Exhibit 99.1
EMC POSTS RECORD SECOND-QUARTER FINANCIAL RESULTS; ACHIEVES 18% YEAR-OVER-YEAR REVENUE GROWTH
HOPKINTON, Mass. – July 23, 2008 – EMC Corporation (NYSE: EMC), the world leader in information infrastructure solutions, today announced record second-quarter revenue results and its 20th consecutive quarter of double-digit year-over-year revenue growth. The company achieved balanced execution with double-digit revenue growth in systems, software and services and across all of its major business segments and geographies. EMC’s total consolidated revenue for the second quarter of 2008 was $3.67 billion, an increase of 18% over the $3.12 billion reported for the second quarter of 2007.
Second-quarter GAAP net income was $377.5 million or $0.18 per diluted share. Non-GAAP second-quarter net income, which excludes stock-based compensation and intangible amortization, was $511.7 million or $0.24 per diluted share, 20% higher than the non-GAAP earnings per diluted share of $0.20 for the year-ago period.
Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, “EMC demonstrated solid second-quarter performance. I’m proud that we’ve achieved 20 consecutive quarters, or half a decade, of consecutive double-digit revenue growth. Very few companies, particularly of our size, can make that claim. Our focus on information infrastructure and virtual infrastructure is paying off and is the driving force behind our strong financial position, our successful business model and our competitive advantage.”
Tucci added, “Despite continued economic uncertainty at the macro level, we believe spending on information infrastructure and virtual infrastructure technologies and solutions will continue to grow, driven largely by the need to manage the ever-expanding volume of information efficiently, securely and cost effectively. The challenge of dealing with this information overload is leading to a set of needs that EMC — our people, technology, services, and partners — is uniquely able to address.”
From a geographic perspective, revenue from the United States increased 10% compared with the same period a year ago. Revenue from operations outside of the United States grew 27% year over year and represented a record 48% of total second-quarter revenue. Revenue from EMC’s Europe, Middle East & Africa (EMEA) region increased 27%, Asia-Pacific & Japan (APJ) revenue increased 27%, and Latin America revenue increased 24%, each compared with the year-ago quarter.
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “I am pleased with EMC’s execution and solid performance in the second quarter. We achieved strong top-line and bottom-line growth and ended the quarter with a record $8.1 billion in cash and investments. As one of the most trusted technology partners in IT, we believe we are well positioned strategically and operationally for ongoing success.”
Second-Quarter Highlights
Revenue from EMC’s Information Storage business, which includes revenue from storage systems, storage software and related customer and professional services, reached $2.87 billion, an increase of 14% compared with the year-ago period. Growth in the Information Storage business reflects continued worldwide demand for EMC’s networked storage solutions, with particularly strong traction from faster-growing international regions, EMC’s mid-range storage systems connected to IP networks, and the company’s professional consulting and implementation services. In the high-end of the market, second-quarter revenue from EMC Symmetrix networked storage products increased 10% year over year, driven by continued customer demand for large-scale enterprise consolidation and improved energy efficiency. In the mid-range, EMC Celerra network-attached storage products continued to experience strong revenue growth, increasing more than 50% year over year. Also during the quarter, the business benefited from innovative technologies and features introduced this year, including new solid state drives that use flash memory, virtual provisioning for simplified storage provisioning and increased system utilization, and data de-duplication for improved backup efficiency.
EMC’s Content Management and Archiving business increased second-quarter revenue 18% year over year to $204 million. Growth in the business was led by customer demand for EMC’s solutions for effective transactional content management that advance collaboration, compliance and risk-management initiatives, as well as improve business processes and increase productivity. This week, EMC announced the Documentum 6.5 platform, offering customers even more advanced enterprise content management (ECM) capabilities that blend the ease of use of Web 2.0 applications while minimizing the associated risk. With Documentum 6.5, organizations can leverage newer technologies, such as Web 2.0, improve the existing content applications already in use, and power all of these with a more scalable and secure ECM platform than ever before available.
For the second quarter of 2008, revenue from RSA, The Security Division of EMC, grew 15% year over year, reaching $144 million and benefiting from strength in areas such as data loss prevention (DLP), identity protection & verification, and security information & event management. During the quarter, the division made available key advancements to its DLP suite through important new capabilities and launched a comprehensive Identity Assurance solution that enables trusted identities to freely and securely interact with systems and access information. These additions support EMC’s Information Risk Management strategy, which allows customers to effectively recognize, assess and mitigate the risk to their information at any point in its lifecycle. Organizations continue to choose RSA’s comprehensive portfolio of security products and services to meet key compliance requirements around data security, security information management and data loss prevention more efficiently and holistically.
VMware (NYSE: VMW), which is majority-owned by EMC, contributed second-quarter revenues of $453 million, an increase of 52% compared to the year-ago quarter. VMware is the global leader in virtualization solutions from the desktop to the datacenter. Customers of all sizes rely on VMware to reduce capital and operating expenses, ensure business continuity, strengthen security and be more energy efficient. Visithttp://ir.vmware.com for more information about the virtualization software leader’s second-quarter financial results.
