Business News

EMC Reports Second-Quarter 2009 Financial Results

Thursday 23. July 2009 - Highlights - Second-quarter consolidated revenue - $3.26 billion, up 3% sequentially; GAAP net income attributable to EMC - $205.2 million, up 6% sequentially - Second-quarter GAAP EPS of $0.10 and non-GAAP EPS of $0.18 - Sequential revenue growth across all major geographies and business units within EMC Information Infrastructure business - Year to date operating cash flow of $1.44 billion; free cash flow of approximately $1.1 billion - Record cash and investments - $10 billion - Full-year 2009 business outlook - consolidated revenue of $13.8 billion; GAAP EPS of $0.51 and Non-GAAP EPS of $0.82

EMC Corporation (NYSE: EMC), the world leader in information infrastructure solutions, today reported second-quarter 2009 revenue of $3.26 billion, an increase of 3% sequentially and second-quarter GAAP net income attributable to EMC of $205.2 million, an increase of 6% sequentially. A continued focus on its technology leadership, global sales and service execution and achieving maximum operating efficiencies contributed to EMC’s sequential revenue and profit growth.

Second-quarter consolidated revenue of $3.26 billion declined 11% compared with the year-ago period or 8% adjusting for the impact from currency. Second-quarter 2009 GAAP net income attributable to EMC was $205.2 million or $0.10 per diluted share, compared with $360.1 million or $0.17 per diluted share for the second quarter of 2008. Second-quarter 2009 non-GAAP(1) net income attributable to EMC was $358.9 million or $0.18 per diluted share, compared with $494.4 million or $0.24 per diluted share for the second quarter of 2008.(2) In the second quarter, EMC generated operating cash flow of $574 million, free cash flow of $400 million and ended the quarter with record cash and investments of $10 billion. Year to date EMC generated operating cash flow of $1.44 billion and free cash flow of approximately $1.1 billion.

Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “This marks another quarter of solid execution, and I am proud of the EMC and VMware teams around the world that produced these results. We are focused on four of the hottest and fastest-growing areas of IT spending – next-generation fully virtualized data centers; cloud computing; virtualized desktops and clients; and next-generation backup, recovery and archive solutions. This, together with our market leading products, solutions, services and proven go-to-market model gives us confidence that EMC will continue to gain market share this year. When IT markets resume to more normal spending rates, we expect EMC will return to generating double-digit revenue growth.”

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “While global conditions remain challenging and our full-year view of declining IT spending remains unchanged, EMC’s second-quarter financial performance reflects customers’ budget stabilization and improved business predictability. Continued focus on helping customers address their most pressing IT priorities helped EMC’s Information Infrastructure business achieve balanced sequential revenue growth across all major geographies and in every business unit. Our sustained focus on cost containment and operational efficiency helped drive sequential growth in our Information Infrastructure gross and operating margins.”

Second-Quarter Highlights

EMC’s Information Infrastructure business revenue for the second quarter – comprising Information Storage, RSA Security, and Content Management & Archiving – was $2.80 billion, an increase of 5% sequentially. The business was driven by strong sequential growth of the company’s market-leading EMC CLARiiON mid-tier storage systems; EMC Celerra unified storage systems; EMC’s backup and recovery software; RSA information security solutions; and EMC Global Services. During the quarter, the business also benefited from new, industry-leading products, technology integrations and product enhancements from across EMC’s Information Infrastructure portfolio. Second-quarter highlights also included customer demand for EMC’s:

— Market-leading networked storage solutions that deliver unprecedented
levels of performance, scalability and efficiency, in particular EMC’s
unified storage systems that connect to a variety of networks, its
next-generation high-end systems for virtual data centers and its
entire line of storage systems that leverage enterprise flash drives.
— RSA security solutions helping customers solve their most complex
information security requirements while efficiently running their
security operations, with particular strength in the quarter from the
RSA security information and event management solutions, RSA data loss
prevention suite, and the RSA identity protection and verification
suite.
— Enterprise content management and archiving solutions that help
customers advance business process and collaboration, while also
driving efficiency, information governance and compliance.
— Broad consulting and professional services portfolio enabling
customers to meet their near-term cost containment, business agility
and IT optimization requirements, while supporting their longer-term
strategies in areas such as the next-generation virtual data center
and cloud computing.

