Exhibit 99.1
FOR IMMEDIATE RELEASE | Contact: Greg Eden 508-293-7195 eden_greg@emc.com |
EMC REPORTS STRONG FOURTH QUARTER RESULTS
Revenue Up 25% Year-to-Year as Customers Embrace EMC’s Broad Set of Information
Lifecycle Management Solutions, both Documentum and LEGATO Achieve Record Results
HOPKINTON, Mass. – January 22, 2004 – EMC Corporation (NYSE:EMC) today reported fourth-quarter and full fiscal year financial results for 2003, reflecting strong customer demand for the company’s broad portfolio of systems, software and services for information lifecycle management.
Total consolidated revenue for EMC’s fourth quarter was $1.86 billion, 25% higher than the $1.49 billion reported for the fourth quarter of 2002. Net income for the fourth quarter was $220 million or $.09 per diluted share, including a net benefit of $.01 resulting from certain income tax benefits, partially offset by restructuring and other special charges primarily related to the completed acquisitions of LEGATO Systems, Inc., and Documentum, Inc. This compares with a net loss of $64 million or ($.03) per share for the fourth quarter of 2002.
Total consolidated revenue for EMC’s full 2003 fiscal year was $6.24 billion, 15% higher than the $5.44 billion reported for the full 2002 fiscal year. Net income for the full 2003 fiscal year was $496 million or $.22 per diluted share, compared with a net loss of $119 million or ($.05) per share for the full 2002 fiscal year.
Joe Tucci, EMC’s President and CEO, said, “The strength of our broadened product portfolio, combined with outstanding execution and an improving global economy, made for a solid finish to 2003. Our information lifecycle management strategy is being well received by both long-standing and new customers who are grappling with the challenges of compliance, information protection and constrained budgets. EMC strengthened its market position and clearly gained share in 2003.”
Tucci continued, “I could not be prouder of the EMC team. The impact of helping our customers control both their information and their costs is evident in today’s results. Our innovation engine continued to run in overdrive throughout the year, enabling us to rapidly deliver new capabilities and functionality to our customers, who will reap even greater benefits from our aggressive product development in 2004.”
EMC’s revenue growth was strong across all major business segments and geographies in the fourth quarter. EMC Symmetrix, CLARiiON and Centera networked storage systems and core EMC software and services, which excludes revenue from LEGATO Software and
Documentum, each experienced double-digit sequential revenue growth compared with the third quarter of 2003. Total CLARiiON revenue, which includes systems and related software, reached nearly $1 billion for the full year, continuing to rapidly gain share in the mid-tier storage market. Connectivity revenues also had double-digit sequential growth, stimulated by high demand for EMC’s groundbreaking new NAS Gateway, the Celerra NS600G. Consolidated international revenue grew 33% compared to the same period a year ago, representing a record 43% of EMC’s fourth quarter revenues.
Bill Teuber, EMC’s Executive Vice President and Chief Financial Officer, said, “For the year we reached and exceeded every major financial goal we set at the start of 2003. We were increasingly profitable during each quarter of 2003 and grew revenues every quarter over the preceding one throughout the year. Our crisp execution translated into continued improvements in our cost structure and additional margin expansion. We ended the year with the strongest balance sheet in EMC’s history with more than $6.9 billion in cash and investments.”
During the fourth quarter, EMC completed the acquisitions of LEGATO Systems, Inc., on October 20, and Documentum, Inc., on December 18, significantly expanding the world’s most comprehensive portfolio of information lifecycle management solutions. LEGATO and Documentum each achieved record revenue during the fourth quarter. LEGATO and Documentum revenue recognized after the respective closings of these acquisitions are included in EMC’s fourth quarter and full fiscal year results.
EMC’s market-leading Symmetrix DMX high-end storage systems were named “Product of the Year” for 2003 among all disk and disk subsystems by TechTarget’s Storage magazine and Searchstorage.com. Among other highlights of the fourth quarter, EMC continued to broaden its product portfolio and gain industry-wide recognition for delivering innovation and award-winning service to customers around the globe. EMC unveiled a series of new mid-tier network-attached storage (NAS) systems, including the NS600G NAS Gateway and NetWin 200 systems. EMC’s LEGATO Software division delivered enhancements to its RepliStor for Windows Storage Server solution, allowing for the support of many-to-one and one-to-many replication configurations for data consolidation on a Windows Storage Server. Both EMC and LEGATO were recognized by the Service and Support Professionals Association (SSPA) for outstanding customer support.DM Review magazine selected EMC as the Best Storage Solutions Provider for 2003, andContingency Planning & Management (CPM) magazine inducted EMC into the CPM Hall of Fame for its contributions to business continuity.
Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions, divestitures or business combinations that may be completed after the date hereof. These statements supersede all prior statements regarding Business Outlook set forth in prior EMC news releases.
· | Consolidated revenues for the first quarter of 2004 are expected to be approximately $1.8 billion to $1.835 billion. |
· | Diluted earnings per share for the first quarter of 2004, excluding an approximate charge of $.01 associated with the acquisition of VMware, Inc, should be $.06. Including the charge, earnings per share should be $.05. |
· | Consolidated revenues for 2004 are expected to grow at 25%+, slightly exceeding $7.8 billion. |
· | Gross margins should slightly exceed 50% during some point prior to the fourth quarter of 2004, with some natural ebb and flow between quarters based on a variety of factors, including volume and mix. |
· | Selling, general and administrative expenses, as a percentage of revenue, should be in the mid 20% range for 2004. |
· | Research and development expenses, as a percentage of revenue, should be approximately 12% for 2004. |
· | Amortization expense attributable to the LEGATO, Documentum and VMware acquisitions should be approximately $125 million for 2004. |
· | Operating income, as a percentage of revenue, should reach the mid-teens by the fourth quarter of 2004. |
· | Interest income is expected to be lower in 2004 compared with 2003. |
· | The income tax rate, as a percentage of pre-tax income, is expected to be approximately 30% for 2004. |
· | Excluding the impact of its stock buy-back program, EMC expects to have approximately 2.5 billion diluted shares outstanding for the full year 2004. |
About EMC
EMC Corporation (NYSE: EMC) is the world leader in products, services and solutions for information storage and management that help organizations extract the maximum value from their information, at the lowest total cost, across every point in the information lifecycle. Information about EMC’s products and services can be found atwww.EMC.com.
This release contains “forward-looking statements” as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) risks associated with strategic investments and acquisitions, including the challenges and costs of integration, restructuring and achieving anticipated synergies associated with the acquisitions of LEGATO Systems, Inc., Documentum, Inc. and VMware, Inc.; (ii) adverse changes in general economic or market conditions; (iii) delays or reductions in information technology spending; (iv) the transition to new products, the uncertainty of customer acceptance of new product offerings, and rapid technological and market change; (v) insufficient, excess or obsolete inventory; (vi) competitive factors, including but not limited to pricing pressures; (vii) component quality and availability; (viii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (ix) war or acts of terrorism; (x) the ability to attract and retain highly qualified employees; (xi) fluctuating currency exchange rates; and (xii) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.
EMC CORPORATION
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 1,401,854 | $ | 1,148,807 | $ | 4,723,554 | $ | 4,219,156 | ||||||||
Services | 460,656 | 340,591 | 1,513,254 | 1,219,196 | ||||||||||||
1,862,510 | 1,489,398 | 6,236,808 | 5,438,352 | |||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of sales | 731,502 | 721,599 | 2,664,162 | 2,614,482 | ||||||||||||
Cost of services | 205,970 | 180,032 | 730,588 | 705,028 | ||||||||||||
Research and development | 188,410 | 186,796 | 718,470 | 781,457 | ||||||||||||
Selling, general and administrative | 488,187 | 393,054 | 1,656,164 | 1,680,814 | ||||||||||||
Restructuring and other special charges | 40,482 | 150,402 | 66,267 | 150,402 | ||||||||||||
Operating income (loss) | 207,959 | (142,485 | ) | 401,157 | (493,831 | ) | ||||||||||
Investment income | 38,007 | 69,734 | 187,803 | 256,153 | ||||||||||||