“EMC has amassed the broadest, most innovative and most integrated product portfolio in company history. The rapid pace at which we’re able to deliver new technologies and features to market makes EMC’s portfolio even more compelling,” continued Goulden. “Customers need help keeping up with information as it continues to grow at nearly 60% per year. EMC’s unique ability to help solve all their information management challenges is a powerful competitive advantage.”
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 give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. These statements supersede all prior statements regarding business outlook set forth in prior EMC news releases.
All dollar amounts and percentages in the business outlook should be considered to be approximations.
| | • | | Consolidated EMC revenues are expected to exceed $15 billion in 2008. |
| | • | | Consolidated GAAP diluted earnings per share (including the $79.2 million non-cash charge for in-process research and development (IPR&D) in the first quarter of 2008) are expected to be $0.74 in 2008. |
| | • | | Consolidated non-GAAP diluted earnings per share (excluding the $79.2 million non-cash charge for IPR&D in the first quarter of 2008) are expected to be $0.78 in 2008. |
| | • | | Consolidated non-GAAP diluted earnings per share (excluding the $79.2 million non-cash charge for IPR&D in the first quarter of 2008, the impact of stock-based compensation and intangible asset amortization) are expected to be $1.04 in 2008. |
| | • | | Consolidated stock-based compensation expense is expected to be $0.18 per diluted share in 2008 and the amortization of intangible assets is expected to be $0.08 per diluted share in 2008. |
| | • | | Consolidated GAAP tax rate for 2008 is expected to be 20% and the non-GAAP tax rate to be 22%. The tax impact of IPR&D, stock-based compensation and intangible asset amortization is expected to be 2%. |
About EMC
EMC Corporation (NYSE: EMC) is the world’s leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC’s products and services can be found atwww.EMC.com.
# # #
EMC, Symmetrix, Celerra and Documentum are registered trademarks of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. All other trademarks used are the property of their respective owners.
Forward-Looking Statements
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) our ability to protect our proprietary technology; (iv) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (v) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vi) competitive factors, including but not limited to pricing pressures and new product introductions; (vii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (viii) component and product quality and availability; (ix) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (x) insufficient, excess or obsolete inventory; (xi) war or acts of terrorism; (xii) the ability to attract and retain highly qualified employees; (xiii) fluctuating currency exchange rates; and (xiv) 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.
Use of Non-GAAP Financial Measures
This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures.
Where specified in the accompanying schedules for various periods entitled “Reconciliation of GAAP to Non-GAAP,” certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense and intangible amortization) are excluded from the non-GAAP financial measures.
EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.
This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.
All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.
EMC CORPORATION
Consolidated Income Statements
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30,
2008 | | | June 30,
2007 | | | June 30,
2008 | | | June 30,
2007 | |
Revenues: | | | | | | | | | | | | | | | | |
Product sales | | $ | 2,461,651 | | | $ | 2,222,355 | | | $ | 4,802,081 | | | $ | 4,334,781 | |
Services | | | 1,212,223 | | | | 902,317 | | | | 2,341,852 | | | | 1,764,896 | |
| | | | | | | | | | | | | | | | |
| | | 3,673,874 | | | | 3,124,672 | | | | 7,143,933 | | | | 6,099,677 | |
Cost and expenses: | | | | | | | | | | | | | | | | |
Cost of product sales | | | 1,119,553 | | | | 1,036,242 | | | | 2,194,136 | | | | 2,074,720 | |
Cost of services | | | 525,751 | | | | 387,617 | | | | 1,011,832 | | | | 754,204 | |
Research and development | | | 442,502 | | | | 384,966 | | | | 876,016 | | | | 740,358 | |
