EMC: Fiscal 1Q09 Financial Results

EMC Corporation reported first-quarter 2009 revenue of $3.15 billion, reflecting solid revenue results in a challenging global economic environment. Through its continued emphasis on operational efficiency, in the first quarter EMC, ending March 31, 2009, generated operating cash flow of $864 million and free cash flow of $681 million, all contributing to record cash and investments of $9.8 billion.

First-quarter consolidated revenue of $3.15 billion declined 9.2% compared with the year-ago period, or 5.7%, adjusting for the impact from currency. First-quarter 2009 GAAP net income attributable to EMC was $194.1 million or $0.10 per diluted share, compared with $251.6 million or $0.12 per diluted share for the first quarter of 2008. First-quarter 2009 non-GAAP net income attributable to EMC was $323.7 million or $0.16 per diluted share, compared with $460.1 million or $0.22 per diluted share for the first quarter of 2008.

Joe Tucci, EMC Chairman, President and Chief Executive Officer, said: "Within a very tough economy, EMC executed soundly in the first quarter, leveraging the unique power of our highly complementary information infrastructure and virtual infrastructure strategies. As we look to the balance of 2009, we believe the global IT spending environment has reached or is very near the bottom. We expect IT spending to improve in the second half of 2009 as customers will have better budget visibility, be further through their own restructuring programs and broader stimulus packages should be underway."

Tucci continued: "Looking ahead, EMC will advance our place among our customers’ most strategic IT providers as they take advantage of trends shaping the future of IT such as the virtual data center and cloud computing. As a technology-driven company, we will continue to use our financial strength to remain aggressive with R&D, extend our technology leadership, forge even tighter and deeper strategic alliances and deliver customers even more advanced solutions and services for their most strategic IT initiatives."

David Goulden, EMC Executive Vice President and Chief Financial Officer, said: "EMC’s first-quarter results reflect the resiliency of our business in a very challenging global economy. We executed well on our cost reduction plans during the quarter and maintained disciplined expense control, which resulted in decent profitability and excellent free cash flow, while continuing investments to further enhance our product and services offerings and expand our customer reach."

Goulden continued: "We are taking additional near-term cost reduction actions that will save EMC an additional $100 million in 2009. We now expect to reduce EMC’s 2009 Information Infrastructure costs by approximately $450 million from our 2008 spend, increasing to approximately $500 million in 2010. We believe these near- and longer-term actions to improve our effectiveness and efficiency will help EMC ride out this period of economic uncertainty and put us in a position of even greater strength when conditions improve."

EMC’s best estimate is that 2009 global IT spending will decline as a percentage in the very-high-single-digit to very-low-double-digit range compared with 2008. EMC also expects second-quarter 2009 global IT spending will probably be flat compared with the first quarter of 2009, and the second half of 2009 will be stronger than the first half of the year.

First-Quarter Highlights
EMC’s Information Infrastructure business revenue for the first quarter – comprising Information Storage, RSA Security, and Content Management & Archiving – was $2.7 billion. During the quarter, the business benefited from new, industry-leading products, the quality and breadth of EMC’s global services portfolio, technology integrations and product enhancements from across EMC’s information infrastructure portfolio. First-quarter Information Infrastructure business highlights included customer demand for EMC’s:

• Industry-leading networked storage solutions, in particular EMC’s unified storage systems that connect to a variety of networks and the company’s high-end and midrange storage systems with solid state drives that use flash memory.
• Expansive portfolio of industry-leading backup, recovery and archive solutions that leverage data deduplication to meet their data protection requirements, reduce cost and mitigate risk.
• RSA security solutions helping customers solve their most complex information security challenges, with particular strength in the quarter from the RSA security information and event management solutions, and the RSA identity protection and verification suite.
• Broad consulting and professional services portfolio helping customers meet their near-term cost containment requirements while supporting their longer-term objectives, such as consolidation and virtualization.
• Solutions for effective content management that advance collaboration, business process and IT efficiency and compliance.

VMware, which is majority-owned by EMC, contributed first-quarter revenue of $470.4 million, an increase of 7.4% compared with the year-ago quarter.

EMC consolidated first-quarter revenue from the United States was $1.64 billion and represented 52% of total first-quarter revenue. Revenue from EMC’s operations outside of the United States was $1.51 billion and represented 48% of total first-quarter revenue.

Certain Items Impacting 2009
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. The items set forth under "Certain Items Impacting 2009" in EMC’s news release dated January 27, 2009 still represent EMC’s current expectations unless specifically superseded by these statements.

All dollar amounts and percentages set forth below should be considered to be approximations.

The following items are expected
to impact EMC’s 2009 results:

• In 2009, savings from cost reduction actions are expected to reduce the company’s 2008 cost base by $450 million, up $100 million from the company’s previous estimate of $350 million. The savings are expected to be weighted toward the latter half of 2009.
• Due to pressure on IT spending, EMC anticipates lower gross and operating margins for 2009 compared with 2008.
• Operating profitability should show signs of improvement from first-quarter 2009 levels in the second half of 2009.
• VMware’s contributions to consolidated diluted earnings per share are expected to be $0.02 lower in the second quarter of 2009 compared with the first quarter of 2009.

Due to the current macro-economic conditions and limited visibility, EMC is not offering revenue, EPS or other financial outlook at this time.