Tucci Touts ILM

EMC Corp. (NYSE: EMC) claimed its eighth consecutive quarter of meeting or exceeding expectations in its third-quarter report this morning.

Revenue of $2.03 billion for the quarter was up 3 percent sequentially and 34 percent year-over-year; net income of $218 million ($0.09 per diluted share) was up 13 percent sequentially and 37 percent year-over-year. All figures exceed the guidance EMC gave in its last quarterly report in June (see EMC Bucks June Swoon).

EMC expects revenues for the fourth quarter 2004 to fall between $2.23 billion and $2.27 billion, with diluted earnings per share between $0.11 and $0.12. For the full year, EMC expects to show $8.1 billion in revenue and claim an estimated 18 percent of total storage networking market share.

Execs on a conference call with analysts today touted the company's overall focus on ILM (information lifecycle management) as the key to ongoing success. CEO Joe Tucci said EMC's ability to offer "solution sets, surrounded with the right services," has helped it pull ahead of competitors and grow at roughly three times the rate of the overall storage market.

Tucci said it's the midrange and "mid-tier" markets, in which it's made a spate of recent announcements that's scapping up the ILM pitch (see EMC Challenges NetApp NAS). He said EMC's making a hit by tying software and services to Clariion and Centera midrange systems and Celera NAS products.Tucci says he's not worried about recent midrange product announcements from IBM Corp. (NYSE: IBM) and Hewlett-Packard Co. (NYSE: HPQ), though he's not minimizing those companies' ability to compete. "We're clearly in the lead... We have a faster cycle of innovation and have not yet played our next cycle of platform cards," he boasts.

So what's not to love? Well, there's the high end, for one thing: Sales of $646 million in Symmetrix hardware and software were down a bit from last quarter's $650 million, a third consecutive quarterly reduction. Tucci conceded that competition's increased, particularly from Hitachi Data Systems (HDS), which recently revamped its high-end Universal Storage Platform and opened its own services organization to focus on its own "solutions" approach (see Hitachi Struts Mr. Universal and HDS Launches Services Group).

EMC's not the only vendor to feel the high-end pinch. IBM is also feeling the heat of Hitachi's Universal makeover (see IBM Shark Sales Sink). Still, Tucci says EMC won't stop developing in that segment, and the company hopes to win through its own "solutions," or ILM, approach.

EMC faces another challenge in changing customer purchasing patterns. Tucci cautions that customers no longer buy storage ahead of their immediate needs: "They want to pay as they grow, not up front." So despite the fact that the fourth quarter will show the usual seasonal uptick in spending for EMC, he says the days when companies bought tons of storage ahead of time, flooding the revenue gates all at once, are over.

Some other tidbits from today's call:

Mary Jander, Site Editor, Byte and Switch