EMC Q2 coffers full, but outlook half-empty
Fights demands to spin VMware
Storage titan EMC enjoyed a solid second quarter this year, although you wouldn't guess it by the company's mournful outlook.
"The economic environment is tough and I believe it will remain tough for at least the next several quarters," said CEO Joe Tucci in the company's quarterly conference call. "Really, IT spending is being more scrutinized now than it has been at any point in the 2003-2007 time frame, and for sure customers are showing more caution."
Net income was up 13 per cent from the same period last year to $377.4m. Sales rose 18 per cent to $3.67bn — marking the company's 20th consecutive quarter of double-digit sales growth.
Revenues from the US increased 10 per cent year-over year. Revenues from abroad grew 27 per cent from 2007 and represented a record 48 per cent of the Hopkinton Massachussetts-based company's total second quarter sales.
Topping growth for EMC was sales in emerging market, its mid-range storage systems, and its consulting and implementation services.
Revenues from EMC's high-end Symmetrix arrays increased 10 per cent year-over-year. Its Celerra NAS gear revenues grew more than 50 per cent.
CLARiion revenues grew 8 per cent from 2007. Tucci said purchases have slowed down for two reasons: Product enhancements are forthcoming, and Dell (which accounts for about 33 per cent of Clariion sales) is "still high on what they can accomplish" with EqualLogic boxes since the PC vendor bought the company back in November.
EMC forecasts revenues to exceed $15bn for the full year 2008.
The VMware spin conundrum
Tucci spent a good portion of the call talking about EMC's majority stake in VMware. The virtualization house missed analyst expectations in its earnings report yesterday, renewing cries for EMC to spin off its remaining shares.
"As we have said before, EMC has no plan to spin out its remaining 85 per cent ownership in VMware," said Tucci.
Still, analysts persisted with the idea.
"We're going to do what is in the best interest for the shareholders," he said. They're not in conflict. I think right now we have to focus back on the business — get VMware back on track"
...and more yet.
"There's a timing for everything, OK?" said Tucci. "And I kind of know a lot more of what's going on than anybody else, and we will do the right thing for the shareholder when and if the time is right."
Tucci recently fired VMware chief and co-founder Diane Green when the company changed its 2008 revenue forecast to be "modestly below" its previous guidance of 50 per cent growth. In VMware's earnings report yesterday, it specified growth will be 42 per cent to 45 per cent for the year. ®