Press Release

EMC Reports Fourth Quarter, Full Year Results

Broadened Software Portfolio, Market-Leading Mid-tier Systems Drive Sixth Consecutive Quarter of Double-Digit Revenue Growth

Hopkinton, Mass., Tuesday, January 25, 2005 - 

 

EMC Corporation (NYSE:EMC) today reported strong fourth-quarter and full fiscal year financial results for 2004. EMC's sixth consecutive quarter of double-digit year-over-year revenue growth was driven by robust customer demand for its expanded software portfolio, tiered networked storage systems and professional services.

 

Total consolidated revenue for EMC's fourth quarter was $2.36 billion, 27% higher than the $1.86 billion reported for the fourth quarter of 2003. Net income for the quarter grew 46% to $321 million or $.13 per diluted share, compared with $220 million or $.09 per diluted share reported for the fourth quarter of 2003.

 

Total consolidated revenue for EMC's full 2004 fiscal year was $8.23 billion, 32% higher than the $6.24 billion reported for the full 2003 fiscal year. Net income for the full 2004 fiscal year grew 76% to $871 million or $.36 per diluted share, compared with $496 million or $.22 per diluted share reported for the full 2003 fiscal year.

 

Joe Tucci, EMC's President and CEO, said, "EMC had a strong finish to a solid 2004. Customers rewarded our focus on information lifecycle management (ILM) with a sixth consecutive quarter of double-digit revenue growth. Our people, products and partners continue to define what is required to be the best-of-breed provider of systems, software, services and integrated solutions for comprehensive information storage and management."

 

"2004 was an exceptional year for EMC," continued Tucci. "We extended our market and technology position across all of our major segments and geographies, while significantly advancing our ILM and VMware's virtual infrastructure strategies. In 2005, we intend to further expand our share of an expected $51 billion market opportunity by accelerating our pace of innovation, driving additional value from our acquired companies, expanding our channel partner network and increasing our focus on overall customer satisfaction."

 

Core EMC revenue in the fourth quarter of 2004, which excludes revenue related to EMC's Dantz, Documentum, Legato and VMware acquisitions, grew 19% compared with the fourth quarter of 2003. All of EMC's major geographies recorded double-digit revenue growth, with consolidated international revenue increasing 26% during the quarter.

 

Bill Teuber, EMC's Executive Vice President and Chief Financial Officer, said, "For the second consecutive year we exceeded every major financial goal that we set in January. Moving our operating margins up into the mid-teens has been a focus for some time, and we finished the fourth quarter in that range. Cash and investments grew by more than $400 million during the quarter, while we continued to leverage our financial strength by buying back $128 million in company stock and acquiring Dantz Development Corporation. The strength of our balance sheet will continue to provide us with solid financial footing for our growth plans moving forward."

 

Fourth Quarter Highlights

 

Systems revenue grew 15% compared with the year-ago quarter, with every product category showing year-over-year growth. Growth in EMC Symmetrix networked storage systems revenue confirmed that EMC continued its high-end market share gains in the fourth quarter. On a year-over-year basis, EMC CLARiiON networked storage systems revenues grew 46% as small to medium-sized enterprises embraced CLARiiON's unique blend of functionality and affordability. The new EMC CLARiiON Disk Library (CDL) products were notably strong as customers implemented EMC's backup-to-disk solutions to reduce recovery times. EMC Celerra NAS (networked attached storage) and EMC Centera CAS (content addressed storage) products continued to gain momentum in the marketplace with strong, double-digit year-over-year revenue growth. Centera had a record quarter, growing revenues 48% over the year-ago quarter.

 

Total software license revenue in the fourth quarter increased 43% compared with the same period a year ago, driven by EMC's acquisitions of Dantz, Documentum, Legato and VMware, and by a 26% year-over-year increase in EMC's quarterly core software sales.

 

The EMC Software Group reported consolidated revenues of $410 million in the fourth quarter, a sequential increase of 17% compared with the third quarter of 2004. Each of the EMC Software Group's major components had record revenues during the quarter, with double-digit revenue growth across EMC's core multi-platform, Documentum and Legato software products. The EMC Software Group saw notable product strength during the quarter from its EMC Legato NetWorker software, EMC Documentum Enterprise Content Management Platforms and EMC ControlCenter software family.

 

VMware, an EMC subsidiary, delivered record quarterly revenues of $71 million in the fourth quarter, an increase of 159% over VMware's fourth-quarter 2003 results. VMware's torrid growth was led by strong customer demand for its enterprise products, including VMware ESX Server and VMware VirtualCenter.

 

EMC services revenue grew 35% compared with the year-ago fourth quarter. The increase was due to the impact of EMC's software acquisitions, growing software maintenance revenues and customer demand for assistance in implementing information lifecycle management.

 

"We believe our broadened product portfolio delivered share gains across each of our business lines in the fourth quarter," Tucci said. "Growth among our platforms was driven by our mid-tier systems and supported by our market-leading high-end EMC Symmetrix family, which recorded its highest quarterly revenue in more than two years. Our recent acquisitions continued to have momentum in the market. Solutions from Legato and Documentum each delivered in excess of $100 million in quarterly revenues for the first time, and VMware maintained its triple-digit revenue growth for the fourth consecutive quarter as an EMC subsidiary."

 

2004 Highlights

 

EMC's revenue growth was strong across all major business lines in 2004. EMC's systems business, which grew revenues 17%, benefited from Symmetrix's year-long high-end share gains and CLARiiON's record performance, which completely changed the dynamics of the mid-tier market in 2004.

 

Total software revenues, including license and maintenance revenues, grew to $2.98 billion and accounted for more than a third of total revenues in 2004, due in part to the outstanding performance of EMC's recent software acquisitions. VMware alone nearly tripled its revenues in 2004, cementing its position as the fastest-growing software concern of its size.

 

Services revenues grew 44% in 2004, due to increased customer demand for professional service implementations and increased software maintenance revenues.

 

Consolidated international revenues grew 39% in 2004, driven by double-digit revenue growth in Europe, Asia and Latin America. International revenue represented 42% of EMC's total 2004 revenues, compared with 40% in 2003.

 

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 include the impact of expensing stock options under the Financial Accounting Standards Board's Statement 123R (FAS 123R), which will be effective for fiscal quarters after June 15, 20051, or the potential impact of any 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.

 

First quarter of 2005

  • Consolidated revenues for the first quarter of 2005 are expected to be approximately $2.23 billion to $2.25 billion.
  • Diluted earnings per share for the first quarter of 2005 should be $.10 to $.11.

 

Full-year 2005

  • Consolidated revenues for 2005 are expected to grow at approximately twice the rate of the market, which is estimated to grow around 7%-8%. The positive impact of the SMARTS acquisition, which is expected to close during the first quarter, will be additive to EMC's 2005 growth rate.
  • The gross margin percentage should be around 52% for the year, with some natural ebb and flow between quarters due to EMC's continued investments in certain geographies, competitive pressures and costs in supply chain.
  • Operating expenses (which include selling, general and administrative expenses and research and development expenses) as a percentage of revenue, should be in the 35.5% to 37.0% range for 2005.
  • Operating income as a percentage of revenue should reach the high teens by the fourth quarter of 2005.
  • The income tax rate as a percentage of pre-tax income is expected to be approximately 28% for 2005.
  • Diluted earnings per share for 2005 should be $.47 to $.51.

 

About EMC

 

EMC Corporation (NYSE: EMC) is the world leader in products, services and solutions for information storage and management 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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