EMC Growth Continues

While a few of its competitors stumbled last quarter, EMC Corp. (NYSE: EMC) met analysts expectations and increased revenues (see EMC Reports Q1).

EMC today reported revenue of $2.24 billion, 20 percent higher than the $1.87 billion reported for the first quarter of 2004 (see EMC Earnings Up). Net income was $270 million, or $0.11 per share, 93 percent higher than the $140 million, or $0.06 per share, reported a year ago.

Revenue decreased around 5 percent sequentially from the seasonally strong fourth quarter when EMC recorded $2.36 billion in revenue and EPS of $0.13, but EMC’s first-quarter revenue and EPS hit the consensus of analysts polled by Thomson First Call (see EMC Closes Year With a Bang). EMC also hit the middle range of its previous revenue guidance and high end of its EPS guidance.

EMC’s report shows the quarter wasn't a wash for storage, despite recent negative news from IBM Corp. (NYSE: IBM), Storage Technology Corp. (StorageTek) (NYSE: STK), and Sun Microsystems Inc. (Nasdaq: SUNW). (See Storage Spending Slips.)

Still, CEO Joe Tucci acknowledged a rough patch. “We saw a slow February, but activity picked up in March,” he said on a conference call with analysts.Much of EMC’s growth came from backup and archiving software licenses, through products acquired with Legato and Dantz. Those licenses grew 36 percent from last year.

Revenue from EMC subsidiary VMware Inc. more than doubled, growing 104 percent from the same period last year. Content management software license revenue -- mainly from products gained though the Documentum acquisition -- grew 23 percent year over year.

EMC acquired Legato, Documentum, and server virtualization vendor VMware in 2003, and picked up Dantz last year (see EMC Swings Into Software Big Leagues, EMC Gobbles VMware, and EMC Dances With Dantz). "Clearly, our acquisition strategy is bearing fruit,” Tucci said.

Systems revenue grew 15 percent year-over-year to $1.03 billion. High-end Symmetrix SAN revenue fell 3 percent year-over-year, but midrange Clariion SAN revenue increased 47 percent. Celerra NAS and Centerra fixed storage also increased in double digits.

Tucci said a shortage in Fibre Channel drives from disk vendors failed to hurt EMC much in the quarter (see Storage Drives Are Low on Fibre). “Obviously our disk suppliers came through for us,” he said. “ While we expect supplies to remain tight, we believe we will be OK [this quarter] as well.”Despite an optimistic tone on the call, EMC’s guidance for this quarter of approximately $2.33 billion to $2.35 billion in revenue and EPS of $0.12 represents softer growth than usual. That’s less than EMC’s traditional 5 percent to 7 percent growth in the second quarter. Year-over-year, EMC expects to grow 18 percent to 19 percent this quarter -- down a bit from the 20 percent revenue increase last quarter.

But if the slower growth is due to competition, EMC isn’t letting on. Tucci said EMC is handling new products on the high end from Hitachi Data Systems (HDS) and IBM better than it did in 2001-02 when the same competitors grabbed large chunks of EMC’s market share (see Hitachi Struts Mr. Universal and IBM's New Shark Tale). Tucci also said IBM’s recent deal to sell Network Appliance Inc. (Nasdaq: NTAP) products might confuse IBM customers (see IBM, NetApp Ink OEM Pact).

“We got them a little bit nervous,” Tucci said of his allied rivals. “I don’t take them lightly, but I think we’re in pretty good shape.”

As for new EMC products, Tucci said its storage router virtualization appliance is on track to ship by the end of June (see EMC Takes Storage Router for a Spin). He also said EMC is on schedule to upgrade other hardware platforms within 18 months of their last major refresh, which came in February 2004 (see EMC Hits Hardware Refresh).

EMC announced a new NAS system last week, and Tucci said EMC will extend its partnership with Dell Computer Corp. (Nasdaq: DELL) into NAS (see EMC Launches High-End NAS). Dell resells EMC Clariion systems, and Dell CEO Kevin Rollins hinted in February that NAS would be added to that arrangement (see Dell & EMC May Do NAS).— Dave Raffo, Senior Editor, Byte and Switch