EMC: Refocus Of Business Into Three Parts Gives Company A Strong 2Q

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EMC Information Infrastructure revenue for the second quarter grew 4 percent over last year to reach $4.3 billion, EMC's Goulden said. This included $1.2 billion in high-end storage sales, up 5 percent; $1.5 billion in unified and backup/recovery storage sales, up 3 percent; $300 million in emerging storage sales, up 39 percent; $930 million in other storage sales including professional services, down 4 percent; $230 million in RSA security sales, up 3 percent; and $150 million in IIG sales, flat with last year.

VMware, which on Tuesday separately reported its financials, had revenue of $1.2 billion, up 14 percent over last year.

Pivotal, a joint venture between EMC and VMware for developing cloud and big data technology, had second-quarter revenue of $70 million, up 11 percent over last year.

Indirect channels helped drive a lot of EMC's business, particularly in parts of the markets seeing high growth, Goulden said.

Demand for Vblock solutions from VCE, the joint venture between EMC, Cisco and VMware that develops pre-configured and pre-integrated converged infrastructure solutions, soared 50 percent during the second quarter, with over half the orders coming from repeat customers, Goulden said.

"We're seeing initial Vblock purchases by new customers growing in size and number of systems as converged infrastructure becomes a more acceptable paradigm for customers," he said.

Sales of solutions based on EMC's VSPEX reference architecture for converged infrastructure is also booming, Goulden said.

The company has sold over 3,600 VSPEX-based solutions since they were introduced in April of 2012, he said.

"In other words, in less than half the time, we have more systems installed than another less-flexible reference architecture that's been on the market for several years. ... With over one-third of the VSPEX systems sold in Q2 alone, this is clearly gaining momentum," he said.

The "less-flexible reference architecture" likely refers to the combined NetApp-Cisco FlexPod solution.

Both the Vblock and VSPEX solutions are strong channel plays.

EMC's cloud service provider program expanded quickly in the second quarter, with several new partners joining the program and dozens more still being approved, Goulden said. Revenue from cloud service providers grew over 40 percent in the second quarter over last year, he said.

Looking forward, the rollout of several new product generations in the second, third and fourth quarters of 2013 gives EMC the confidence to reaffirm the company's expectations for the entire year.

For all of 2013, EMC expects revenue to increase 8 percent to $23.5 billion, non-GAAP earnings per share to increase 9 percent to $1.85 per share, and free cash flow to increase 10 percent to $5.5 billion, all compared to full year 2012, Goulden said.


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