EMC Thursday said its second quarter revenue and profits were down compared to last year, but that corporate IT budgets are firming up and becoming more predictable, a sure sign that things are looking up.
Investors liked the EMC financial report. In the first 90 minutes of trading, EMC shares were up 5 percent to $15.15.
Joe Tucci, EMC's chairman, president, and CEO, said in a conference call with Wall Street analysts that IT budgets in the second quarter firmed up quite a bit compared to the first quarter, and are starting to approach normal. "Simply put, our business felt more predictable," Tucci said.
Such predictability was not possible in the first quarter because customer spending was unstable. "The visibility looking out the windshield (then) was foggy," he said.
EMC is continuing to forecast that overall IT spending will fall in the high single-digit to low double-digit percent range, Tucci said.
However, for EMC, that is an opportunity to grab market share, especially as customers look for ways to consolidate IT suppliers.
EMC on Thursday also said that its tender offer for all outstanding shares of common stock of Data Domain was completed, with shareholders of that company tendering approximately 90.3 percent of outstanding shares, and that it expects to close its acquisition of Data Domain on Thursday.
That predictability, combined with EMC's being able to capitalize on what it calls four of the hottest growth markets, is leading EMC to forecast that while revenue and profit for the entire year will be slightly down compared to all of 2009, the company will be in a strong position relative to the rest of the storage industry.
For its second quarter, which ended June 30, EMC reported revenue of $3.26 billion, down about 11.3 percent compared to the $3.67 billion it reported during the second quarter of 2008.
The company also reported a profit of $202.5 million, or 10 cents per share, down from the $360.1 million or 17 cents per share it reported for the same quarter of last year.
For all of 2009, EMC is forecasting revenue of $13.8 billion, including about $200 million from its acquisition of Data Domain. This is down 7.4 percent from last year's total revenue of $14.8 billion.
The company also expects to post a profit of 51 cents per share, down from 64 cents per share in 2008.
EMC's total services revenue was up about 3.3 percent for the second quarter, but that was far outweighed by a drop in product revenue for the quarter of about 18.5 percent.
Of its product segments, information storage product revenue was down 19.1 percent, content management and archiving revenue was down 17.2 percent, security product revenue including its RSA line was down 5.6 percent, information infrastructure product revenue was down 18.5 percent, and VMware product revenue was down 18.9 percent.
Dell accounted for about 10 percent of EMC's total revenue for the quarter, and for about 29 percent of EMC's total Clariion product revenue, said David Goulden, EMC executive vice president and CFO.
Goulden also said that EMC has shipped about 1 petabyte of solid state drive (SSD) storage so far in 2009.
EMC is currently participating in four of the hottest growth areas of the IT market, including the building of next-generation fully virtualized data centers, cloud computing, virtual clients and serves, and next-generation backup and recovery.
All four of those growth markets require storage that grows, has deduplication capabilities to reduce total capacity requirements, provides security for the data, and has an ecosystem of partners, Tucci said.
EMC's second-quarter revenue from the United States was $1.68 billion, or about 52 percent of total second-quarter revenue. That geographic mix was flat with the same period last year.
With the acquisition of Data Domain, EMC expects to add about $200 million in revenue from that company during the second half of 2009, Tucci said. For all of 2009, EMC expects total revenue from its Data Domain and Avamar deduplication technology to top $1 billion, he said.
That will be accomplished by EMC investing in R&D and bringing Data Domain's products to its worldwide sales organizations, giving EMC a complete line of dedupe technology including the Avamar source dedupe and Data Domain's in-line dedupe appliances, Tucci said.
During the question and answer period during the financial call, Tucci also said he expects industry consolidation to continue, but refused to discuss specific areas where EMC might be looking to make new acquisitions.
In terms of any holes in EMC's offerings where the company might like to make an acquisition, Tucci said there's "nothing glaring, we're always looking for opportunities."