EMC Keeps Pulling in Big Bucks

After a strong first quarter, CEO Joe Tucci says the company has no plans to spin off VMware.

Data storage giant EMC is continuing its lengthy hot streak of quarterly financial success, reporting April 23 record first-quarter revenue and double-digit revenue growth across the company.
It was EMC's 19th consecutive quarter of double-digit, year-over-year revenue growth. The 39,000-employee company exceeded analyst revenue estimates by $20 million.
EMC's total revenue for the first quarter of 2008 was $3.47 billion, an increase of about 17 percent over the $2.98 billion reported for the same period in 2007.
During the quarter, EMC generated operating cash flow of $918.3 million, an increase of 14 percent compared with the same period a year ago, and free cash flow of $717.5 million, an increase of 22 percent year-over-year.
"EMC is off to a solid start to the year, and we remain on track to achieve the 2008 financial targets we set for the business at the beginning of the year," President and CEO Joe Tucci told a conference call of journalists and analysts. "We entered the year with the strongest and most diversified product, solutions and services portfolio in our history. Looking ahead, EMC's growth opportunities are many as we continue to aggressively strengthen our core business, grow into new and adjacent markets and expand our presence around the globe."
In a question-and-answer period following the financial statements, Tucci said analysts can expect to see EMC moving steadily into the consumer sector, thanks largely to the acquisition of Iomega, which is scheduled to close later in the second quarter.
"About 70 percent of all [digital] information is created by individuals," Tucci said, "and we see about 85 percent of that being managed by services in the cloud. We want to connect both of those sectors, and we think we're on a good path to doing that."
EMC's one former sore spot, server and desktop virtualization market leader VMware-which stumbled in the fourth quarter of 2007, reporting revenues that fell short of Wall Street expectations-bounced back a bit, although its stock price is still languishing.
VMware, 90 percent of which is owned by EMC, reported first-quarter revenues of $438.2 million, up 71 percent from a year ago and about 6.5 percent from the $412 million it reported last quarter, a bit more than Wall Street had forecast.
In January, VMware's stock value dropped from $83 to $60.73 per share, losing about 27 percent of its paper value-or about $8 billion-in a matter of hours because of its fourth-quarter numbers. VMware also forecast 2008 revenue growth of 50 percent, compared with 88 percent in 2007.
Some industry insiders have suggested that EMC might be planning to spin off VMware, but Tucci flatly denied that notion.
"Right now we absolutely, positively have no plans of spinning off VMware," Tucci said.
Compared with the first quarter of 2007, EMC's systems revenue increased 10 percent and represented 41 percent of total first-quarter revenue. Software license and maintenance revenue increased 18 percent and accounted for 41 percent of total revenue. Other services revenue grew 30 percent and represented 18 percent of total revenue.
"EMC's results prove that a diversified product portfolio and a well-established brand can be successful in difficult economic times," Brian Babineau, an analyst for Enterprise Strategy Group, told eWEEK.
About VMware, Babineau said the division "had some tailwind, which was something that was of concern, because [competitor] Microsoft went to beta with its own [virtualization] offerings. It proves that people will pay for good products despite free [beta] offerings coming into the marketplace."
More details on the EMC financial report can be found here.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...