Selling, general and administrative | | | 1,135,674 | | | | 924,349 | | | | 2,217,889 | | | | 1,800,039 | |
In-process research and development | | | — | | | | — | | | | 79,204 | | | | — | |
Restructuring credits | | | — | | | | — | | | | (357 | ) | | | (2,670 | ) |
| | | | | | | | | | | | | | | | |
Operating income | | | 450,394 | | | | 391,498 | | | | 765,213 | | | | 733,026 | |
| | | | |
Investment income | | | 58,730 | | | | 50,850 | | | | 135,870 | | | | 102,989 | |
Interest expense | | | (18,794 | ) | | | (18,136 | ) | | | (36,836 | ) | | | (36,429 | ) |
Other (expense) income, net | | | (2,811 | ) | | | 2,968 | | | | (7,574 | ) | | | 7,808 | |
| | | | | | | | | | | | | | | | |
Income before taxes and minority interest | | | 487,519 | | | | 427,180 | | | | 856,673 | | | | 807,394 | |
Income tax provision | | | 102,338 | | | | 92,773 | | | | 196,493 | | | | 160,380 | |
| | | | | | | | | | | | | | | | |
Income before minority interest | | | 385,181 | | | | 334,407 | | | | 660,180 | | | | 647,014 | |
Minority interest in VMware, net of taxes | | | (7,713 | ) | | | — | | | | (13,874 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 377,468 | | | $ | 334,407 | | | $ | 646,306 | | | $ | 647,014 | |
| | | | | | | | | | | | | | | | |
Net income per weighted average share, basic: | | $ | 0.18 | | | $ | 0.16 | | | $ | 0.31 | | | $ | 0.31 | |
| | | | | | | | | | | | | | | | |
Net income per weighted average share, diluted: | | $ | 0.18 | | | $ | 0.16 | | | $ | 0.31 | | | $ | 0.30 | |
| | | | | | | | | | | | | | | | |
| | | | |
Weighted average shares, basic | | | 2,057,766 | | | | 2,070,636 | | | | 2,066,470 | | | | 2,075,683 | |
Weighted average shares, diluted | | | 2,094,795 | | | | 2,121,645 | | | | 2,102,184 | | | | 2,122,080 | |
| | | | |
As a % of total revenue: | | | | | | | | | | | | | | | | |
Gross margin | | | 55.2 | % | | | 54.4 | % | | | 55.1 | % | | | 53.6 | % |
Selling, general and administrative | | | 30.9 | % | | | 29.6 | % | | | 31.0 | % | | | 29.5 | % |
Research and development | | | 12.0 | % | | | 12.3 | % | | | 12.3 | % | | | 12.1 | % |
Operating income | | | 12.3 | % | | | 12.5 | % | | | 10.7 | % | | | 12.0 | % |
Net income | | | 10.3 | % | | | 10.7 | % | | | 9.0 | % | | | 10.6 | % |
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended June 30, 2008
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | | Cost of Revenue | | | Research and
Development | | | Selling, General
and
Administrative | | | Operating
Income | | | Other Income,
net | | Income
Before
Taxes
and
Minority
Interest | | | Income Tax
Provision | | | Income
Before
Minority
Interest | | | Minority
Interest | | | Net Income | | | Net Income
per Weighted
Average
Share, Basic | | | Net Income
per Weighted
Average
Share, Diluted | |
EMC Consolidated GAAP | | $ | 3,673,874 | | | $ | 1,645,304 | | | $ | 442,502 | | | $ | 1,135,674 | | | $ | 450,394 | | | $ | 37,125 | | $ | 487,519 | | | $ | 102,338 | | | $ | 385,181 | | | $ | (7,713 | ) | | $ | 377,468 | | | $ | 0.183 | | | $ | 0.179 | |
Stock-based compensation expense | | | — | | | | (19,058 | ) | | | (39,433 | ) | | | (61,829 | ) | | | 120,320 | | | | — | | | 120,320 | | | | 26,455 | | | | 93,865 | | | | (5,043 | ) | | | 88,822 | | | $ | 0.043 | | | $ | 0.042 | |
Intangible amortization | | | — | | | | (39,268 | ) | | | (2,866 | ) | | | (26,743 | ) | | | 68,877 | | | | — | | | 68,877 | | | | 23,045 | | | | 45,832 | | | | (375 | ) | | | 45,457 | | | $ | 0.022 | | | $ | 0.022 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMC Consolidated Non-GAAP (1) | | $ | 3,673,874 | | | $ | 1,586,978 | | | $ | 400,203 | | | $ | 1,047,102 | | | $ | 639,591 | | | $ | 37,125 | | $ | 676,716 | | | $ | 151,838 | | | $ | 524,878 | | | $ | (13,131 | ) | | $ | 511,747 | | | $ | 0.249 | | | $ | 0.243 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
EMC Information Infrastructure GAAP | | $ | 3,221,299 | | | $ | 1,564,859 | | | $ | 327,917 | | | $ | 937,000 | | | $ | 391,523 | | | $ | 33,563 | | $ | 425,086 | | | $ | 90,930 | | | $ | 334,156 | | | $ | — | | | $ | 334,156 | | | $ | 0.162 | | | $ | 0.160 | |
Stock-based compensation expense | | | — | | | | (12,486 | ) | | | (19,631 | ) | | | (43,307 | ) | | | 75,424 | | | | — | | | 75,424 | | | | 15,770 | | | | 59,654 | | | | — | | | | 59,654 | | | $ | 0.029 | | | $ | 0.028 | |
