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EMC Earnings Up

Buoyed by triple-digit income growth thanks to its new software divisions, EMC Corp. (NYSE: EMC) now braces for serious hardware challenges later this year.

EMC today announced income of $140 million, or $0.06 earnings per share, for its first quarter of 2004, in line with analyst expectations and up from $35 million, $0.02 EPS, in the same quarter last year. EMCs revenues grew to $1.87 billion in the quarter, up 34 percent from $1.38 billion a year ago (see EMC Reports $140M Income).

The company’s challenge appears to be keeping market share for its recently refreshed hardware platforms -- especially as IBM Corp. (NYSE: IBM) and Hitachi Data Systems (HDS) plan to roll out new storage systems in the second half of the year.

Three software companies EMC acquired last year -- Legato, Documentum, and VMware -- accounted for $203 million of EMC's $484 million in software revenues. EMC’s overall revenue growth was 21 percent, year to year, excluding these new software divisions. The rise in software revenues helped EMC increase gross margins to 50.1 percent, up from 49.7 percent last quarter.

EMC CEO Joe Tucci feels the results justify the $3.65 billion EMC spent on the three companies last year (see EMC Cops Documentum, EMC Gobbles Legato, and EMC Gobbles VMware). “I absolutely believe these were great moves for us,” Tucci said today on a conference call with analysts. “It's been a real boost for EMC's image, both internally and externally in the market.”

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