EMC Corporation (NYSE:EMC), the world leader in information infrastructure solutions, today reported record second-quarter revenue and strong profit growth marked by double-digit revenue growth in its systems, software and services businesses and across all major geographies. EMC has now delivered double-digit top-line growth for 16 consecutive quarters.
Total consolidated revenue for the second quarter of 2007 was $3.12 billion, 21% higher than the $2.57 billion reported for the second quarter of 2006. GAAP net income for the second quarter of 2007 was $334.4 million or $0.16 per diluted share, 33% higher than the GAAP earnings per diluted share of $0.12 reported for the year-ago period. EMC generated strong operating cash flow of $622 million, an increase of 59%, and free cash flow of $422 million, an increase of 123%, compared with the same period a year ago.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “EMC executed well in the second quarter. Customers continued to choose EMC for the depth and breadth of our information infrastructure technologies and solutions, which translated into solid revenue growth that was well balanced across our systems, software and services businesses and all major geographies. Add to this the explosion of digital information and the positive 2007 IT spending outlook we see in all major geographies, and it is clear that we are in a sweet spot of the IT industry.”
Compared with the second quarter of 2006, EMC systems revenue increased 18% year-over-year, led by strong revenue growth from the company’s mid-range information storage products. EMC systems revenue represented 43% of total second-quarter revenue. Software license and maintenance revenue increased 27% year-over-year, led by strong customer demand for RSA’s security offerings and for VMware Virtual Infrastructure. Software license and maintenance revenue accounted for 41% of total revenue in the quarter. Professional services, systems maintenance and other services revenue grew by 18%, driven by double-digit services growth in all four major EMC business segments. Professional services, systems maintenance and other services represented 16% of total second-quarter revenue.
For the second-quarter of 2007, revenue from North America increased 20% compared with the same period a year ago and represented 58% of total reported revenue. Revenue from operations outside of North America grew 23% year-over-year, highlighted by double-digit year-over-year revenue growth in EMC’s major international regions: Europe, Middle East and Africa (EMEA); Latin America and Asia-Pacific and Japan (APJ). APJ, which experienced 32% revenue growth year-over-year, retained its distinction as EMC’s fastest-growing major international region for the second straight quarter.
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “Looking across our business, we remain pleased with our strong, balanced performance and the progress EMC is making towards its 2007 operational and financial goals. We believe we are now on track to exceed the annual targets we set in January, as we continue to execute on our plan to help customers address their information infrastructure requirements.”
Second-Quarter Highlights
EMC’s Information Storage business, which includes revenue from storage systems, information management, information protection and resource management software, and related customer and professional services, reached $2.5 billion, an increase of 12% compared with the year-ago quarter. The second-quarter momentum was led by double-digit year-over-year revenue growth in EMC CLARiiON networked storage systems and solid customer demand for EMC’s backup to disk offerings. EMC also announced deeper technology integration across its product portfolio, including EMC Avamar data protection software optimized with VMware and EMC Celerra, and EMC RecoverPoint replication technology with EMC Replication Manager software.
RSA Information Security revenues for the second quarter of 2007 grew 21% when compared with the results of the division’s constituent companies in the year-ago period and generated approximately $125 million in revenue. The information security business continued to do well during the quarter due to significant success in Payment Card Industry Data Security Standard (PCI DSS) initiatives and notable demand across multiple industries for stronger authentication requirements. Also during the quarter, the division experienced strong growth in alternative forms of authentication, which include software tokens and smart cards, as well as in its information and event management offerings, consumer-facing applications, and encryption and key management solutions.
EMC’s Content Management and Archiving business grew second-quarter revenue to $174 million, an increase of 5% year-over-year. In May 2007, EMC announced the availability of EMC Documentum TaskSpace – a new, highly configurable user interface for the next-generation EMC Documentum 6 enterprise content management (ECM) platform. Next week, EMC will formally announce the Documentum 6 platform, advancing EMC’s ability to lead the industry into the next generation of enterprise content management. In recognition of its ECM market presence, EMC was honored in the quarter with two marquis ECM industry awards: E -DOC magazine’s Readers’ Choice Award and the ECM Connection ACE Award. Last week EMC also announced that it has been positioned as a leader in the Forrester Wave™: Business Process Management for Document Processes.
VMware, an EMC subsidiary, grew sales 89% year-over-year to $298 million during the second quarter as it continued to unlock the value of virtualization for existing and new customers around the world. During the quarter, the virtualization leader broadened its product portfolio with new releases of its award-winning virtual desktop software and continued to expand its network of technology and distribution partners. VMware recently announced that Intel Corporation, through its global investment arm, Intel Capital, has agreed to become an investor. The partial initial public offering (IPO) of VMware is expected to be completed this summer.
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 give effect to the potential impact of 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.
