EMC 1Q Profit Rises Nearly 15 Percent
EMC Corp. said Tuesday its first-quarter profit rose nearly 15 percent as
the data storage vendor reported surging growth in Asia and strong sales of
software that helps companies manage information flow.
EMC said net income for the January-through-March period rose to $312.6 million,
up from a profit of $272.5 million in the same period a year ago.
On a per-share basis, the profit rose a sharper 36 percent, from 11 cents to
15 cents, aided by stock buybacks that reduced the shares on the market. The
latest quarter's result also was boosted a penny a share by a tax benefit.
The latest quarter's performance was 2 cents higher than the consensus estimate
of analysts surveyed by Thomson Financial, who expected a profit of 13 cents
per share, on average.
Revenue rose 17 percent to $2.98 billion, narrowly beating analysts' consensus
forecast of nearly $2.94 billion.
First-quarter revenue from EMC's Asia-Pacific customers grew 28 percent, almost
double the 16 percent growth in North America.
"After strengthening our executive management team in the region about
a year ago, our business in that part of the world is back on track," said
Joe Tucci, EMC's chairman and chief executive.
EMC also recently announced plans to invest $100 million over the next four
years in Russia, where the company plans to add a software development center
in St. Petersburg.
Growth in North American spending on information technology through the first
three months of this year slightly lagged the pace in last year's first quarter,
Tucci told analysts on a conference call.
But he said EMC believes it is "on track to meet and hopefully beat"
the company's targets for a 14 percent increase in revenue this year to at least
$12.7 billion, and a profit of at least 64 cents per share. Analysts expect
a full-year profit of 66 cents per share, and revenue of $12.71 billion, on
Shares of Hopkinton, Mass.-based EMC rose 33 cents, or 2.24 percent, in early
trading on the New York Stock Exchange to $15.09, eclipsing the stock's previous
52-week high of $14.89.
First-quarter revenue from software licenses jumped 29 percent, far outpacing
the 6 percent growth in the storage systems business at EMC, whose rivals include
IBM Corp., Hewlett-Packard Co., and Network Appliance Inc.
EMC has made a string of acquisitions in recent years to expand beyond its
core business of supplying hardware that stores troves of data. As a result,
the faster-growing data-management software business accounted for 40 percent
of EMC's overall revenue in the first quarter, just shy of the 44 percent from
Revenue from EMC's third major business area, professional services and systems
maintenance, grew by 21 percent in the latest quarter.
VMware, an EMC subsidiary whose "virtualization" software helps make
computing more efficient, continued to show strong growth with a 95 percent
increase in revenue to $256 million. In February, EMC announced plans to sell
about 10 percent of VMware in an initial public offering sometime this summer.
EMC plans to hold onto the remaining shares.
Another closely watched segment of EMC will be its information security products,
where revenue grew 25 percent last quarter to $120 million. EMC expanded in
that area last year by making its biggest-ever acquisition, a $2.1 billion purchase
of RSA Security Inc. Many analysts questioned the high price, which hurt EMC's
stock last summer.
This year's first quarter marked the 15th consecutive period in which EMC posted
double-digit revenue growth. But the stock has remained essentially flat over
the past three years amid growing competitive pressures and lower profit margins
in EMC's storage business.
During the first quarter, EMC bought back about 35 million of its shares, totaling