Interest expense | (319 | ) | (3,071 | ) | (3,030 | ) | (11,415 | ) | ||||||||
Other expense, net | (5,081 | ) | (16,436 | ) | (14,907 | ) | (47,394 | ) | ||||||||
Income (loss) before taxes | 240,566 | (92,258 | ) | 571,023 | (296,487 | ) | ||||||||||
Income tax provision (benefit) | 20,469 | (28,342 | ) | 74,915 | (177,781 | ) | ||||||||||
Net income (loss) | $ | 220,097 | $ | (63,916 | ) | $ | 496,108 | $ | (118,706 | ) | ||||||
Net income (loss) per weighted average share, basic | $ | 0.10 | $ | (0.03 | ) | $ | 0.22 | $ | (0.05 | ) | ||||||
Net income (loss) per weighted average share, diluted | $ | 0.09 | $ | (0.03 | ) | $ | 0.22 | $ | (0.05 | ) | ||||||
Weighted average shares, basic | 2,285,795 | 2,193,269 | 2,211,544 | 2,206,294 | ||||||||||||
Weighted average shares, diluted | 2,325,593 | 2,193,269 | 2,237,656 | 2,206,294 | ||||||||||||
As a % of total revenue: | ||||||||||||||||
Gross margin | 49.7 | % | 39.5 | % | 45.6 | % | 39.0 | % | ||||||||
Selling, general and administrative | 26.2 | % | 26.4 | % | 26.6 | % | 30.9 | % | ||||||||
Research and development | 10.1 | % | 12.5 | % | 11.5 | % | 14.4 | % | ||||||||
Operating income (loss) | 11.2 | % | -9.6 | % | 6.4 | % | -9.1 | % | ||||||||
Net income (loss) | 11.8 | % | -4.3 | % | 8.0 | % | -2.2 | % |
EMC CORPORATION
Consolidating Statement of Income
Three Months Ended December 31, 2003
(in thousands, except per share amounts)
(Unaudited)
EMC | Legato (1) | Documentum (2) | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Net sales | $ | 1,336,556 | $ | 40,409 | $ | 24,889 | $ | 1,401,854 | ||||||||
Services | 417,924 | 36,890 | 5,842 | 460,656 | ||||||||||||
1,754,480 | 77,299 | 30,731 | 1,862,510 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 723,526 | 5,770 | 2,206 | 731,502 | ||||||||||||
Cost of services | 192,411 | 11,483 | 2,076 | 205,970 | ||||||||||||
Research and development | 172,402 | 14,382 | 1,626 | 188,410 | ||||||||||||
Selling, general and administrative | 442,050 | 36,190 | 9,947 | 488,187 | ||||||||||||
Restructuring and other special charges | 11,342 | 19,640 | 9,500 | 40,482 | ||||||||||||
Operating income (loss) | $ | 212,749 | $ | (10,166 | ) | $ | 5,376 | 207,959 | ||||||||
Investment income | 38,007 | |||||||||||||||
Interest expense | (319 | ) | ||||||||||||||
Other expense, net | (5,081 | ) | ||||||||||||||
Income before taxes | 240,566 | |||||||||||||||
Income tax provision | 20,469 | |||||||||||||||
Net income | $ | 220,097 | ||||||||||||||
Net income per weighted average share, basic | $ | 0.10 | ||||||||||||||
Net income per weighted average share, diluted | $ | 0.09 | ||||||||||||||
Weighted average shares, basic | 2,285,795 | |||||||||||||||
Weighted average shares, diluted | 2,325,593 | |||||||||||||||
As a % of total revenue: | ||||||||||||||||
Gross margin | 47.8 | % | 77.7 | % | 86.1 | % | 49.7 | % | ||||||||
Selling, general and administrative | 25.2 | % | 46.8 | % | 32.4 | % | 26.2 | % | ||||||||
Research and development | 9.8 | % | 18.6 | % | 5.3 | % | 10.1 | % | ||||||||
Operating income (loss) | 12.1 | % | -13.2 | % | 17.5 | % | 11.2 | % | ||||||||
Net income | 11.8 | % |
(1) | From date of acquisition (October 21, 2003) through December 31, 2003. |
(2) | From date of acquisition (December 19, 2003) through December 31, 2003. |
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
(Unaudited)
December 31, | December 31, | |||||||
2003 | 2002 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,869,426 | $ | 1,686,598 | ||||
Short-term investments | 928,248 | 864,743 | ||||||
Accounts and notes receivable, less allowance for doubtful accounts of $39,482 and $50,551 | 952,421 | 881,325 | ||||||
Inventories | 514,015 | 437,805 | ||||||
Deferred income taxes | 271,746 | 250,197 | ||||||
Other current assets | 151,448 | 96,580 | ||||||
Total current assets | 4,687,304 | 4,217,248 | ||||||
Long-term investments | 4,109,911 | 3,134,290 | ||||||
Property, plant and equipment, net | 1,610,182 | 1,624,396 | ||||||
Intangible and other assets, net | 901,767 | 365,557 | ||||||
Goodwill, net | 2,711,677 | 205,030 | ||||||
Deferred income taxes | 72,019 | 43,926 | ||||||
Total assets | $ | 14,092,860 | $ | 9,590,447 | ||||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and current portion of long-term obligations | $ | 7,104 | $ | 27,507 | ||||
Accounts payable | 414,251 | 429,732 | ||||||
Accrued expenses | 1,009,696 | 948,357 | ||||||
Income taxes payable | 436,434 | 187,695 | ||||||
Deferred revenue | 679,044 | 448,359 | ||||||
Total current liabilities | 2,546,529 | 2,041,650 | ||||||
Deferred revenue | 451,296 | 156,412 | ||||||
Convertible debt | 129,966 | — | ||||||
Other liabilities | 80,348 | 166,383 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Series preferred stock, par value $.01; authorized 25,000 shares, none outstanding | — | — | ||||||
Common stock, par value $.01; authorized 6,000,000 shares; issued 2,476,821 and 2,235,930 shares | 24,768 | 22,359 | ||||||
Additional paid-in capital | 6,894,823 | 3,580,025 | ||||||
Deferred compensation | (94,068 | ) | (10,762 | ) | ||||
Retained earnings | 4,566,157 | 4,070,049 | ||||||
Accumulated other comprehensive income (loss), net | 2,197 | (53,488 | ) | |||||
Treasury stock, at cost; 62,082 and 50,555 shares | (509,156 | ) | (382,181 | ) | ||||
Total stockholders’ equity | 10,884,721 | 7,226,002 | ||||||
Total liabilities and stockholders’ equity | $ | 14,092,860 | $ | 9,590,447 | ||||
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Twelve Months Ended | ||||||||
December 31, 2003 | December 31, 2002 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 496,108 | $ | (118,706 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 520,698 | 653,686 | ||||||
Non-cash restructuring, inventory and other special charges (reversals) | 45,969 | (26,027 | ) | |||||
Amortization of deferred compensation | 13,725 | 13,077 | ||||||
Provision for doubtful accounts | 1,761 | 35,171 | ||||||
Deferred income taxes, net | (19,068 | ) | 74,088 | |||||
Other | 19,771 | 67,011 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts and notes receivable | 42,398 | 435,613 | ||||||
Inventories | (46,342 | ) | 240,377 | |||||
Other assets | (25,760 | ) | 64,918 | |||||
Accounts payable | (32,170 | ) | 4,240 | |||||
Accrued expenses | (44,786 | ) | (74,886 | ) | ||||
Income taxes payable | 230,156 | (158,308 | ) | |||||
Deferred revenue | 412,818 | 236,813 | ||||||
Other liabilities | (94,048 | ) | (1,333 | ) | ||||
Net cash provided by operating activities | 1,521,230 | 1,445,734 | ||||||
Cash flows from investing activities: | ||||||||
Additions to property, plant and equipment | (368,545 | ) | (391,076 | ) | ||||
Cash acquired from business acquisitions | 323,930 | — | ||||||
Capitalized software development costs | (113,427 | ) | (126,678 | ) | ||||
Purchases of short and long-term available for sale securities | (6,430,482 | ) | (8,437,486 | ) | ||||
Sales of short and long-term available for sale securities | 5,032,720 | 7,199,476 | ||||||
Maturities of short and long-term available for sale securities | 304,408 | 226,408 | ||||||
Other | (61,801 | ) | (47,037 | ) | ||||
Net cash used in investing activities | (1,313,197 | ) | (1,576,393 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | 112,592 | 80,924 | ||||||
Purchase of treasury stock | (126,975 | ) | (363,923 | ) | ||||
Payment of long-term and short-term obligations | (30,406 | ) | (29,694 | ) | ||||
Proceeds from long-term and short-term obligations | 4,736 | 1,516 | ||||||
Net cash used in financing activities | (40,053 | ) | (311,177 | ) | ||||
Effect of exchange rate changes on cash | 14,848 | (585 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 182,828 | (442,421 | ) | |||||
Cash and cash equivalents at beginning of period | 1,686,598 | 2,129,019 | ||||||
Cash and cash equivalents at end of period | $ | 1,869,426 | $ | 1,686,598 | ||||
Non-cash activity: | ||||||||
Exchange of net assets for equity investment | $ | — | $ | 3,560 | ||||
