numerous industries increasingly standardize on VMware virtual infrastructure for server consolidation and containment, software lifecycle automation, business continuity and desktop manageability and security. VMware and its products received numerous industry accolades during the quarter: VMware Infrastructure 3 received the InfoWorld "Technology of the Year Award," the SearchWinComputing.com "Disaster Recovery Product of the Year Award" and the Network World "Best of the New Data Center Award"; VMware Lab Manager won the 2007 Jolt Product Excellence Award; and Linux Magazine named VMware a "top company to watch" in 2007.
In the first quarter, EMC announced its intention to sell approximately 10% of VMware via an initial public offering (IPO) of newly issued VMware stock. EMC expects the IPO will unlock more of VMware's value for EMC shareholders, strengthen VMware's ability to retain and attract the software industry's top talent, and reinforce EMC's commitment to VMware's open platform strategy.
EMC's Content Management and Archiving business grew first-quarter revenue to $172 million, an increase of 3% year-over-year. Maintenance and professional services revenue for the Content Management and Archiving business grew 30% year-over-year, reflecting strong license growth in 2006. Businesses around the world are relying on EMC's industry-leading content management and archiving solutions for a robust, unified repository, as well as for content and process services to automate their entire business process, ensuring compliance and making it easier to find information within or outside the organization. In the first quarter, EMC announced the availability of the EMC Documentum Process Suite, a comprehensive business process management (BPM) solution for analyzing, modeling, orchestrating and optimizing a wide range of enterprise processes involving people, systems, content and data. The introduction marks the integration of the software gained from EMC's June 2006 acquisition of Proactivity Inc., with EMC's existing Documentum business process management capabilities.
Information Security revenues for the first quarter the second full quarter of operation for RSA, The Security Division of EMC grew 25% to $120 million compared with the results reported by the division's constituent companies (RSA Security and Network Intelligence) in the year-ago period. During the quarter, the division attracted more than 1,200 new customers. These results reflect the value of the combined EMC and RSA technology portfolios and RSA's sustained strength within the enterprise, where the focus on identity assurance and robust access controls continues to grow. In addition, the division's consumer identity protection, data security, and information and event management solutions also reported strong year-on-year growth.
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.