Intangible amortization | | | — | | | | (36,974 | ) | | | (2,866 | ) | | | (25,198 | ) | | | 65,038 | | | | — | | | 65,038 | | | | 21,752 | | | | 43,286 | | | | — | | | | 43,286 | | | $ | 0.021 | | | $ | 0.021 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMC Information Infrastructure Non-GAAP (2) | | $ | 3,221,299 | | | $ | 1,515,399 | | | $ | 305,420 | | | $ | 868,495 | | | $ | 531,985 | | | $ | 33,563 | | $ | 565,548 | | | $ | 128,452 | | | $ | 437,096 | | | $ | — | | | $ | 437,096 | | | $ | 0.212 | | | $ | 0.209 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
VMware standalone GAAP | | $ | 456,128 | | | $ | 80,531 | | | $ | 114,128 | | | $ | 200,469 | | | $ | 61,000 | | | $ | 3,101 | | $ | 64,101 | | | $ | 11,765 | | | $ | 52,336 | | | $ | — | | | $ | 52,336 | | | $ | 0.025 | | | $ | 0.025 | |
GAAP adjustments and eliminations | | | (3,553 | ) | | | (86 | ) | | | 457 | | | | (1,795 | ) | | | (2,129 | ) | | | 461 | | | (1,668 | ) | | | (357 | ) | | | (1,311 | ) | | | (7,713 | ) | | | (9,024 | ) | | $ | (0.004 | ) | | $ | (0.005 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
VMware within EMC | | | 452,575 | | | | 80,445 | | | | 114,585 | | | | 198,674 | | | | 58,871 | | | | 3,562 | | | 62,433 | | | | 11,408 | | | | 51,025 | | | | (7,713 | ) | | | 43,312 | | | $ | 0.021 | | | $ | 0.020 | |
Stock-based compensation expense | | | — | | | | (6,572 | ) | | | (19,802 | ) | | | (18,522 | ) | | | 44,896 | | | | — | | | 44,896 | | | | 10,685 | | | | 34,211 | | | | (5,043 | ) | | | 29,168 | | | $ | 0.014 | | | $ | 0.014 | |
Intangible amortization | | | — | | | | (2,294 | ) | | | — | | | | (1,545 | ) | | | 3,839 | | | | — | | | 3,839 | | | | 1,293 | | | | 2,546 | | | | (375 | ) | | | 2,171 | | | $ | 0.001 | | | $ | 0.001 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
VMware within EMC Non-GAAP (3) | | $ | 452,575 | | | $ | 71,579 | | | $ | 94,783 | | | $ | 178,607 | | | $ | 107,606 | | | $ | 3,562 | | $ | 111,168 | | | $ | 23,386 | | | $ | 87,782 | | | $ | (13,131 | ) | | $ | 74,651 | | | $ | 0.036 | | | $ | 0.035 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Wtd. Average Share O/S | | | | 2,057,766 | | | | 2,094,795 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Represents EMC Consolidated GAAP excluding stock-based compensation expense and intangible amortization. |
| (2) | Represents EMC Information Infrastructure GAAP excluding stock-based compensation expense and intangible amortization. |
| (3) | Represents VMware within EMC excluding stock-based compensation expense and intangible amortization. |
Note: schedule may not add due to rounding
Reconciliation of GAAP to Non-GAAP
For the Three Months Ended June 30, 2007
(in thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Revenue | | Cost of Revenue | | | Research and
Development | | | Selling, General
and
Administrative | | | Operating
Income | | | Other Income,
net | | | Income
Before
Taxes | | | Income Tax
Provision | | | Net Income | | | Net Income per
Weighted
Average
Share, Basic | | | Net Income per
Weighted
Average
Share, Diluted | |
EMC Consolidated GAAP | | $ | 3,124,672 | | $ | 1,423,859 | | | $ | 384,966 | | | $ | 924,349 | | | $ | 391,498 | | | $ | 35,682 | | | $ | 427,180 | | | $ | 92,773 | | | $ | 334,407 | | | $ | 0.161 | | | $ | 0.158 | |
Stock-based compensation expense | | | — | | | (13,449 | ) | | | (24,733 | ) | | | (49,024 | ) | | | 87,206 | | | | — | | | | 87,206 | | | | 21,863 | | | | 65,343 | | | $ | 0.032 | | | $ | 0.031 | |
Intangible amortization | | | — | | | (29,185 | ) | | | (2,167 | ) | | | (17,244 | ) | | | 48,596 | | | | — | | | | 48,596 | | | | 17,108 | | | | 31,488 | | | $ | 0.015 | | | $ | 0.015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMC Consolidated Non-GAAP (1) | | $ | 3,124,672 | | $ | 1,381,225 | | | $ | 358,066 | | | $ | 858,081 | | | $ | 527,300 | | | $ | 35,682 | | | $ | 562,982 | | | $ | 131,744 | | | $ | 431,238 | | | $ | 0.208 | | | $ | 0.203 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
EMC Information Infrastructure GAAP | | $ | 2,826,575 | | $ | 1,374,377 | | | $ | 314,019 | | | $ | 792,161 | | | $ | 346,018 | | | $ | 41,195 | | | $ | 387,213 | | | $ | 85,845 | | | $ | 301,368 | | | $ | 0.146 | | | $ | 0.142 | |
Stock-based compensation expense | | | — | | | (12,456 | ) | | | (16,481 | ) | | | (42,296 | ) | | | 71,233 | | | | — | | | | 71,233 | | | | 17,054 | | | | 54,179 | | | $ | 0.026 | | | $ | 0.026 | |
