EMC: Fiscal 3Q11 Financial Results

                 
Storage only

EMC Corporation reported record financial results for the third quarter of 2011 ending September 30, 2011.

Continued strong worldwide customer demand for EMC’s information storage, security and virtualization products and services, balanced revenue growth and continued outstanding execution contributed to EMC achieving all-time record quarterly consolidated revenue and record third-quarter profit. The results were also highlighted by all-time record quarterly gross margins on a GAAP and non-GAAP basis and year-over-year increases in GAAP and non-GAAP operating margins.     

Third-quarter consolidated revenue was $4.98 billion, an increase of 18% compared with the year-ago quarter. Third-quarter GAAP net income attributable to EMC increased 28% year over year to $606 million. Third-quarter GAAP earnings per weighted average diluted share increased 23% year over year to $0.27. Non-GAAP net income attributable to EMC for the third quarter was $822 million, an increase of 27% compared with the year-ago quarter. Third-quarter non-GAAP1 earnings per weighted average diluted share were $0.37, an increase of 23% year over year.

EMC’s cash flow generation continues to be strong, with trailing twelve-month operating cash flow of $5.0 billion and free cash flow2 of $3.8 billion. The company ended the third quarter with $9.3 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said: "I am very pleased with EMC’s execution and solid third-quarter financial performance. Global customer demand for our industry-leading products and services, which led to record quarterly financial results, is clear evidence that EMC is at the center of the most transformative, disruptive and opportunity-rich trends in IT history – namely hybrid cloud computing and the explosion of Big Data. With the strategy, products and momentum in our favor, EMC remains extremely well positioned to help customers accelerate their journey to the cloud, discover the value of Big Data and transform IT into a source of greater efficiency, agility and control."

David Goulden, EMC Executive Vice President and Chief Financial Officer, said: "The priorities we have outlined in our financial ‘triple play’- to gain market share, invest aggressively to take full advantage of the massive opportunities at the intersection of cloud computing and Big Data, and improve profitability – continue to guide us through 2011. We remain on track to exceed our full-year goal of $19.8 billion in revenue, GAAP EPS of $1.07 and non-GAAP EPS of $1.48. We are confident that our company strategy, disciplined investment approach and continued focus on execution, which have driven our success over the past several years, will continue to serve us well in the future."  

Third-Quarter Highlights
Third-quarter highlights included double-digit revenue growth for EMC Information Storage business, which increased 16% year over year. EMC’s high-end Symmetrix storage product portfolio increased revenue 7% compared with the year-ago quarter. EMC’s portfolio of mid-tier storage products (include EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products) grew revenue 28% year over year.

Revenue from VMware, which is majority-owned by EMC, increased 32% and revenue from EMC’s RSA Information Security business grew 16% year over year.

Additional third-quarter highlights included strong revenue growth for the EMC VNX unified storage family and the company’s Backup Recovery Systems.

Revenue from EMC’s portfolio of Big Data solutions, which includes EMC Isilon, EMC Atmos and EMC Greenplum, more than doubled year over year. During the quarter, customers also continued to increasingly turn to EMC’s broad consulting and professional services portfolio to build out their cloud architectures and transform their IT. Finally, VCE, the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel, continued to gain momentum as customer demand increased for converged infrastructure through the Vblock Infrastructure Platform.

EMC’s consolidated third-quarter revenue from the United States reached an all-time record of $2.7 billion, an increase of 17% year over year, representing 54% of consolidated third-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $2.3 billion, an increase of 20% year over year, representing 46% of consolidated third-quarter revenue. Within this, revenue from EMC’s Asia Pacific and Japan region reached an all-time quarterly record, growing 37% year over year. Revenue from EMC’s Europe, Middle East and Africa and Latin America regions increased 15% and 8% year over year, respectively.

Business Outlook

• Consolidated revenues are expected to exceed $19.8 billion for 2011.
• Consolidated GAAP operating income is expected to be 16% to 17% of revenues for 2011 and consolidated non-GAAP operating income is expected to be 23% to 24% of revenues for 2011. Excluded from consolidated non-GAAP operating income are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and an RSA special charge, which account for 4%, 2%, 0.5% and 0.5% of revenues, respectively.
• Total consolidated GAAP non-operating expense, which includes investment income, interest expense and other income and expense, is expected to be $161 million in 2011 and total consolidated non-GAAP non-operating expense is expected to be $210 million in 2011. Excluded from non-GAAP non-operating expense are stock-based compensation expense of $7 million and a non-recurring gain on strategic investments of $56 million.
• Consolidated GAAP net income is expected to exceed $2.4 billion in 2011 and consolidated non-GAAP net income is expected to exceed $3.3 billion in 2011. Excluded from consolidated non-GAAP net income are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, an RSA special charge and a non-recurring gain on strategic investments, which account for $590 million, $225 million, $75 million, $56 million and ($29 million), respectively.
• Consolidated GAAP diluted earnings per share are expected to exceed $1.07 for 2011 and consolidated non-GAAP diluted earnings per share are expected to exceed $1.48 for 2011. Excluded from consolidated non-GAAP diluted earnings per share are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, an RSA special charge and a non-recurring gain on strategic investments, which account for $0.26, $0.10, $0.03, $0.03 and ($0.01) per diluted share, respectively.
• The consolidated GAAP income tax rate is expected to be 21% for 2011. Excluding the impact of stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, an RSA special charge and a non-recurring gain on strategic investments, which collectively impact the tax rate by 1%, the consolidated non-GAAP income tax rate is expected to be 22% for 2011.
• GAAP net income attributable to the non-controlling interest in VMware is expected to be $143 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $205 million for 2011. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are stock-based compensation expense, intangible asset amortization, acquisition-related charges and a non-recurring gain on strategic investments, which account for $58 million, $10 million, $1 million and ($7 million), respectively.
• The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2011.
• The weighted-average outstanding diluted shares are expected to be 2.235 billion for 2011.
• Consolidated net cash provided by operating activities is expected to be $5.4 billion for 2011, and free cash flow is expected to be $4.0 billion in 2011. Excluded from free cash flow are $950 million of additions to property, plant and equipment and $450 million of capitalized software development costs.
• EMC expects to repurchase $2 billion of the company’s common stock in 2011.