Press Release

EMC Reports First Quarter Results

Seventh Consecutive Quarter of Double-Digit Revenue Growth; Software License and Maintenance Revenues 37% of Total

Hopkinton, Mass., Tuesday, April 19, 2005 - 

EMC Corporation (NYSE:EMC) today reported financial results for the first quarter of 2005, achieving double-digit year-to-year revenue growth for the seventh consecutive quarter. EMC, the world leader in information storage and management, saw first-quarter growth driven by its market-leading mid-tier storage systems, expanding software business, and increasingly popular professional services.

Total consolidated revenue for EMC's first quarter was $2.24 billion, 20% higher than the $1.87 billion reported for the first quarter of 2004. Net income for the quarter was $270 million or $.11 per diluted share, 93% higher than the $140 million or $.06 per diluted share reported for the first quarter of 2004.

Joe Tucci, EMC's President and CEO, said, "EMC delivered its seventh quarter in a row of double-digit revenue growth, once again extending one of the strongest and steadiest growth stories in the tech industry today. Solid execution and the investments we have made to broaden our product and market reach played major roles in our ability to successfully navigate through a difficult first quarter."

"Clearly, our acquisition strategy is bearing fruit, strengthening our core business and taking us into opportunity-rich adjacent markets," Tucci continued. "We are satisfying customers' demands with a product portfolio that is second to none and by leveraging our market leadership across all major segments of our business. We are using these combined strengths to greater and greater effect as our hardware, software and services offerings become even more tightly integrated and as we continue our new product introductions this year."

Systems revenue grew 15% in the first quarter, compared with the year-ago quarter, to $1.03 billion, driven by strong, double-digit growth from the EMC CLARiiON, Celerra NAS and Centera platforms. Strong performances across each of EMC's software businesses grew software license and maintenance revenues 26% to $832 million in the first quarter, now representing 37% of total EMC revenues. Professional services, systems maintenance and other services revenue grew 26% to $375 million during the quarter, as customers around the globe turned to EMC to help manage the growing complexity of their information infrastructures.

Bill Teuber, EMC's Executive Vice President and Chief Financial Officer, said, "Our tenth straight quarter of meeting or exceeding our major financial objectives places us firmly on track to deliver on our 2005 goals. During the quarter, we continued to execute well across the board, achieving double-digit growth in all three major business lines and all of our major geographic regions. We generated more than $600 million in cash from operations and used $380 million to acquire SMARTS and buy back 9.8 million shares of company stock. We were particularly pleased with our operating margins for the quarter, and we believe we are on course to end the year with operating margins in the high teens."

First Quarter Highlights

Demand for EMC's broad portfolio of tiered networked storage platforms and related software drove double-digit revenue growth across its platforms businesses in the first quarter. EMC CLARiiON networked storage revenues grew 47% year over year, posting solid growth across all major geographic regions, particularly Europe, and in each of EMC's direct and indirect channels. CLARiiON's fourth consecutive quarter of more than 40% revenue growth was driven by EMC's focus on delivering complete solutions that address the needs of midsize enterprises. EMC Celerra NAS systems revenue grew 40% during the quarter, the fifth consecutive quarter of more than 30% revenue growth. Customer deployments of the EMC Celerra NS Gateway filers and NS integrated products into tiered storage environments continued to drive market momentum for the industry's most comprehensive family of NAS solutions.

The EMC Software Group reported revenues of $401 million in the first quarter, a year-over-year increase of 24%. Growth across the EMC Software Group's major categories was fueled by the tremendous value customers are realizing from the ability of EMC software to help them reduce operational costs and complexity and to comply with government regulations. Storage and Management Software license revenue, which includes EMC PowerPath, the EMC ControlCenter and EMC Visual product families, and the EMC Smarts software product family, grew 21% in the first quarter. Backup and Archive software license revenue, which comprises all EMC software for backup and archiving including the EMC Dantz software family, grew revenues 36% during the quarter, driven by EMC Legato NetWorker, EMC Dantz Retrospect, EMC EmailXtender, EMC DiskXtender and EMC Replication Manager software. Content Management Software license revenue, including the entire EMC Documentum line, grew 23% with the addition of more than 125 new customers during the quarter.

VMware, an EMC subsidiary, reported record quarterly revenues of $80 million in the first quarter, a year-over-year increase of 104%. VMware booked a record number of new deals, and license sales represented nearly 80% of VMware's first-quarter revenues. VMware's triple-digit revenue growth was led by strong customer demand for its virtual infrastructure software products used widely for server consolidation and containment, business continuity, test/development and the enterprise desktop. During the quarter VMware continued to strengthen its channels and deepen relationships with Dell, Hewlett-Packard, IBM and Intel. In the last year, VMware's innovation, excellence and strategic importance to customers around the world have been recognized through more than 20 industry awards.

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 (1) the provisions oftheAmerican Jobs Creation Act of 2004, (2) the potential impact of any mergers, acquisitions, divestitures or business combinations that may be announced after the date hereof or (3) the potential impact of expensing stock options under the Financial Accounting Standards Board's Statement 123R (FAS 123R). These statements supersede all prior statements regarding Business Outlook set forth in prior EMC news releases.

Second quarter of 2005

  • Consolidated revenues for the second quarter of 2005 are expected to be approximately $2.330 billion to $2.355 billion.
  • Diluted earnings per share are expected to be $0.12.

Full-year 2005

  • For the year, EMC's addressable market is estimated to grow at around 7%-8%, and EMC's consolidated revenues are expected to grow at approximately twice the upper-end of that market range. Additionally, revenue from the SMARTS acquisition is expected to add almost another 1% to EMC's revenue growth rate in 2005.
  • Gross margins are expected to be just under 53% for the full-year of 2005.
  • 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 in the fourth quarter of 2005.
  • The income tax rate for the remainder of the year is expected to be around 28%, excluding one-time items.
  • Diluted earnings per share for 2005 should be in the $0.50 to $0.51 range.

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

Notes: