EXHIBIT 99.1
Contact: | Greg Eden | |||
508-293-7195 | ||||
FOR IMMEDIATE RELEASE | eden_greg@emc.com |
EMC REPORTS THIRD QUARTER RESULTS
Revenue Tops $2 Billion; Fifth Consecutive Quarter of Double-Digit Growth
HOPKINTON, Mass. – October 19, 2004 – EMC Corporation (NYSE:EMC) today reported financial results for the third quarter of 2004, achieving its fifth consecutive quarter of double-digit year-over-year revenue growth.
Total consolidated revenue for EMC’s third quarter was $2.03 billion, 34% higher than the $1.51 billion reported for the third quarter of 2003. Net income for the quarter was $218 million or $.09 per diluted share, 37% higher than the $159 million or $.07 per diluted share reported for the third quarter of 2003.
Joe Tucci, EMC’s President and CEO, said, “We again achieved solid, balanced performance in a spending environment that continues to improve at a steady but modest pace. In each of the first three quarters of 2004, we have grown revenues almost three times faster than our overall addressable market. Clearly, our focus on information lifecycle management is influencing and improving how customers manage and store information, as well as setting the agenda for our industry as a whole.”
Core EMC revenue, which excludes revenue related to EMC’s Documentum, Legato and VMware acquisitions, grew 19% compared with the third quarter of 2003. All of EMC’s major geographies recorded double-digit core revenue growth, with each of EMC’s international regions gaining more than 20%.
Bill Teuber, EMC’s Executive Vice President and Chief Financial Officer, said, “We have now met or exceeded our financial goals for eight consecutive quarters. During the third quarter, our gross and operating margins continued to expand, and our already strong balance sheet got even stronger. Cash and investments exceeded $7 billion for the first time in the company’s history while we remained active in the market, buying back $108 million of our stock during the quarter. I am particularly pleased with the returns we are seeing from investments made to broaden our product portfolio and expand our customer reach, which have allowed us to penetrate more deeply into high-growth markets.”
Third Quarter Highlights
EMC systems revenue grew 18% compared with the year-ago quarter as customers of all sizes aligned the value of their information to platforms within EMC’s expanded family of tiered information storage.
“Our commitment to developing the market’s most economical, functionally rich mid-tier systems and software is clearly paying off,” commented Tucci. “Our traditional enterprise customers, along with our rapidly growing base of small to medium-sized customers, are integrating these solutions into their ILM-enabled infrastructures. In the third quarter, our CLARiiON, Centera and NAS (network attached storage) businesses collectively grew well over 50%.”
EMC software license revenue increased 56% compared with the same period a year ago, driven by the Documentum, Legato and VMware acquisitions and double-digit growth from sales of EMC’s core storage software.
The newly formed EMC Software Group, which markets and develops platform-independent information storage and content management software, delivered consolidated revenues of $351 million in the third quarter as customers around the world implemented EMC software to reduce costs, streamline complex IT operations and handle explosive data growth. The major components of EMC Software Group, including core EMC multi-platform software, Documentum and Legato, each had double-digit revenue growth in the third quarter over the comparable year-ago quarter.
VMware, an EMC subsidiary, delivered record quarterly revenues of $61 million in the third quarter, an increase of more than 200% over the third quarter of 2003. With the introduction of VMware ACE in the third quarter, VMware again demonstrated its relentless innovation and aggressive technology leadership. VMware solves the problems of efficiency, flexibility and security with its comprehensive solutions for servers, desktops and test and development that provide an easy on-ramp to next-generation computing models.
EMC services revenue grew 48% compared with the year-ago third quarter, due to the impact of EMC’s software company acquisitions, increased core software maintenance revenue and continued customer demand for information lifecycle management solutions.
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. The business outlook set forth in EMC’s news releases dated January 22, 2004, April 15, 2004, June 10, 2004 and July 20, 2004 still represents EMC’s current expectations unless specifically superceded by these or previously issued statements:
· | Consolidated revenues for the fourth quarter of 2004 are expected to be between $2.23 billion and $2.27 billion. |
· | Diluted earnings per share for the fourth quarter of 2004 are expected to be $0.11 to $0.12. |
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 at www.EMC.com.
EMC, Documentum, LEGATO and VMware are registered trademarks, and EMC CLARiiON and EMC Celerra are trademarks of EMC Corporation. All other trademarks are the property of their respective owners.
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) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) risks associated with acquisitions and investments, 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.; (iv) competitive factors, including but not limited to pricing pressures; (v) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (vi) component quality and availability; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) insufficient, excess or obsolete inventory; (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 Income Statements
(in thousands, except per share amounts)
Unaudited
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2004 | September 30, 2003 | September 30, 2004 | September 30, 2003 | |||||||||||||
Revenues: | ||||||||||||||||
Product sales | $ | 1,486,918 | $ | 1,145,659 | $ | 4,321,293 | $ | 3,321,700 | ||||||||
Services | 541,961 | 365,188 | 1,550,399 | 1,052,598 | ||||||||||||
2,028,879 | 1,510,847 | 5,871,692 | 4,374,298 | |||||||||||||
Cost and expenses: | ||||||||||||||||
Cost of product sales | 746,131 | 658,581 | 2,190,976 | 1,932,660 | ||||||||||||
Cost of services | 239,547 | 177,149 | 701,921 | 524,618 | ||||||||||||
Research and development | 215,708 | 172,858 | 625,411 | 530,060 | ||||||||||||
Selling, general and administrative | 557,450 | 390,164 | 1,640,934 | 1,167,977 | ||||||||||||
Restructuring and other special charges | — | 1,696 | 32,688 | 25,785 | ||||||||||||
Operating income | 270,043 | 110,399 | 679,762 | 193,198 | ||||||||||||
Investment income | 38,373 | 45,473 | 115,410 | 149,796 | ||||||||||||
Interest expense | (1,880 | ) | (672 | ) | (5,575 | ) | (2,711 | ) | ||||||||
Other income (expense), net | 452 | (3,842 | ) | (7,520 | ) | (9,826 | ) | |||||||||
Income before taxes | 306,988 | 151,358 | 782,077 | 330,457 | ||||||||||||
Income tax provision (benefit) | 88,953 | (7,731 | ) | 231,433 | 54,446 | |||||||||||
Net income | $ | 218,035 | $ | 159,089 | $ | 550,644 | $ | 276,011 | ||||||||
Net income per weighted average share, basic | $ | 0.09 | $ | 0.07 | $ | 0.23 | $ | 0.13 | ||||||||
Net income per weighted average share, diluted | $ | 0.09 | $ | 0.07 | $ | 0.23 | $ | 0.12 | ||||||||
Weighted average shares, basic | 2,396,399 | 2,186,213 | 2,405,216 | 2,186,679 | ||||||||||||
Weighted average shares, diluted | 2,433,671 | 2,213,875 | 2,451,916 | 2,208,230 | ||||||||||||
As a % of total revenue: | ||||||||||||||||
Gross margin | 51.4 | % | 44.7 | % | 50.7 | % | 43.8 | % | ||||||||
Selling, general and administrative | 27.5 | % | 25.8 | % | 27.9 | % | 26.7 | % | ||||||||
Research and development | 10.6 | % | 11.4 | % | 10.7 | % | 12.1 | % | ||||||||
Operating income | 13.3 | % | 7.3 | % | 11.6 | % | 4.4 | % | ||||||||
Net income | 10.7 | % | 10.5 | % | 9.4 | % | 6.3 | % |
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
Unaudited
September 30, 2004 | December 31, 2003 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,573,670 | $ | 1,869,426 | ||||
Short-term investments | 877,044 | 928,248 | ||||||
Accounts and notes receivable, less allowance for doubtful accounts of $40,399 and $39,482 | 950,216 | 952,421 | ||||||
Inventories | 547,028 | 514,015 | ||||||
Deferred income taxes | 278,417 | 271,746 | ||||||
Other current assets | 133,498 | 151,448 | ||||||
Total current assets | 4,359,873 | 4,687,304 | ||||||
Long-term investments | 4,584,007 | 4,109,911 | ||||||
Property, plant and equipment, net | 1,564,306 | 1,610,182 | ||||||
Intangible assets, net | 517,598 | 475,295 | ||||||
Other assets, net | 506,600 | 426,472 | ||||||
Goodwill, net | 3,261,366 | 2,711,677 | ||||||
Deferred income taxes | — | 72,019 | ||||||
Total assets | $ | 14,793,750 | $ | 14,092,860 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and current portion of long-term obligations | $ | 62 | $ | 7,104 | ||||
Accounts payable | 448,427 | 414,251 | ||||||
Accrued expenses | 1,012,365 | 1,009,696 | ||||||
Income taxes payable | 433,869 | 436,434 | ||||||
Deferred revenue | 856,631 | 679,044 | ||||||
Total current liabilities | 2,751,354 | 2,546,529 | ||||||
Deferred revenue | 550,396 | 451,296 | ||||||
Deferred income taxes | 71,517 | — | ||||||
Long-term convertible debt | 128,832 | 129,966 | ||||||
Other liabilities | 99,688 | 80,348 | ||||||
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 2,396,279 and 2,476,821 shares | 23,963 | 24,768 | ||||||
Additional paid-in capital | 6,178,893 | 6,894,823 | ||||||
Deferred compensation | (101,647 | ) | (94,068 | ) | ||||
Retained earnings | 5,116,801 | 4,566,157 | ||||||
Accumulated other comprehensive income (loss) | (26,047 | ) | 2,197 | |||||
Treasury stock, at cost; 0 and 62,082 shares | — | (509,156 | ) | |||||
Total stockholders’ equity | 11,191,963 | 10,884,721 | ||||||
Total liabilities and stockholders’ equity | $ | 14,793,750 | $ | 14,092,860 | ||||
As of July 1, 2004, Massachusetts corporations are required to report treasury stock as unissued shares. As such, 99,105 re-acquired shares with a cost of $926,710 have been reclassified to common stock and additional paid-in capital.