Intangible amortization | | | — | | | (23,970 | ) | | | (2,167 | ) | | | (16,171 | ) | | | 42,308 | | | | — | | | | 42,308 | | | | 14,781 | | | | 27,527 | | | $ | 0.013 | | | $ | 0.013 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMC Information Infrastructure Non-GAAP (2) | | $ | 2,826,575 | | $ | 1,337,951 | | | $ | 295,371 | | | $ | 733,694 | | | $ | 459,559 | | | $ | 41,195 | | | $ | 500,754 | | | $ | 117,680 | | | $ | 383,074 | | | $ | 0.185 | | | $ | 0.181 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
VMware standalone GAAP | | $ | 296,825 | | $ | 48,817 | | | $ | 71,581 | | | $ | 129,692 | | | $ | 46,735 | | | $ | (5,223 | ) | | $ | 41,512 | | | $ | 7,288 | | | $ | 34,224 | | | $ | 0.017 | | | $ | 0.016 | |
GAAP adjustments and eliminations | | | 1,272 | | | 665 | | | | (634 | ) | | | 2,496 | | | | (1,255 | ) | | | (290 | ) | | | (1,545 | ) | | | (360 | ) | | | (1,185 | ) | | $ | (0.001 | ) | | $ | (0.001 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
VMware within EMC | | | 298,097 | | | 49,482 | | | | 70,947 | | | | 132,188 | | | | 45,480 | | | | (5,513 | ) | | | 39,967 | | | | 6,928 | | | | 33,039 | | | $ | 0.016 | | | $ | 0.016 | |
Stock-based compensation expense | | | — | | | (993 | ) | | | (8,252 | ) | | | (6,728 | ) | | | 15,973 | | | | — | | | | 15,973 | | | | 4,809 | | | | 11,164 | | | $ | 0.005 | | | $ | 0.005 | |
Intangible amortization | | | — | | | (5,215 | ) | | | — | | | | (1,073 | ) | | | 6,288 | | | | — | | | | 6,288 | | | | 2,327 | | | | 3,961 | | | $ | 0.002 | | | $ | 0.002 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
VMware within EMC Non-GAAP (3) | | $ | 298,097 | | $ | 43,274 | | | $ | 62,695 | | | $ | 124,387 | | | $ | 67,741 | | | $ | (5,513 | ) | | $ | 62,228 | | | $ | 14,064 | | | $ | 48,164 | | | $ | 0.023 | | | $ | 0.023 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Wtd. Average Share O/S | | | | 2,070,636 | | | | 2,121,645 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Represents EMC Consolidated GAAP excluding stock-based compensation expense and intangible amortization. |
| (2) | Represents EMC Information Infrastructure GAAP excluding stock-based compensation expense and intangible amortization. |
| (3) | Represents VMware within EMC excluding stock-based compensation expense and intangible amortization. |
Note: schedule may not add due to rounding
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
Unaudited
| | | | | | | | |
| | | June 30,
2008 | | | December 31,
2007 | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 5,219,347 | | | $ | 4,482,211 | |
Short-term investments | | | 642,598 | | | | 1,644,703 | |
Accounts and notes receivable, less allowance for doubtful accounts of $34,302 and $34,389 | | | 2,190,188 | | | | 2,307,512 | |
Inventories | | | 972,032 | | | | 877,243 | |
Deferred income taxes | | | 475,820 | | | | 475,544 | |
Other current assets | | | 308,782 | | | | 265,889 | |
| | | | | | | | |
Total current assets | | | 9,808,767 | | | | 10,053,102 | |
Long-term investments | | | 2,267,398 | | | | 1,825,572 | |
Property, plant and equipment, net | | | 2,168,760 | | | | 2,159,396 | |
Intangible assets, net | | | 921,720 | | | | 940,077 | |
Other assets, net | | | 791,172 | | | | 775,001 | |
Goodwill, net | | | 6,918,935 | | | | 6,531,506 | |
| | | | | | | | |
Total assets | | $ | 22,876,752 | | | $ | 22,284,654 | |
| | | | | | | | |
| | |
LIABILITIES & STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 825,531 | | | $ | 840,886 | |
Accrued expenses | | | 1,586,963 | | | | 1,696,309 | |
Income taxes payable | | | 19,303 | | | | 146,104 | |
Deferred revenue | | | 1,946,033 | | | | 1,724,909 | |
| | | | | | | | |
Total current liabilities | | | 4,377,830 | | | | 4,408,208 | |
Income taxes payable | | | 284,025 | | | | 246,951 | |
Deferred revenue | | | 1,127,045 | | | | 1,053,394 | |
Deferred income taxes | | | 274,885 | | | | 288,175 | |
Long-term convertible debt | | | 3,450,000 | | | | 3,450,000 | |
Other liabilities | | | 158,347 | | | | 127,621 | |
| | | | | | | | |
Total Liabilities | | | 9,672,132 | | | | 9,574,349 | |
| | |
Minority interest in VMware | | | 263,566 | | | | 188,988 | |
| | |
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 2,070,529 and 2,102,187 shares | | | 20,705 | | | | 21,022 | |
Additional paid-in capital | | | 2,829,211 | | | | 3,038,455 | |
Retained earnings | | | 10,116,595 | | | | 9,470,289 | |
