EMC: Revenue, Earnings Heading Toward The Clouds

EMC Tuesday reported record third-quarter revenue and delivered a strong outlook for the future, crediting its good fortune specifically to its investments in paving the way for customers to move to cloud computing.

EMC said it expects its full-year 2010 revenue and income to be better than originally expected, with its storage, virtualization and security businesses all showing double-digit year-over-year growth.

In a departure from normal financial conference calls, which focus on the revenue and income numbers, EMC spent the first 10-plus minutes of its Tuesday conference call on how it is set to exploit the move toward cloud computing for future continued growth.

David Goulden, EMC's executive vice president and CFO, outlined three steps that customers go through to reach the cloud, including adopting virtualization, integrating business-critical applications to virtualization and adopting IT-as-a-Service architectures for running those applications.

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These are the three areas in which EMC has invested. Goulden said that EMC, through its VMware business, has integrated its storage technology into virtualized environments, worked with VMware and its technology to develop the infrastructure on which customers can build SLAs for business-critical applications, and developed architectures like its Vblock unified storage on which to base IT-as-a-Service.

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"The industry agrees the shift to cloud architecture is not a matter of if, but of when," Goulden said. "And the answer to that question is 'now.' "

Goulden said EMC's ability to integrate its various storage, virtualization and security businesses to drive future growth as customers adopt cloud computing gave it a very healthy third quarter and put the company on the path toward a full-year 2010 revenue run that is expected to exceed that of its record-breaking results of 2008.

For the third quarter ended Sept. 30, EMC reported revenue of $4.2 billion, up 20 percent from $3.5 billion in the same period last year. Net income surged to $489.1 million, up more than 60 percent from $304.9 million.

"We continue to see a slow recovery, albeit with a few bumps in the road," said CEO Joe Tucci in a conference call with financial analysts Tuesday morning. He described sales growth in the U.S., Japan and most of Europe as "moderate" with faster growth in Canada, Mexico and "emerging market" countries such as China and India.

Sales of information storage products reached $3.1 billion in the quarter, up 16 percent year-over-year. Sales of high-end Symmetrix products grew 23 percent while sales of midtier storage products, including EMC's Clariion, Celerra and Centera systems, increased 22 percent.

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Sales of RSA security products increased 22 percent to $186 million, but sales of products from the company's Information Intelligence Group, including its Documentum document management software, were flat.

Tucci said EMC's partnership with Cisco, under which the two are cooperating with Cisco's Unified Computing System (UCS) strategy, is deepening. He also said that sales of the Vblock unified storage offering resulting from a three-way partnership between EMC, Cisco, and VMware, are "well ahead of plan." However, he declined to disclose specific numbers.

EMC has also continued to deepen its partnerships with systems integrators and telcos, Tucci said.

EMC said revenue for the first nine months of the year totaled $12.1 billion and EMC is forecasting that sales for all of 2010 will reach $16.9 billion, a 20 percent increase from 2009.

Looking forward, EMC did not provide specific guidance for 2011 other than to say the company expects to maintain double-digit growth in both sales and earnings.