EMC Earnings Credit ILM Uptick

ILM carries the day, despite small downturn in Symmetrix sales

October 20, 2005

2 Min Read
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EMC Corp. (NYSE: EMC) announced solid quarterly results this morning, citing gains in mid-tier storage systems, services, and software. And though large storage system sales were down, the company foresees good growth next quarter. (See EMC Reports Results .)

EMC reported $2.37 billion in third-quarter revenue, a 17 percent increase year over year, but just a hair above last quarter's $2.34 billion. (See EMC Guides Low .) Net income was $422 million, including $106 million from a tax benefit, which brought diluted earnings per share to $0.17, compared with $293 million in income and $0.12 EPS last quarter.

Despite the obvious tax boost, CEO Joe Tucci credited information lifecycle management (ILM) for the gains. "With each passing quarter, ILM is being adopted by more and more customers who see it as the most logical and efficient way to maximize the value of their information," he said in a statement.

Revenue from software licensing and maintenance grew 16 percent year on year; professional services, many related directly to helping customers plan and build ILM deployments, grew 25 percent; and systems revenue grew 15 percent.

Of EMC's total revenue, systems accounted for $1.09 billion, or about 46 percent; software, for $865 million, or 37 percent; and services, for $402 million, or 17 percent.VMware sales were strong, hitting more than $100 million. EMC officials say enterprises are widely adopting VMware to virtualize their x86-based infrastructure. In other software products, sales of EMC Legato NetWorker, EmailXtender, and Replication Manager helped drive up growth.

But Tucci acknowledged a 2 percent year-on-year droop in Symmetrix sales, which he blamed on a late rollout of new gear. (See EMC Swells Its High End.) And while the Clariion line did well overall (with 20 percent growth), the largest model, the CX700, also slipped in the market.

In a surprising aside, Tucci also revealed that EMC paid $90 million to buy virtual file system supplier Rainfinity. (See EMC to Buy Rainfinity.)

At least one analyst thinks EMC delivered the goods. "With a big push during Q3, EMC met revenue expectations and reported a penny of upside," writes analyst Daniel J. Renouard and colleagues of Robert W. Baird & Co. Inc. in a note today. "Although roughly half of the upside is from lower tax rate and higher interest/other, results still reflect considerable leverage in the model."

EMC guidance calls for a 14 percent increase in revenue this quarter, with EPS staying the same. Full-year revenues should show a 17 percent increase.Mary Jander, Site Editor, Byte and Switch

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