- July 23, 2009 -
HOPKINTON, Mass. July 23, 2009 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-GAAP1 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."
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:
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.
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.
EMC Corporation (NYSE: EMC) is the world's leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC's products and services can be found at www.EMC.com
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⊃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.
2The 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.
This release contains "forward-looking statements" as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) our ability to protect our proprietary technology; (iv) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (v) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vi) competitive factors, including but not limited to pricing pressures and new product introductions; (vii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (viii) component and product quality and availability; (ix) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (x) insufficient, excess or obsolete inventory; (xi) war or acts of terrorism; (xii) the ability to attract and retain highly qualified employees; (xiii) fluctuating currency exchange rates; (xiv) litigation that we may be involved in; and (xv) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.
Use of Non-GAAP Financial Measures
This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.
Where specified in the accompanying schedules for various periods entitled "Reconciliation of GAAP to Non-GAAP," certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization and restructuring and other special charges) are excluded from the non-GAAP financial measures.
EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.
This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.
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