EMC Reports Third-Quarter Financial Results; Achieves 13% Year-Over-Year Revenue Growth
HOPKINTON, MASS - EMC Corporation (NYSE: EMC), the world leader in information infrastructure solutions, today announced record third-quarter revenue and its 21st consecutive quarter of double-digit year-over-year revenue growth. EMC’s total consolidated revenue for the third quarter of 2008 was $3.7 billion, an increase of 13% over the $3.3 billion reported for the third quarter of 2007.
Third-quarter GAAP net income was $411 million or $0.20 per diluted share, which includes a $0.01 special income tax benefit. Third-quarter non-GAAP net income¹ was $528 million or $0.25 per diluted share, 14% higher than the non-GAAP earnings per diluted share of $0.22 for the year-ago period.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “Against the backdrop of a tough global economy, EMC delivered its 21st consecutive quarter of double-digit revenue growth and solid double-digit profit growth. These results reflect the high quality and leadership of EMC’s broad portfolio of storage, information management and security products and services, and the global reach of our direct sales force and trusted partners. Customers will continue to turn to EMC as they focus their efforts on cost savings and maximizing efficiency across their information infrastructure. Even with a challenging economic environment ahead, we remain confident and well positioned to compete effectively, continue winning business and outpace our peers in the marketplace.”
Consolidated revenue from the United States increased 7% compared with the same period a year ago. Revenue from operations outside of the United States grew 19% year over year and represented 46% of total third-quarter revenue. Revenue from EMC’s Europe, Middle East & Africa (EMEA) region increased 20%, Asia-Pacific & Japan (APJ) revenue increased 19%, and Latin America revenue increased 27%, each compared with the year-ago quarter.
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “EMC is well positioned with the financial flexibility of a strong cash position and cash flow, along with an expanding market opportunity driven by the continued growth of business and personal information. As customers deal with this information growth, while also reducing costs and improving IT efficiencies, we are confident that EMC has the best portfolio of products and services to help them succeed. We remain laser-focused on managing our cost structure, increasing customer loyalty, maximizing shareholder value and strengthening our competitive advantage to gain market share.”
Revenue from EMC’s Information Storage business, which includes revenue from storage systems, storage management software and related customer and professional services, reached $2.9 billion, an increase of 11% compared with the year-ago period. This growth was largely driven by strong customer demand for EMC’s industry-leading networked storage solutions across a broad customer base, with double-digit year-over-year revenue growth from EMC’s midrange and entry-level information storage platforms that connect to both IP and Fibre channel networks. During the quarter, EMC’s Information Storage business also benefited from double-digit year-over-year revenue growth from its broad portfolio of industry-leading backup, recovery and archive software that helps customers meet new information protection and recovery requirements, control explosive data growth and improve cost savings in the data center.
For the third quarter of 2008, revenue from RSA, The Security Division of EMC, grew 11% year over year, reaching $147 million. The third-quarter growth in the RSA business was led by customer demand for its security information and event management solutions and its identity protection and verification solutions. Growth in the business reflects the completeness of EMC’s information-centric security strategy and its leading portfolio of solutions that are uniquely suited to help customers address the overall process of securing data, managing risk, and meeting multiple compliance demands in a holistic, repeatable and cost-efficient manner.
EMC’s Content Management and Archiving business’ third-quarter revenue was $188 million. During the quarter, the business benefited from continued demand for EMC’s next-generation enterprise content management solutions for effective transactional content management, dynamic customer communication management and content management for the Web 2.0 enterprise – fostering dynamic new ways people work, network and collaborate, while advancing requirements for security, performance and compliance.
VMware (NYSE: VMW), which is majority-owned by EMC, contributed third-quarter revenues of $472 million, an increase of 33% compared to the year-ago quarter. VMware is the global leader in virtualization solutions from the desktop to the data center. Customers of all sizes rely on VMware to reduce capital and operating expenses, ensure business continuity, strengthen security and be more energy efficient. Visit http://ir.vmware.com for more information about the virtualization software leader’s third-quarter financial results.
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 the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof or costs incurred in expense reduction initiatives. These statements supersede all prior statements regarding business outlook set forth in prior EMC news releases.
All dollar amounts in the business outlook should be considered to be approximations.
EMC’s outlook for the fourth quarter of 2008 is as follows:
* Consolidated revenues of $4 billion.
* Consolidated GAAP diluted earnings per share between $0.23 and $0.24.
* Consolidated non-GAAP diluted earnings per share (excluding stock-based compensation and intangible asset amortization) between $0.30 and $0.31.
* Stock-based compensation of $0.05 per diluted share and intangible asset amortization of $0.02 per diluted share
EMC will host its 2008 third quarter earnings conference call today at 8:30 a.m. ET, which will be made available on EMC’s web site at www.EMC.com/earnings.
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.
1 Items excluded from the non-GAAP results are stock-based compensation and intangible amortization for both the third quarters of 2008 and 2007, a special income tax benefit and a restructuring charge for the third quarter of 2008 and net gains on investments, including the gain on the sale of VMware stock in the third quarter of 2007. See attached schedules for reconciliation of GAAP to non-GAAP.
EMC is a registered trademark of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. All other trademarks used are the property of their respective owners.
This release 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) the impact of any expense reduction initiatives; 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. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.
Use of Non-GAAP Financial Measures
This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.
Where specified in the accompanying schedules for various periods entitled “Reconciliation of GAAP to Non-GAAP,” certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible amortization, special income tax benefits, restructuring charges and net gains on investments) are excluded from the non-GAAP financial measures.
EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.
This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.
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