EMC Sets Quarterly, Yearly Earnings Records

EMC keeps breaking earnings records-quarter after quarter after quarter.

The data-storage, security and cloud-management-software provider on Jan. 25 reported a pair of accounting trifectas: record consolidated revenue, net income and free cash flow for both the fourth quarter and for 2010 in its entirety.

In Q4 2010, EMC's consolidated revenue, which includes revenue from all its affiliates, was $4.9 billion, an increase of 19 percent from the year-ago quarter. Its GAAP (Generally Accepted Accounting Principles) net income increased a sizable 61 percent from 2009, to $628.6 million (29 cents per share).

EMC's non-GAAP net income for the fourth quarter came in at $920.1 million, an increase of 32 percent over Q4 2009. Yearly consolidated revenues were $19.6 billion, up 15 percent over 2009.

All the numbers easily beat Wall Street expectations.

During the quarter, EMC's record quarterly operating cash flow and free cash flow amounted to $1.5 billion and $1.2 billion-up 50 percent and 54 percent, respectively, year over year. The company completed the quarter with $9.5 billion in cash and investments.

"We are very pleased at EMC's performance this quarter, in all phases of the business," Joe Tucci, chairman, president and CEO, told listeners on the company's earnings call. "We executed our strategy well, we've gained market share, and we continue to innovate for our customers."

Tucci has had to restate this same message every three months for the last few years, but it's certainly not a bad problem to have.

EMC, whose market sweet spot has long been the large enterprise, has made a concerted effort in the last couple of years to move into the midrange and small-to-medium-size business markets. Tucci said on the call that the company would continue to focus much of its new-business efforts in those areas.

New Products for Smaller Enterprises

On Jan. 18, EMC introduced 41 new storage-related products in a major launch event-the largest in the company's history. Several of those new systems are aimed at the SMB market (companies with fewer than 500 employees), including the new VNXe entry-level array.

However, it won't all be smooth sailing ahead for EMC, with a plethora of new competitors already well-established in the smaller-business markets.

"EMC will face headwinds from multiple forces as it attempts to expand in the midmarket," Greg Richardson, storage analyst at Technology Business Research, told eWEEK. "NetApp, for one, is very strong in the channel. EMC will leverage the VNXe as a means to drive a high-volume business, enabling the company to open doors with smaller, growing organizations, particularly in emerging markets."

Although EMC posted 22 percent year-to-year growth in mid-tier revenue in 4Q10, Richardson said, he believes EMC will be forced to adjust its services model to win in the channel against NetApp.

"NetApp leaves whitespace for channel partners to utilize their own services when deploying and support NetApp products," Richardson said.