Accumulated other comprehensive loss | | | (25,457 | ) | | | (8,449 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 12,941,054 | | | | 12,521,317 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 22,876,752 | | | $ | 22,284,654 | |
| | | | | | | | |
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
| | | | | | | | |
| | | Six Months Ended | |
| | | June 30, 2008 | | | June 30, 2007 | |
Cash flows from operating activities: | | | | | | | | |
Cash received from customers | | $ | 7,585,822 | | | $ | 6,391,546 | |
Cash paid to suppliers and employees | | | (5,947,544 | ) | | | (4,930,350 | ) |
Dividends and interest received | | | 135,058 | | | | 116,747 | |
Interest paid | | | (36,778 | ) | | | (38,854 | ) |
Income taxes paid | | | (199,689 | ) | | | (108,841 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 1,536,869 | | | | 1,430,248 | |
| | | | | | | | |
| | |
Cash flows from investing activities: | | | | | | | | |
Additions to property, plant and equipment | | | (326,449 | ) | | | (324,210 | ) |
Capitalized software development costs | | | (118,848 | ) | | | (98,046 | ) |
Purchases of short and long-term available for sale securities | | | (1,005,655 | ) | | | (3,165,846 | ) |
Sales and maturities of short and long-term available for sale securities | | | 1,572,954 | | | | 4,148,396 | |
Acquisitions, net of cash acquired | | | (604,788 | ) | | | (161,002 | ) |
Other | | | (3,060 | ) | | | (6,860 | ) |
| | | | | | | | |
Net cash (used in) provided by investing activities | | | (485,846 | ) | | | 392,432 | |
| | | | | | | | |
| | |
Cash flows from financing activities: | | | | | | | | |
Issuance of common stock from the exercise of stock options | | | 156,220 | | | | 355,324 | |
Issuance of VMware’s common stock from the exercise of stock options | | | 133,327 | | | | — | |
Repurchase of EMC common stock | | | (686,950 | ) | | | (878,226 | ) |
Excess tax benefits from stock-based compensation | | | 88,613 | | | | 32,684 | |
Payment of short and long-term obligations | | | (5,279 | ) | | | (4,263 | ) |
Proceeds from short and long-term obligations | | | 1,820 | | | | 2,506 | |
| | | | | | | | |
Net cash used in financing activities | | | (312,249 | ) | | | (491,975 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash | | | (1,638 | ) | | | (4,716 | ) |
| | | | | | | | |
Net increase in cash and cash equivalents | | | 737,136 | | | | 1,325,989 | |
Cash and cash equivalents at beginning of period | | | 4,482,211 | | | | 1,828,106 | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | 5,219,347 | | | $ | 3,154,095 | |
| | | | | | | | |
| | |
Reconciliation of net income to net cash provided by operating activities: | | | | | | | | |
Net income | | $ | 646,306 | | | $ | 647,014 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Minority interest in subsidiary | | | 13,874 | | | | — | |
Depreciation and amortization | | | 517,692 | | | | 438,260 | |
Non-cash restructuring and other special charges | | | 80,970 | | | | — | |
Stock-based compensation expense | | | 239,405 | | | | 170,553 | |
Increase (decrease) in provision for doubtful accounts | | | 8,576 | | | | (82 | ) |
Deferred income taxes, net | | | 26,173 | | | | (28,163 | ) |
Excess tax benefits from stock-based compensation | | | (88,613 | ) | | | (32,684 | ) |
Other | | | (5,123 | ) | | | 6,524 | |
Changes in assets and liabilities, net of acquisitions: | | | | | | | | |
Accounts and notes receivable | | | 160,492 | | | | 29,166 | |
Inventories | | | 12,668 | | | | 39,897 | |
Other assets | | | (35,719 | ) | | | (79,042 | ) |
Accounts payable | | | (61,343 | ) | | | 9,373 | |
Accrued expenses | | | (248,139 | ) | | | (105,797 | ) |
Income taxes payable | | | (32,677 | ) | | | 79,731 | |
Deferred revenue | | | 272,821 | | | | 262,784 | |
Other liabilities | | | 29,506 | | | | (7,286 | ) |
| | | | | | | | |
Net cash provided by operating activities | | $ | 1,536,869 | | | $ | 1,430,248 | |
| | | | | | | | |
EMC Corporation
Reconciliation of Cash Flow from Operations to Free Cash Flow
(in thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30,
2008 | | | June 30,
2007 | | | June 30,
2008 | | | June 30,
2007 | |
EMC Consolidated | | | | | | | | | | | | | | | | |
Cash flow from Operations | | $ | 618,577 | | | $ | 621,565 | | | $ | 1,536,869 | | | $ | 1,430,248 | |
Capital Expenditures | | | (179,937 | ) | | | (153,684 | ) | | | (326,449 | ) | | | (324,210 | ) |
