Press Release

EMC Reports Second Quarter Results

19% Increase Marks EM' 8th Consecutive Quarter of Double-Digit Revenue Growth

Hopkinton, Mass., Thursday, July 21, 2005 - 

 

EMC Corporation (NYSE:EMC), the world leader in information storage and management, today reported financial results for the second quarter of 2005, achieving double-digit, year-over-year revenue growth for the eighth consecutive quarter. EMC's second quarter growth was driven by its market-leading mid-tier storage systems, increasingly popular virtual infrastructure software from its VMware subsidiary, and an expanding services business.

 

Total consolidated revenue for EMC's second quarter was $2.34 billion, 19% higher than the $1.97 billion reported for the second quarter of 2004. Net income for the quarter was $293 million, 52% higher than the $193 million reported for the second quarter of 2004. Earnings per diluted share was $0.12, an increase from the $0.08 per diluted share reported for the year-ago quarter.

 

Joe Tucci, EMC's President and CEO, said, "We continued to execute in the second quarter, resulting in revenue growth that we believe was more than twice the rate of the market. EMC leads one of the fastest-growing segments of IT and it is clear we are gaining share. We're committed to strengthening and expanding our portfolio so we can meet even more of our customers' needs and open up new market opportunities."

 

"This was our eighth quarter in a row of double-digit revenue growth not only for the company, but also across our major geographies and business lines," continued Tucci. "Our sustained performance is a direct result of the tremendous market acceptance of EMC's Information Lifecycle Management solutions, which we build from our broad portfolio of proven, best-of-breed platforms, software, and services. With our expanded portfolio, we're able to help more customers, in more ways, manage the complexity of their IT environments, harness their information growth, and solve their toughest business challenges."

 

Systems revenue grew 15% in the second quarter, compared with the year-ago quarter, to $1.1 billion. EMC's software businesses grew software license and maintenance revenues 23% year on year to $878 million in the second quarter, representing 37% of total EMC revenues. Professional services, systems maintenance, and other services revenue grew 26% year on year to $389 million during the quarter.

 

Bill Teuber, EMC's Executive Vice President and Chief Financial Officer, said, "Our focus on driving profitable growth while gaining market share is working exceptionally well, as evidenced by our 11th consecutive quarter of meeting or exceeding our major financial targets. During the quarter we leveraged the power of our product portfolio to grow net income at nearly three times the rate of revenue growth, expand gross margins to 53.6%, and continue our march toward high-teens operating margins by year end. We also continued to strengthen our financial position in the quarter, ending June with nearly $7.7 billion in cash and investments after buying back $144 million worth of EMC shares in the quarter."

 

Second Quarter Highlights

 

EMC Symmetrix product revenue grew 4% in the second quarter compared to the second quarter of 2004 as large enterprises deployed EMC's market- and performance-leading Symmetrix DMX-2 information storage systems to manage their most demanding information storage requirements. EMC CLARiiON product revenues grew 32%, the 10th consecutive quarter of more than 30% revenue growth. EMC CLARiiON, the information storage system mid-tier market and performance leader, had its strongest growth in Europe and among small- to-medium-sized enterprises. EMC platform software, including license and maintenance revenues, grew 24%, reflecting growth across each of EMC's storage systems, driven by customer demand for EMC's market leading replication software to safeguard their information assets.

 

The EMC Software Group reported second quarter revenues of $408 million in open, platform-independent software, a year-over-year increase of 16%. Backup, Recovery and Archive software license revenue, which increased 28% during the quarter, was the strongest growth performer within the EMC Software Group. Enterprise customers continued to leverage EMC Legato NetWorker for backup-to-disk solutions and deployed EMC EmailXtender to help unlock the complexity that accompanies email retention compliance, while small- to-medium sized businesses invested in EMC Dantz Retrospect data protection software to easily administer and receive fast, reliable backups and restores.

 

Services growth in the second quarter continued to be driven by professional services, which has become an integral part of the value EMC delivers to customers. EMC Consulting engagements in the quarter were driven by customers under pressure to respond to compliance demands, implement tiered information infrastructures, and classify information to better align IT resources with business requirements.

 

VMware, an EMC subsidiary, achieved record quarterly revenues of $91 million in the second quarter, a year-over-year increase of 93%, making it one of the fastest-growing major software businesses in the world. Software license revenues were up 70% over the year-ago quarter on a record number of orders. Services, including maintenance and consulting, increased nearly 200%. VMware's revenue growth was driven by the proliferation of virtual infrastructure into x86 environments as customers deployed VMware products for server consolidation and containment, business continuity, test/development and the enterprise desktop. VMware software partners BEA Systems, MySQL AB, Novell and Red Hat joined Oracle Corporation in distributing their software via VMware virtual machines.

 

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.

 

Third quarter of 2005

  • Consolidated revenues for the third quarter of 2005 are expected to be approximately flat compared to the second quarter of 2005, including the impact of currency.
  • Diluted earnings per share are expected to be $0.12.

 

Full-year 2005

  • For the year, EMC's consolidated revenues are expected to grow at approximately 17%.
  • Gross margins are expected to be between 53% and 54% 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 approximately 37.5% for the full year of 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 27%, 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

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