• Consolidated revenue for 2007 is expected to exceed $12.7 billion.
• GAAP diluted earnings per share for 2007 are expected to exceed $0.64.
Total consolidated revenue for the second quarter of 2007 was $3.12 billion, 21% higher than the $2.57 billion reported for the second quarter of 2006. GAAP net income for the second quarter of 2007 was $334.4 million or $0.16 per diluted share, 33% higher than the GAAP earnings per diluted share of $0.12 reported for the year-ago period. EMC generated strong operating cash flow of $622 million, an increase of 59%, and free cash flow of $422 million, an increase of 123%, compared with the same period a year ago.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “EMC executed well in the second quarter. Customers continued to choose EMC for the depth and breadth of our information infrastructure technologies and solutions, which translated into solid revenue growth that was well balanced across our systems, software and services businesses and all major geographies. Add to this the explosion of digital information and the positive 2007 IT spending outlook we see in all major geographies, and it is clear that we are in a sweet spot of the IT industry.”
Compared with the second quarter of 2006, EMC systems revenue increased 18% year-over-year, led by strong revenue growth from the company’s mid-range information storage products. EMC systems revenue represented 43% of total second-quarter revenue. Software license and maintenance revenue increased 27% year-over-year, led by strong customer demand for RSA’s security offerings and for VMware Virtual Infrastructure. Software license and maintenance revenue accounted for 41% of total revenue in the quarter. Professional services, systems maintenance and other services revenue grew by 18%, driven by double-digit services growth in all four major EMC business segments. Professional services, systems maintenance and other services represented 16% of total second-quarter revenue.
For the second-quarter of 2007, revenue from North America increased 20% compared with the same period a year ago and represented 58% of total reported revenue. Revenue from operations outside of North America grew 23% year-over-year, highlighted by double-digit year-over-year revenue growth in EMC’s major international regions: Europe, Middle East and Africa (EMEA); Latin America and Asia-Pacific and Japan (APJ). APJ, which experienced 32% revenue growth year-over-year, retained its distinction as EMC’s fastest-growing major international region for the second straight quarter.
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “Looking across our business, we remain pleased with our strong, balanced performance and the progress EMC is making towards its 2007 operational and financial goals. We believe we are now on track to exceed the annual targets we set in January, as we continue to execute on our plan to help customers address their information infrastructure requirements.”
Second-Quarter Highlights
EMC’s Information Storage business, which includes revenue from storage systems, information management, information protection and resource management software, and related customer and professional services, reached $2.5 billion, an increase of 12% compared with the year-ago quarter. The second-quarter momentum was led by double-digit year-over-year revenue growth in EMC CLARiiON networked storage systems and solid customer demand for EMC’s backup to disk offerings. EMC also announced deeper technology integration across its product portfolio, including EMC Avamar data protection software optimized with VMware and EMC Celerra, and EMC RecoverPoint replication technology with EMC Replication Manager software.
RSA Information Security revenues for the second quarter of 2007 grew 21% when compared with the results of the division’s constituent companies in the year-ago period and generated approximately $125 million in revenue. The information security business continued to do well during the quarter due to significant success in Payment Card Industry Data Security Standard (PCI DSS) initiatives and notable demand across multiple industries for stronger authentication requirements. Also during the quarter, the division experienced strong growth in alternative forms of authentication, which include software tokens and smart cards, as well as in its information and event management offerings, consumer-facing applications, and encryption and key management solutions.
EMC’s Content Management and Archiving business grew second-quarter revenue to $174 million, an increase of 5% year-over-year. In May 2007, EMC announced the availability of EMC Documentum TaskSpace – a new, highly configurable user interface for the next-generation EMC Documentum 6 enterprise content management (ECM) platform. Next week, EMC will formally announce the Documentum 6 platform, advancing EMC’s ability to lead the industry into the next generation of enterprise content management. In recognition of its ECM market presence, EMC was honored in the quarter with two marquis ECM industry awards: E -DOC magazine’s Readers’ Choice Award and the ECM Connection ACE Award. Last week EMC also announced that it has been positioned as a leader in the Forrester Wave™: Business Process Management for Document Processes.
VMware, an EMC subsidiary, grew sales 89% year-over-year to $298 million during the second quarter as it continued to unlock the value of virtualization for existing and new customers around the world. During the quarter, the virtualization leader broadened its product portfolio with new releases of its award-winning virtual desktop software and continued to expand its network of technology and distribution partners. VMware recently announced that Intel Corporation, through its global investment arm, Intel Capital, has agreed to become an investor. The partial initial public offering (IPO) of VMware is expected to be completed this summer.
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 give effect to the potential impact of 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.
• Consolidated revenue for 2007 is expected to exceed $12.7 billion.
• GAAP diluted earnings per share for 2007 are expected to exceed $0.64.
