EMC Executive Vice President and CFO David Goulden Discusses EMC's First-Quarter 2009 Financial Results
EMC announced first-quarter financial results on April 23, 2009. EMC Executive Vice President and CFO David Goulden discusses the results below. Additional information regarding EMC’s financial results is available here.
April 23, 2009
How would you characterize EMC's first-quarter financial performance?
David Goulden: 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, while continuing investments to further enhance our product and services offerings and expand our customer reach. This dual focus on efficiency and investment is key to reinforcing EMC's strong position to weather this downturn, take share in our addressable markets and position EMC for even more success when the economy turns around.
How is EMC progressing with its cost savings initiatives?
David Goulden: We have made great progress on our restructuring and cost saving initiatives. As of the end of March, we had completed approximately 50% of our headcount reductions. In addition, our cost savings efforts are on target relative to our previous plan for $350 million of savings this year. The first quarter actually saw a better-than-planned savings due to EMC employees doing a great job of controlling short-term spending, a little more-than-expected help from favorable currency rates and a few one-time items. While these favorable factors won’t be as positive through the rest of 2009, we have identified some additional, near-term, cost reductions that will save EMC another $100 million predominantly in the second half of 2009. Based on our existing cost reduction plans and these additional actions, we now expect to reduce our 2009 Information Infrastructure costs by approximately $450 million from our 2008 spend. Given the shorter-term nature of some of these new initiatives, we still expect total cost reductions to be approximately $500 million in 2010.
Why is it so important to have a strong cash balance in this economy?
David Goulden: EMC ended the first quarter with a record $9.8 billion in cash and investments, with $5.9 billion held overseas and at VMware. Financial flexibility is a critical strength and competitive advantage for EMC, particularly in this unprecedented and unpredictable economy. Our financial strength allows us to continue to invest in our business even during challenging economic cycles
Where is EMC focusing its financial strength?
David Goulden: As a technology-driven company, we will continue 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. For example, in recent months we’ve integrated flash technology across our entire information storage product line, broadened our deduplication solutions and added NAS and home media products to the Iomega® consumer product family. In addition, as a leading IT provider for virtual data centers and cloud infrastructures, we continue to innovate. Our Atmos™ cloud infrastructure product, recently announced EMC Symmetrix® V-Max™ system, and VMware vSphere® integration across our entire storage portfolio are examples of our efforts here - and there is much more to come.
What are your views on global IT spending for the remainder of 2009?
David Goulden: While things are still pretty murky out there, the additional three months of experience gives us a better view of 2009. Based on what we are seeing and hearing out there, our best guess at this time is that global IT spending will likely be down as a percentage in the very-high-single-digit to very-low-double-digit range compared with 2008. In terms of linearity for the year, it looks like second-quarter global IT spending will probably be flat with the first quarter, and we continue to expect the second half of 2009 to be stronger than the first half.
This is not an economic prediction but more a belief that it looks like customers will end up spending more of their 2009 money in the second half than the first. Historically this has been true and we think that it should be somewhat more pronounced this year as customers will have better visibility to budgets, be further along with their own restructuring programs and broader stimulus packages should be underway.
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
EMC, Symmetrix, Atmos and V-Max are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. Iomega is a registered trademark of Iomega Corporation in the United States and/or other countries. VMware and vSphere are registered trademarks of VMware, Inc. in the United States and/or other jurisdictions. All other trademarks used are the property of their respective owners.
This document 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 document 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 document after the date of this release.