EMC Closes Year With a Bang

EMC Corp. (NYSE: EMC) reported better-than-expected fourth-quarter revenues today, bringing a close to a year of double-digit growth (see EMC Posts $2.3B Quarter).

EMC reported $2.36 billion in revenue, up 16 percent sequentially and 27 percent year-over-year. Net income of $321 million was up 47 percent sequentially and 46 percent from the previous year. Earnings per share (EPS) were $0.13 compared to $0.09 a year ago.

For the year, EMC reported $8.23 billion in revenue, up 32 percent over 2003's $6.24 billion. Net income for the full fiscal year 2004 was $871 million ($0.36 per diluted share), up 76 percent from 2003's net income of $496 million ($0.22 per diluted share).

Needless to say, EMC execs waxed confident on today's call, even focusing on areas where the company faces its toughest competition, such as in high-end storage.

Though EMCs midrange Clariion series continued to grow at a clip this quarter (up 46 percent year-on-year to $393 million), high-end Symmetrix revenue of $755 million was up 3 percent from last year and 17 percent sequentially after three quarters of decline. EMC CEO Joseph Tucci says quarterly revenue suggests EMC is gaining share on the high end as well as the midrange.This was EMC's first full quarter since Hitachi Data Systems (HDS) rolled out its TagmaStore and IBM Corp. (NYSE: IBM) launched its DS8000 high-end systems (see Hitachi Struts Mr. Universal and IBM's New Shark Tale).

Though HDS's TagmaStore is reportedly selling well, IBM hasn’t begun volume shipment of the DS8000 that it announced in October (see IBM Denies Slipped Ship Date). IBM’s storage revenue fell 11 percent last quarter, according to results it posted a week ago, but Big Blue executives say they're optimistic about the DS8000.

Hitachi and especially IBM are expecting improved sales from their new offerings this year, and EMC is likely to at least feel pricing pressure from the increased competition.

Tucci's ready with criticism, though. “When we announce our hardware products, they're available then, and we do a substantial amount of revenue,” he said today. “I think when you announce hardware ahead of time like Hitachi and IBM did, it doesn't help a whole bunch in the market.”

Tucci says EMC plans to upgrade its hardware platform between 12 and 18 months after its last major refresh, which came last February (see EMC Hits Hardware Refresh)Despite his confidence in fending off rivals at the high end, Tucci concedes that EMC's fortunes aren't riding on that market segment. "I'm not sure any new introduction of a great piece of hardware is going to make a hell of a big difference in this industry.”

So what’s driving EMC revenue now? Besides Clariion, EMC reported several strong growth areas:

Tucci mentioned replication and virtualization as major pieces of EMC's future product functionality, and EMC marketing VP Howard Elias says the company is on schedule to ship its storage router virtualization appliance by midyear (see EMC Takes Storage Router for a Spin). However, he says he doesn't expect significant revenue from the storage router until 2006.

For guidance, EMC forecasts revenue of $2.23 billion to $2.25 billion and EPS of $0.10 to $0.11 for the current quarter.

— Dave Raffo, Senior Editor, Byte and Switch0