EMC Rolls Along with Record-Setting Q1 Earnings

By Chris Preimesberger  |  Posted 2010-04-21

Like "Ol' Man River" in the old Jerome Kern-Oscar Hammerstein II song, EMC just keeps rolling along -- making lots of money, that is.

The world's largest independent data storage company April 21 reported its best first quarter in company history with earnings of $3.9 billion, an increase of 23 percent over Q1 2009 as demand for its data protection, disaster recovery and security products continued on an upward trend.

EMC reported a profit of $372.7 million (17 cents a share), which is up from $194.1 million (10 cents) a year ago. Earnings rose to 26 cents from 16 cents, excluding certain items such as a litigation reserve, EMC said.

Revenue increased 23 percent to $3.89 billion. Income from its virtualization subsidiary, VMware, contributed a healthy $632 million to the top line.

Hopkinton, Mass.-based EMC also amended its 2010 financial forecast upward, moving shares up 2.4 percent to $19.88 in early trading. The company's stock is up about 56 percent over this time last year.

EMC President, CEO and Chairman Joe Tucci told listeners on the quarterly conference call that the company's cloud computing sales and marketing strategy is working "on plan" and that the "pent-up demand from last year's 'hiatus' appears to be loosening."

EMC Pursuing Four New 'Billion-dollar' Markets

"Our private-cloud strategy and focus on four multibillion-dollar markets -- each expected to experience rapid growth for many years to come -- are resonating very well with customers," Tucci said.

Tucci identified those four markets as turning conventional data centers into private clouds, servicing the growing ISP market, the development of deduplication-oriented acquisitions Data Domain and Avamar, and virtual client devices.

"Taken together, Data Domain [acquired in 2009 following a bidding war with NetApp] and Avamar [acquired in 2006] have amounted to a billion-dollar business for us," Tucci said.

EMC Dipping Deeper into Midmarket

Greg Richardson, a storage analyst with Technology Business Research, wrote in a report that EMC -- traditionally a large-enterprise storage supplier -- is riding strong midmarket demand to drive its hardware revenue growth.

"Watch out NetApp, EMC is getting comfortable in the midmarket ... Although the company has traditionally focused on the high-end of the mid-tier market, EMC announced that it has strengthened its focus on adding new, high-growth customers in the low-end of the midmarket," Richardson wrote.

To better position itself for growth in the midmarket, which generates 75 percent of its revenue through the channel, EMC extended its Velocity Incentive Program for Channel Partners into 2010, which gives incentives to partners that sell into EMC's under-penetrated markets.

"Additionally, EMC announced it will leverage its longstanding relationship with Dell to extend its reach into the lower parts of the mid-tier storage market in 2010. EMC reported $800 million of revenue from the midmarket in 1Q10, up 32 percent from the year-ago quarter," Richardson wrote.

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