— Expanding portfolio of increasingly strategic backup, recovery and
archive solutions that leverage data deduplication to meet a variety
of data protection requirements, maximize efficiency of storage
environments and help customers curb costs.



EMC also announced today the successful completion of its tender offer for all outstanding shares of common stock of Data Domain, Inc., with stockholders tendering approximately 90.3% of outstanding Data Domain shares. Together with the 3.9% of outstanding Data Domain shares EMC previously purchased, EMC now controls approximately 94.2% of Data Domain shares outstanding. EMC expects to effect a second-step merger and close its acquisition of Data Domain today. Upon completion of the acquisition, Data Domain will form the foundation of a new, high-growth product division within EMC’s Information Storage business focused on the development and delivery of next-generation disk-based backup, recovery and archive solutions. For its quarter ending June 30, 2009, Data Domain achieved consolidated revenues of nearly $86 million, an increase of 40% compared with the year ago period.

VMware (NYSE:VMW), which is majority-owned by EMC, contributed second-quarter revenue of $455 million.

EMC consolidated second-quarter revenue from the United States was $1.68 billion, up 3% sequentially, and represented 52% of total second-quarter revenue. Revenue from EMC’s operations outside of the United States was $1.58 billion, up 4% sequentially, and represented 48% of total second-quarter revenue.

Business Outlook

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. These statements supersede all prior statements regarding business outlook and certain items impacting 2009 set forth in prior EMC news releases.

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

— Consolidated EMC revenues are expected to be $13.8 billion in 2009,
including $200 million of revenues from Data Domain. Consolidated
third-quarter revenues are expected to increase 2% to 3% from the
second quarter 2009 excluding revenues from the acquisition of Data
Domain, and are expected to increase 4% to 5% including revenues from
the acquisition of Data Domain.
— Consolidated GAAP diluted earnings per share are expected to be $0.51
in 2009, including the negative impact of a little less than $0.02 per
share from the acquisition of Data Domain.
— Consolidated non-GAAP diluted earnings per share, excluding the impact
of restructuring and acquisition-related charges, stock-based
compensation expense, intangible asset amortization and a gain
recognized from holdings in Data Domain common stock are expected to
be $0.82 in 2009. The acquisition of Data Domain is expected to have
a neutral impact on non-GAAP diluted EPS for the full-year 2009.
— Consolidated restructuring and acquisition-related charges,
stock-based compensation expense and intangible asset amortization are
expected to be $0.04, $0.20 and $0.08 per diluted share, respectively
in 2009. Expected to offset these charges is a $0.01 per diluted
share gain recognized from holdings in Data Domain common stock.
— Information storage GAAP gross margins are expected to be 50% for the
second half of 2009. Excluding the impact of stock-based compensation
expense, which impacts gross margins by 0.6% and intangible asset
amortization, which impacts gross margins by 0.4%, information storage
non-GAAP gross margins are expected to be 51% for the second half of
2009.
— The consolidated GAAP income tax rate is expected to be 17% in 2009.
Excluding the impact of restructuring and acquisition-related charges,
stock-based compensation expense, intangible asset amortization and
gain recognized from holdings in Data Domain common stock, which
collectively impact the tax rate by 4%, the consolidated non-GAAP
income tax rate is expected to be 21% for 2009.
— In 2010, savings from cost reduction actions are expected to reduce
the company’s 2008 cost base by $500 million.

— In 2010, revenues from Data Domain and EMC Avamar products and
services are expected to exceed $1 billion.




(1) Items excluded from the non-GAAP results are stock-based compensation expense and intangible asset amortization for the second quarters of 2009 and 2008 and restructuring and other special charges for the second quarter of 2009. See attached schedules for reconciliation of GAAP to non-GAAP.

(2) The results for 2008 have been adjusted to give effect to the adoption of Statement of Financial Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements-An Amendment of ARB No. 51” and FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”.

EMC, Avamar, CLARiiON and Celerra are registered trademarks of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. All other trademarks used are the property of their respective owners.