Capitalized Software | | | (64,527 | ) | | | (46,126 | ) | | | (118,848 | ) | | | (98,046 | ) |
| | | | | | | | | | | | | | | | |
Free Cash Flow | | $ | 374,113 | | | $ | 421,755 | | | $ | 1,091,572 | | | $ | 1,007,992 | |
| | | | | | | | | | | | | | | | |
| | | | |
VMware within EMC | | | | | | | | | | | | | | | | |
Cash flow from Operations | | $ | 161,419 | | | $ | 116,217 | | | $ | 267,477 | | | $ | 252,635 | |
Capital Expenditures | | | (45,324 | ) | | | (62,921 | ) | | | (86,343 | ) | | | (110,738 | ) |
Capitalized Software | | | (11,770 | ) | | | (3,872 | ) | | | (15,934 | ) | | | (10,831 | ) |
| | | | | | | | | | | | | | | | |
Free Cash Flow | | $ | 104,325 | | | $ | 49,424 | | | $ | 165,200 | | | $ | 131,066 | |
| | | | | | | | | | | | | | | | |
| | | | |
EMC Information Infrastructure | | | | | | | | | | | | | | | | |
Cash flow from Operations | | $ | 457,158 | | | $ | 505,348 | | | $ | 1,269,392 | | | $ | 1,177,613 | |
Capital Expenditures | | | (134,613 | ) | | | (90,763 | ) | | | (240,106 | ) | | | (213,472 | ) |
Capitalized Software | | | (52,757 | ) | | | (42,254 | ) | | | (102,914 | ) | | | (87,215 | ) |
| | | | | | | | | | | | | | | | |
Free Cash Flow | | $ | 269,788 | | | $ | 372,331 | | | $ | 926,372 | | | $ | 876,926 | |
| | | | | | | | | | | | | | | | |
EMC Corporation
Supplemental Revenue Analysis
(in thousands)
Unaudited
Revenue Components
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q1 2007 | | | Q2 2007 | | | Q3 2007 | | | Q4 2007 | | | 2007 | | | Q1 2008 | | | Q2 2008 | | | YTD 2008 | |
Consolidated Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Systems | | $ | 1,305,766 | | | $ | 1,354,438 | | | $ | 1,411,367 | | | $ | 1,688,565 | | | $ | 5,760,136 | | | $ | 1,440,123 | | | $ | 1,528,012 | | | $ | 2,968,135 | |
Software: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Software License | | | 806,660 | | | | 867,917 | | | | 921,517 | | | | 1,055,746 | | | | 3,651,840 | | | | 900,307 | | | | 933,639 | | | | 1,833,946 | |
Software Maintenance | | | 382,080 | | | | 400,233 | | | | 426,198 | | | | 472,264 | | | | 1,680,775 | | | | 506,218 | | | | 524,725 | | | | 1,030,943 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Software License & Maintenance | | | 1,188,740 | | | | 1,268,150 | | | | 1,347,715 | | | | 1,528,010 | | | | 5,332,615 | | | | 1,406,525 | | | | 1,458,364 | | | | 2,864,889 | |
Other Services | | | 480,499 | | | | 502,084 | | | | 540,672 | | | | 614,199 | | | | 2,137,454 | | | | 623,411 | | | | 687,498 | | | | 1,310,909 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Consolidated Revenues | | $ | 2,975,005 | | | $ | 3,124,672 | | | $ | 3,299,754 | | | $ | 3,830,774 | | | $ | 13,230,205 | | | $ | 3,470,059 | | | $ | 3,673,874 | | | $ | 7,143,933 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year | | | 2.1 | % | | | 2.1 | % | | | 1.8 | % | | | 3.2 | % | | | 2.3 | % | | | 2.3 | % | | | 2.7 | % | | | 2.5 | % |
EMC Corporation
Supplemental
Revenue Analysis
(in thousands)
Unaudited
Supplemental Revenue Data
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q1 2007 | | Q2 2007 | | Q3 2007 | | Q4 2007 | | 2007 | | Q1 2008 | | Q2 2008 | | YTD 2008 |
Storage Systems Revenue | | $ | 1,302,740 | | $ | 1,347,357 | | $ | 1,405,139 | | $ | 1,682,395 | | $ | 5,737,631 | | $ | 1,433,190 | | $ | 1,523,695 | | $ | 2,956,885 |
Storage Software: | | | | | | | | | | | | | | | | | | | | | | | | |
Storage Software License | | | 486,558 | | | 512,521 | | | 515,056 | | | 561,622 | | | 2,075,757 | | | 470,449 | | | 494,331 | | | 964,780 |
Storage Software Maintenance | | | 234,796 | | | 242,940 | | | 252,642 | | | 271,848 | | | 1,002,226 | | | 291,556 | | | 283,292 | | | 574,848 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Storage Software License & Maintenance | | | 721,354 | | | 755,461 | | | 767,698 | | | 833,470 | | | 3,077,983 | | | 762,005 | | | 777,623 | | | 1,539,628 |
Storage Other Services | | | 402,834 | | | 425,200 | | | 450,450 | | | 516,782 | | | 1,795,266 | | | 516,634 | | | 571,929 | | | 1,088,563 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Storage Revenue | | $ | 2,426,928 | | $ | 2,528,018 | | $ | 2,623,287 | | $ | 3,032,647 | | $ | 10,610,880 | | $ | 2,711,829 | | $ | 2,873,247 | | $ | 5,585,076 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Content Management and Archiving Systems Revenue | | $ | 68 | | $ | 1,708 | | $ | 1,485 | | $ | 2,157 | | $ | 5,418 | | $ | 2,521 | | $ | 138 | | $ | 2,659 |