Issuance of common stock and stock options exchanged in business combinations | 3,109,899 | — |
EMC Corporation
Supplemental Financial Data
Revenue Analysis
(in thousands)
Unaudited
Revenue Components
Q1 2002 | Q2 2002 | Q3 2002 | Q4 2002 | YTD 2002 | Q1 2003 | Q2 2003 | Q3 2003 | Q4 2003 | YTD 2003 | ||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Systems | $ | 741,578 | $ | 779,109 | $ | 662,417 | $ | 802,196 | $ | 2,985,300 | $ | 752,387 | $ | 803,814 | $ | 801,075 | $ | 957,411 | $ | 3,314,687 | |||||||||||||||
Software | 282,323 | 320,568 | 283,591 | 346,611 | 1,233,093 | 298,591 | 321,249 | 344,584 | 444,443 | 1,408,867 | |||||||||||||||||||||||||
Services | 238,530 | 251,148 | 279,217 | 309,472 | 1,078,367 | 306,025 | 328,370 | 341,113 | 438,235 | 1,413,743 | |||||||||||||||||||||||||
1,262,431 | 1,350,825 | 1,225,225 | 1,458,279 | 5,296,760 | 1,357,003 | 1,453,433 | 1,486,772 | 1,840,089 | 6,137,297 | ||||||||||||||||||||||||||
Other Businesses | 39,547 | 36,713 | 34,213 | 31,119 | 141,592 | 27,148 | 25,867 | 24,075 | 22,421 | 99,511 | |||||||||||||||||||||||||
Total Consolidated Revenues | $ | 1,301,978 | $ | 1,387,538 | $ | 1,259,438 | $ | 1,489,398 | $ | 5,438,352 | $ | 1,384,151 | $ | 1,479,300 | $ | 1,510,847 | $ | 1,862,510 | $ | 6,236,808 | |||||||||||||||
Percentage impact to revenue growth rates due to changes in exchange rates from the prior year | 2.5 | % | 3.1 | % | 2.9 | % | 5.1 | % | 3.7 | % |
EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Supplemental Revenue Data
| |||||||||||||||
Q1 2003 | Q2 2003 | Q3 2003 | Q4 2003 | YTD 2003 | |||||||||||
Symmetrix Hardware and Software Revenue (a) | $ | 574,944 | $ | 618,297 | $ | 624,847 | $ | 732,371 | $ | 2,550,459 | |||||
CLARiiON Hardware and Software Revenue (a) | 217,896 | 228,324 | 227,595 | 269,572 | 943,387 | ||||||||||
Connectivity Revenue (b) | 130,290 | 136,578 | 136,637 | 161,478 | 564,983 | ||||||||||
EMC-only Platform Software Revenue (c) | 199,791 | 211,461 | 228,994 | 251,452 | 891,698 | ||||||||||
Multi-Platform Software Revenue: (d) | 98,800 | 109,788 | 115,590 | 192,991 | 517,169 | ||||||||||
EMC | $ | 127,693 | |||||||||||||
Legato | 40,409 | ||||||||||||||
Documentum | 24,889 | ||||||||||||||
Total Multi-Platform Software Revenue | $ | 192,991 | |||||||||||||
Software Maintenance Revenue: | |||||||||||||||
EMC | $ | 100,383 | |||||||||||||
Legato | 33,887 | ||||||||||||||
Documentum | 4,238 | ||||||||||||||
Total Software Maintenance Revenue | $ | 138,508 | |||||||||||||
Total Software License and Maintenance Revenue | $ | 582,951 | |||||||||||||
Legato Software and Services Revenue | $ | 77,299 | |||||||||||||
Documentum Software and Services Revenue | $ | 30,731 | |||||||||||||
(a) | Includes hardware, hardware upgrades and platform software. |
(b) | Includes Connectrix fibre channel switch/director revenues and Celerra file server revenue, exclusive of disk revenue. |
(c) | Includes software products whose operation requires the EMC platform operating environments. |
(d) | Includes software products whose operation does not require the EMC platform operating environments. |
EMC CORPORATION
Supplemental Schedule of Earnings Adjusted to Expense Stock Options
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Net income (loss) | $ | 220,097 | $ | (63,916 | ) | $ | 496,108 | $ | (118,706 | ) | ||||||
Stock option expense | (94,273 | ) | (90,168 | ) | (373,019 | ) | (356,415 | ) | ||||||||
Adjusted net income (loss) | $ | 125,824 | $ | (154,084 | ) | $ | 123,089 | $ | (475,121 | ) | ||||||
Net income (loss) per weighted average share, basic—as reported | $ | 0.10 | $ | (0.03 | ) | $ | 0.22 | $ | (0.05 | ) | ||||||
Net income (loss) per weighted average share, diluted—as reported | $ | 0.09 | $ | (0.03 | ) | $ | 0.22 | $ | (0.05 | ) | ||||||
Adjusted net income (loss) per weighted average share, basic | $ | 0.06 | $ | (0.07 | ) | $ | 0.06 | $ | (0.22 | ) | ||||||
Adjusted net income (loss) per weighted average share, diluted | $ | 0.05 | $ | (0.07 | ) | $ | 0.06 | $ | (0.22 | ) | ||||||