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
For the Nine Months Ended | ||||||||
September 30, 2004 | September 30, 2003 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 550,644 | $ | 276,011 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 450,923 | 389,910 | ||||||
Non-cash restructuring and other special charges | 17,051 | 5,732 | ||||||
Amortization of deferred compensation | 40,312 | 7,193 | ||||||
Provision for doubtful accounts | 4,854 | 4,444 | ||||||
Deferred income taxes, net | 154,017 | 12,783 | ||||||
Tax benefit from stock options exercised | 27,330 | 3,093 | ||||||
Other | (1,746 | ) | 8,280 | |||||
Changes in assets and liabilities, net of acquisitions: | ||||||||
Accounts and notes receivable | 12,991 | 171,597 | ||||||
Inventories | (15,372 | ) | (64,526 | ) | ||||
Other assets | (8,640 | ) | (70,004 | ) | ||||
Accounts payable | 27,197 | (38,253 | ) | |||||
Accrued expenses | (5,567 | ) | (66,741 | ) | ||||
Income taxes payable | (16,234 | ) | 190,129 | |||||
Deferred revenue | 200,818 | 275,700 | ||||||
Other liabilities | 14,631 | (95,403 | ) | |||||
Net cash provided by operating activities | 1,453,209 | 1,009,945 | ||||||
Cash flows from investing activities: | ||||||||
Additions to property, plant and equipment | (259,867 | ) | (266,490 | ) | ||||
Capitalized software development costs | (126,559 | ) | (84,419 | ) | ||||
Purchases of short and long-term available for sale securities | (5,295,866 | ) | (4,591,509 | ) | ||||
Sales of short and long-term available for sale securities | 4,770,994 | 3,779,868 | ||||||
Maturities of short and long-term available for sale securities | 73,544 | 186,389 | ||||||
Business acquisitions, net of cash acquired | (544,016 | ) | (11,573 | ) | ||||
Other | (58,146 | ) | (28,741 | ) | ||||
Net cash used in investing activities | (1,439,916 | ) | (1,016,475 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | 115,324 | 48,771 | ||||||
Repurchase of common stock | (417,554 | ) | (99,447 | ) | ||||
Payment of long-term and short-term obligations | (7,136 | ) | (27,831 | ) | ||||
Proceeds from long-term and short-term obligations | — | 4,609 | ||||||
Net cash used in financing activities | (309,366 | ) | (73,898 | ) | ||||
Effect of exchange rate changes on cash | 317 | 599 | ||||||
Net decrease in cash and cash equivalents | (295,756 | ) | (79,829 | ) | ||||
Cash and cash equivalents at beginning of period | 1,869,426 | 1,686,598 | ||||||
Cash and cash equivalents at end of period | $ | 1,573,670 | $ | 1,606,769 | ||||
EMC Corporation
Supplemental Financial Data
Revenue Analysis
(in thousands)
Unaudited
Revenue Components
Q1 2003 | Q2 2003 | Q3 2003 | Q4 2003 | YTD 2003 | Q1 2004 | Q2 2004 | Q3 2004 | YTD 2004 | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||
Systems | $ | 752,387 | $ | 803,814 | $ | 801,075 | $ | 957,411 | $ | 3,314,687 | $ | 894,956 | $ | 930,230 | $ | 948,938 | $ | 2,774,124 | ||||||||||||||||||
Software | 298,591 | 321,249 | 344,584 | 444,443 | 1,408,867 | 483,640 | 525,549 | 537,980 | 1,547,169 | |||||||||||||||||||||||||||
Services | 306,025 | 328,370 | 341,113 | 438,235 | 1,413,743 | 473,155 | 498,449 | 527,658 | 1,499,262 | |||||||||||||||||||||||||||
1,357,003 | 1,453,433 | 1,486,772 | 1,840,089 | 6,137,297 | 1,851,751 | 1,954,228 | 2,014,576 | 5,820,555 | ||||||||||||||||||||||||||||
Other Businesses | 27,148 | 25,867 | 24,075 | 22,421 | 99,511 | 19,878 | 16,956 | 14,303 | 51,137 | |||||||||||||||||||||||||||
Total Consolidated Revenues | $ | 1,384,151 | $ | 1,479,300 | $ | 1,510,847 | $ | 1,862,510 | $ | 6,236,808 | $ | 1,871,629 | $ | 1,971,184 | $ | 2,028,879 | $ | 5,871,692 | ||||||||||||||||||
Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year | 2.5 | % | 3.1 | % | 2.9 | % | 5.1 | % | 3.7 | % | 5.9 | % | 3.9 | % | 3.1 | % | 4.2 | % |
EMC Corporation
Supplemental Financial Data
Revenue Analysis
(in thousands)
Unaudited
Supplemental Revenue Data
Q1 2003 | Q2 2003 | Q3 2003 | Q4 2003 | YTD 2003 | Q1 2004 | Q2 2004 | Q3 2004 | YTD 2004 | |||||||||||||||||||
Symmetrix Hardware and Software Revenue ( a ) | $ | 574,944 | $ | 618,297 | $ | 624,847 | $ | 732,371 | $ | 2,550,459 | $ | 671,838 | $ | 650,181 | $ | 646,292 | $ | 1,968,311 | |||||||||
CLARiiON Hardware and Software Revenue ( a ) | 217,896 | 228,324 | 227,595 | 269,572 | 943,387 | 284,615 | 326,086 | 354,563 | 965,264 | ||||||||||||||||||
Connectivity Revenue ( b ) | 130,290 | 136,578 | 136,637 | 161,478 | 564,983 | 143,516 | 164,326 | 169,105 | 476,947 | ||||||||||||||||||
EMC-only Platform Software Revenue ( c ) | 199,791 | 211,461 | 228,994 | 251,452 | 891,698 | 251,135 | 263,168 | 275,851 | 790,154 | ||||||||||||||||||
Multi-Platform Software Revenue: ( d ) | 98,800 | 109,788 | 115,590 | 192,991 | 517,169 | 232,505 | 262,381 | 262,129 | 757,015 | ||||||||||||||||||
EMC | $ | 127,693 | $ | 125,316 | $ | 147,941 | $ | 132,117 | $ | 405,374 | |||||||||||||||||
Legato | 40,409 | 36,849 | 41,719 | 41,999 | 120,567 | ||||||||||||||||||||||
Documentum | 24,889 | 37,188 | 33,890 | 38,267 | 109,345 | ||||||||||||||||||||||
VMware | — | 33,152 | 38,831 | 49,746 | 121,729 | ||||||||||||||||||||||
Total Multi-Platform Software Revenue | $ | 192,991 | $ | 232,505 | $ | 262,381 | $ | 262,129 | $ | 757,015 | |||||||||||||||||
Software Maintenance Revenue | $ | 138,508 | $ | 176,102 | $ | 189,947 | $ | 207,257 | $ | 573,306 | |||||||||||||||||
EMC Software Group Revenue ( e ) | $ | 350,883 | |||||||||||||||||||||||||
Total Software License and Maintenance Revenue | $ | 582,951 | $ | 659,742 | $ | 715,496 | $ | 745,237 | $ | 2,120,475 | |||||||||||||||||
Legato Software and Services Revenue | $ | 77,299 | $ | 83,001 | $ | 86,305 | $ | 90,889 | $ | 260,195 | |||||||||||||||||
Documentum Software and Services Revenue | $ | 30,731 | $ | 81,000 | $ | 77,961 | $ | 85,857 | $ | 244,818 | |||||||||||||||||
VMware Software and Services Revenue | $ | 39,294 | $ | 47,198 | $ | 60,620 | $ | 147,112 | |||||||||||||||||||
( 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. |
( e ) | Includes multi-platform software license and maintenance revenue, Legato software and services revenue and Documentum software and services revenue. |
EMC CORPORATION
Supplemental Schedule of Earnings Adjusted to Expense Stock Options
(in thousands, except per share amounts)
Unaudited
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2004 | September 30, 2003 | September 30, 2004 | September 30, 2003 | |||||||||||||
Net income | $ | 218,035 | $ | 159,089 | $ | 550,644 | $ | 276,011 | ||||||||
Stock option expense | (87,069 | ) | (91,505 | ) | (271,125 | ) | (278,746 | ) | ||||||||
Adjusted net income (loss) | $ | 130,966 | $ | 67,584 | $ | 279,519 | $ | (2,735 | ) | |||||||
Net income per weighted average share, basic - as reported | $ | 0.09 | $ | 0.07 | $ | 0.23 | $ | 0.13 | ||||||||
Net income per weighted average share, diluted - as reported | $ | 0.09 | $ | 0.07 | $ | 0.23 | $ | 0.12 | ||||||||
Adjusted net income per weighted average share, basic | $ | 0.05 | $ | 0.03 | $ | 0.12 | $ | — | ||||||||
Adjusted net income per weighted average share, diluted | $ | 0.05 | $ | 0.03 | $ | 0.11 | $ | — | ||||||||