Midrange Storage, VMware Growth Drive Strong EMC Results

EMC Tuesday reported solid revenue and earnings growth for its second fiscal quarter of 2012, the company's tenth consecutive quarter of double-digit year-over-year growth in revenue, income and earnings per share.

Despite a drop in European sales and slowing growth in China and in government markets, EMC saw across-the-board increases and expects to reach record revenue for the entire year, according to the Hopkinton, Mass.-based company.

Businesses need to invest in storage even when the economy is slow, said David Goulden, EMC's CFO and newly appointed president and COO.

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EMC expects annual revenue of $22 billion, up 10 percent compared to the $20 billion it reported for all of 2011, according to the company It also expects earnings of $2.75 billion for the year compared to $2.5 billion in 2011.

For the second fiscal quarter ended June 30, EMC reported revenue of $5.3 billion, up 10 percent over the $4.8 billion the company reported for its second fiscal quarter of 2011. Sales to North America rose 14 percent over last year.

EMC also reported second-quarter income of $650 million, up 19 percent over last year's $547 million, and earnings per share of 29 cents, up 21 percent over last year's 24 cents.

EMC's information storage revenue, which includes its storage hardware and software sales, grew 7 percent over last year to $3.8 billion, Goulden said.

Midrange networked storage revenue grew 10 percent over last year due to strong contributions from EMC's VNX and VNXe SMB storage lines and its Isilon scale-out NAS line, while high-end storage revenue growth was an anemic 3 percent, he said.

EMC has done well in terms of managing the costs associated with its storage hardware by adopting common industry-standard hardware platforms for all its lines, Goulden said. That strategy results in faster time to market, a lower cost of goods sold, and lower software and management costs, he said.

The company has been quickly ramping up its flash storage business as well, which also takes advantage of industry-standard hardware, Goulden said.

NEXT: EMC Expects Positive Cloud, Flash Impact

EMC offers four types of flash-based storage, including hybrid storage arrays containing spinning disks with a small amount of SSDs for performance; all flash-based arrays from its May acquisition of flash array developer XtremIO; its upcoming Thunder line of network-based flash storage appliances; and its VFCache line of PCIe flash memory modules for inside servers.

"EMC will be the only company offering the right flash solution for all situations," Goulden said.

EMC's RSA Security division saw revenue growth of 13 percent over last year to $221 million. Goulden said security is a top customer concern and that EMC has been working to integrate security with other EMC and VMware products.

VMware revenue rose 22 percent to $1.1 billion, Goulden said. VMware is 90-plus-percent owned by EMC.

EMC also continued to expand its channel relationships, particularly with service providers moving to offer cloud services, he said.

Joe Tucci, EMC chairman and CEO, said during the question-and-answer portion of Tuesday's financial analyst call that the growth in cloud storage should not have a major impact on EMC's revenue for the foreseeable future because of the company's cloud service provider relationships.

"We believe our strategy of being inside [an enterprise] with private clouds and working with public cloud services providers is working quite well," Tucci said.

Tucci said that EMC's flash storage strategy fits well with the four key considerations when looking at where data resides, including what kind of performance a particular piece of information requires, the persistency of that information, the longevity of that information, and the need to share that information.

Some data will sit in a cloud, as long as it meets customer SLAs and policies, while other data will sit in PCIe storage, in all-flash arrays or in mixed arrays. "It's not one size fits all," Tucci said.

PUBLISHED JULY 24, 2012