Content Management and Archiving Software: | | | | | | | | | | | | | | | | | | | | | | | | |
Content Management and Archiving Software License | | | 68,472 | | | 69,046 | | | 79,247 | | | 115,305 | | | 332,070 | | | 58,607 | | | 73,277 | | | 131,884 |
Content Management and Archiving Software Maintenance | | | 60,339 | | | 60,416 | | | 61,595 | | | 70,590 | | | 252,940 | | | 73,758 | | | 75,660 | | | 149,418 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Content Management and Archiving Software License & Maintenance | | | 128,811 | | | 129,462 | | | 140,842 | | | 185,895 | | | 585,010 | | | 132,365 | | | 148,937 | | | 281,302 |
Content Management and Archiving Other Services | | | 43,319 | | | 42,432 | | | 46,985 | | | 50,074 | | | 182,810 | | | 50,317 | | | 54,931 | | | 105,248 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Content Management and Archiving Revenue | | $ | 172,198 | | $ | 173,602 | | $ | 189,312 | | $ | 238,126 | | $ | 773,238 | | $ | 185,203 | | $ | 204,006 | | $ | 389,209 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Security Systems Revenue | | $ | 2,958 | | $ | 5,373 | | $ | 4,743 | | $ | 4,013 | | $ | 17,087 | | $ | 4,412 | | $ | 4,179 | | $ | 8,591 |
Security Software: | | | | | | | | | | | | | | | | | | | | | | | | |
Security Software License | | | 81,934 | | | 81,300 | | | 82,979 | | | 94,604 | | | 340,817 | | | 77,271 | | | 84,888 | | | 162,159 |
Security Software Maintenance | | | 21,627 | | | 23,392 | | | 25,126 | | | 27,752 | | | 97,897 | | | 28,785 | | | 30,108 | | | 58,893 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Security Software License & Maintenance | | | 103,561 | | | 104,692 | | | 108,105 | | | 122,356 | | | 438,714 | | | 106,056 | | | 114,996 | | | 221,052 |
Security Other Services | | | 13,342 | | | 14,890 | | | 20,016 | | | 21,226 | | | 69,474 | | | 24,389 | | | 24,871 | | | 49,260 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Security Revenue | | $ | 119,861 | | $ | 124,955 | | $ | 132,864 | | $ | 147,595 | | $ | 525,275 | | $ | 134,857 | | $ | 144,046 | | $ | 278,903 |
| | | | | | | | | | | | | | | | | | | | | | | | |
EMC Information Infrastructure Systems Revenue | | $ | 1,305,766 | | $ | 1,354,438 | | $ | 1,411,367 | | $ | 1,688,565 | | $ | 5,760,136 | | $ | 1,440,123 | | $ | 1,528,012 | | $ | 2,968,135 |
EMC Information Infrastructure Software: | | | | | | | | | | | | | | | | | | | | | | | | |
EMC Information Infrastructure Software License | | | 636,964 | | | 662,867 | | | 677,282 | | | 771,531 | | | 2,748,644 | | | 606,327 | | | 652,496 | | | 1,258,823 |
EMC Information Infrastructure Software Maintenance | | | 316,762 | | | 326,748 | | | 339,363 | | | 370,190 | | | 1,353,063 | | | 394,099 | | | 389,060 | | | 783,159 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total EMC Information Infrastructure Software License & Maintenance | | | 953,726 | | | 989,615 | | | 1,016,645 | | | 1,141,721 | | | 4,101,707 | | | 1,000,426 | | | 1,041,556 | | | 2,041,982 |
EMC Information Infrastructure Other Services | | | 459,495 | | | 482,522 | | | 517,451 | | | 588,082 | | | 2,047,550 | | | 591,340 | | | 651,731 | | | 1,243,071 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total EMC Information Infrastructure Revenue | | $ | 2,718,987 | | $ | 2,826,575 | | $ | 2,945,463 | | $ | 3,418,368 | | $ | 11,909,393 | | $ | 3,031,889 | | $ | 3,221,299 | | $ | 6,253,188 |
| | | | | | | | | | | | | | | | | | | | | | | | |
VMware Software: | | | | | | | | | | | | | | | | | | | | | | | | |
VMware Software License | | $ | 169,696 | | $ | 205,050 | | $ | 244,235 | | $ | 284,215 | | $ | 903,196 | | $ | 293,980 | | $ | 281,143 | | $ | 575,123 |
VMware Software Maintenance | | | 65,318 | | | 73,485 | | | 86,835 | | | 102,074 | | | 327,712 | | | 112,119 | | | 135,665 | | | 247,784 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total VMware Software License & Maintenance | | | 235,014 | | | 278,535 | | | 331,070 | | | 386,289 | | | 1,230,908 | | | 406,099 | | | 416,808 | | | 822,907 |
VMware Other Services | | | 21,004 | | | 19,562 | | | 23,221 | | | 26,117 | | | 89,904 | | | 32,071 | | | 35,767 | | | 67,838 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total VMware Revenue | | $ | 256,018 | | $ | 298,097 | | $ | 354,291 | | $ | 412,406 | | $ | 1,320,812 | | $ | 438,170 | | $ | 452,575 | | $ | 890,745 |
| | | | | | | | | | | | | | | | | | | | | | | | |
