EMC Shows Strong Earnings and Record Q4 Results

EMC reported impressive sales growth and beat Q4 estimates while projecting that its virtualization, data storage and services businesses are good bets for healthy expansion in 2012.

EMC reported fourth-quarter 2011 earnings per share (EPS) of 42 cents, up 16.1 percent year over year and ahead of Wall Street predictions.

In its earnings call with analysts, EMC Chairman and CEO Joe Tucci said, "For the year, EMC's revenues grew 18 percent. And to be totally transparent, normalizing the effect of our acquisitions, we grew at 16 percent on an apples-to-apples basis while producing substantial leverage as our non-GAAP [Generally Accepted Accounting Principle] EPS grew 20 percent."

EPS, excluding stock-based compensation, restructuring charges and intangible asset amortization, was 49 cents, up 16.7 percent year over year from 42 cents in the year-ago quarter.

The company reported that revenue increased 14 percent year over year to $5.57 billion in the fourth quarter. That growth was primarily attributed to continued strong demand for EMC's storage, data protection, virtualization and security products and services in the quarter.

The company also stated that when broken down by segment, product sales jumped 11.2 percent year over year to $3.54 billion. Services benefited from strong demand and increased 19.3 percent year over year to $2.03 billion in the reported quarter.

EMC Information Storage business revenue jumped 11.8 percent year over year to $4.07 billion. The company's high-end Symmetrix storage product portfolio climbed 11 percent year over year, while its midtier storage product portfolio experienced a revenue growth of 24 percent in the quarter.

The RSA information security business jumped 16.3 percent year over year in the reported quarter. VMware, in which EMC holds a majority stake, posted an impressive revenue growth of 26.8 percent year over year to reach $1.06 billion in the reported quarter. The only reported downside was in the company's Information Intelligence segment, which dipped 1.1 percent to $201.2 million.

Looking at the earnings from a geographical basis, domestic revenue climbed 16 percent to $3 billion and contributed 54 percent to the quarter's revenue. Revenue from the company's international operations escalated 12 percent to $2.6 billion and accounted for 46 percent of revenue. Revenue increased 6 percent for EMEA, 26 percent APAC and 26 percent for Latin America.

Pleased with the 2011 results, Tucci predicted that the company will see robust growth in the future, especially for 2012, despite economic instabilities. "We have no doubt that the global economy will remain choppy as it has for the vast majority of 2011, especially as it was in the second half. Within this economic landscape, we strongly believe that there will be real growth in IT spending this year," Tucci said.

For 2012, the company will continue to count on growth in specific technology areas. "Our guiding light will be our strategies for private and hybrid cloud computing, big data and security, for we firmly believe that at the intersection of cloud, big data and trust, there is massive opportunity," Tucci said.

"This year, we expect revenues of $22 billion and non-GAAP EPS of $1.70. As is our custom, these are the financial goals that were approved by our board, and they are the goals in which management will be evaluated and compensated," Tucci said. Furthermore he said he expects that as of February "our board will give us an additional goal for free cash flow. This goal will clearly be higher than the $4.4 billion we produced in 2011."

Although EMC may be optimistic about its 2012 growth forecasts, the company still has many competitors snapping at it heels. Most notable is Microsoft, at least on the virtualization front with the company's push into private cloud networking and virtualization markets. On the storage side, EMC can expect to see alternative vendors make more noise and seek to grab more market share with hybrid and flash-based products, including Coraid, Nimble Storage and newcomer Violin Memory. The bigger, more established players such as NetApp, Hewlett-Packard and Cisco are also in the mix of aggressive competition.