Exhibit 99.1
Contact: Michael Gallant
508-293-6357
FOR IMMEDIATE RELEASE gallant_michael@emc.com
-----------------------
EMC REPORTS FOURTH QUARTER RESULTS
REVENUE UP 18% SEQUENTIALLY ON STRONG CUSTOMER DEMAND, MARKET SHARE GAINS FOR
CLARiiON CX SYSTEMS, INFORMATION STORAGE SOFTWARE
HOPKINTON, Mass. - January 23, 2003 - EMC Corporation (NYSE:EMC) today reported
fourth quarter and full fiscal year results for 2002. The results included an
18% sequential revenue increase in the fourth quarter compared with the third
quarter of 2002, led by strong customer demand for the new CLARiiON CX family of
mid-tier networked storage systems and for EMC's industry-leading portfolio of
information storage software products.
Total consolidated revenue for the fourth quarter was $1.49 billion,
18% higher than the $1.26 billion reported in the third quarter of 2002, and 2%
lower than the $1.51 billion reported in the fourth quarter of 2001. Net loss
for the fourth quarter, including an after-tax restructuring and other special
charge of $117 million, was $64 million or $.03 per share, compared with a net
loss of $70 million or $.03 per share in the fourth quarter of 2001. Net income
for the fourth quarter of 2002, excluding the aforementioned $117 million
charge, was $53 million, or $.02 per diluted share.
Total consolidated revenue for the full 2002 fiscal year was $5.44
billion, compared with $7.09 billion for the full 2001 fiscal year. Net loss for
the full 2002 fiscal year was $119 million or $.05 per share, compared with a
net loss of $508 million or $.23 per share for the full 2001 fiscal year.
Joe Tucci, EMC's President and CEO, said, "We finished 2002 on a very
strong note as our automated networked storage strategy began to pay off. Each
of our major businesses -information storage systems, software and services -
achieved double-digit sequential revenue growth. It's clear we gained market
share, particularly in mid-tier storage and storage software. We are now
approaching customers with our strongest and most complete product line ever, a
lower cost structure, and a significantly improved go-to-market model. We expect
to gain market share in all of our strategic segments and grow profitably
throughout 2003."
EMC's fourth-quarter results were marked by success in several
strategic areas. Revenue from EMC's mid-tier CLARiiON products experienced
strong double-digit growth in the fourth quarter compared with the third quarter
of 2002. Revenue from information storage software grew 22% in the fourth
quarter compared with the third quarter of 2002. EMC Centera Content Addressed
Storage systems, introduced in April 2002, significantly exceeded fourth-quarter
revenue expectations, with well over one petabyte (1,000 terabytes) of Content
Addressed Storage shipped during the quarter.
Bill Teuber, EMC's Executive Vice President and Chief Financial
Officer, said, "The balanced sequential revenue growth we achieved was
encouraging. Healthy customer demand for our automated networked storage
solutions helped increase our overall product volume, leading to a significant
improvement in gross margins. Throughout 2002, we focused on controlling the
controllable. Since we intensified our attack on costs six quarters ago, we have
achieved an annualized cost savings rate of more than $1.25 billion, resulting
in a quarterly break-even level of about $1.37 billion. In addition, we
continued to strengthen the balance sheet during the year. Absent the $364
million we spent repurchasing our shares, cash and investments would have
increased $966 million during 2002. We ended the year with cash and investments
of $5.7 billion, or approximately 60% of total assets."
During the fourth quarter, EMC continued its most aggressive series of
product roll-outs ever by delivering two new members of the powerful CLARiiON CX
family of mid-tier networked storage systems; combining the functionality and
availability found in EMC's high-end NAS solutions with the cost advantages of
CLARiiON into the EMC Celerra NS600; and providing customers with NAS software
solutions that enable organizations to centrally manage and automate the
movement of files and data across geographically dispersed locations with new
EMC OnCourse software. EMC also expanded its alliance with Dell and jointly
teamed with Microsoft to develop the largest Microsoft SQL Server(TM) storage
area network (SAN) ever built; unveiled major advances in its WideSky Developers
Suite; and outlined plans to drive standards-compliant, open storage management
solutions into real-world environments.
EMC products, services and people were recognized during the fourth
quarter for innovation, market leadership, and historic contributions. The
readers of INTELLIGENT ENTERPRISE MAGAZINE selected EMC ControlCenter as the
world's best family of storage management software in the publication's annual
"Intelligent Enterprise Reader's Choice Awards"; EMC Centera was named "Product
of the Year" by the content collaboration magazine TRANSFORM MAGAZINE, and
received "Best of Show" honors at the BioIT WORLD CONFERENCE & EXPO; EMC won the
Software Technical Assistance Recognition (STAR) award for outstanding
mission-critical support for the second year in a row; and EMC Executive
Chairman Mike Ruettgers was inducted into the IT INDUSTRY HALL OF FAME for
transforming and revolutionizing the way businesses access, manage, share and
protect digital information.
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.
o Revenue in the first quarter of 2003 is expected to be between $1.35
billion and $1.4 billion.
o Excluding any restructuring charges, earnings per share in the first
quarter of 2003 is expected to be, at best, $.01 per diluted share.
o Additional improvements in the overall cost structure are expected during
2003, resulting in an expected break-even level under $1.3 billion by the
end of Q2 of 2003.
o Excluding any restructuring charges, EMC expects to report net income for
each quarter in 2003.
o EMC expects continued improvement in gross margins and operating margins
during 2003, although quarterly margins may vary during the year based on
volume.
o R&D investment for 2003 is expected to be slightly lower than the $781
million invested in 2002, as additional efficiencies are gained.
o Capital spending for 2003 is expected to be approximately the same to
slightly down compared with the $391 million spent in 2002.
o The tax rate for 2003 is expected to be approximately 30%.
ABOUT EMC
EMC Corporation is the world leader in information storage systems,
software, networks and services, providing automated networked storage solutions
that enable organizations of all sizes to better and more cost-effectively
manage, protect and share their information. More information about EMC's
products and services can be found at www.EMC.com.
EMC and CLARiiON are registered trademarks, and Celerra, Centera, OnCourse,
ControlCenter and WideSky are trademarks of EMC Corporation. 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)
the transition to new products, the uncertainty of customer acceptance of new
product offerings, and rapid technological and market change; (iv) insufficient,
excess or obsolete inventory; (v) competitive factors, including but not limited
to pricing pressures; (vi) component quality and availability; (vii) the
relative and varying rates of product price and component cost declines; (viii)
the ability to attract and retain highly qualified employees; (ix) fluctuating
currency exchange rates; (x) risks associated with strategic investments and
acquisitions; and (xi) 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 CORPORATION
Consolidated Statements of Operations
Three Months Ended December 31, 2002
(in thousands, except per share amounts)
(Unaudited)
GAAP Adjustments Adjusted
------------ ----------- -------------
Revenues:
Net sales $ 1,148,807 $ 1,148,807
Services 340,591 340,591
------------ ----------- -------------
1,489,398 1,489,398
Costs and expenses:
Cost of sales 721,599 (823)(1) 722,422
Cost of services 180,032 180,032
Research and development 186,796 186,796
Selling, general and administrative 393,054 393,054
Restructuring and special charges 150,402 150,402 (2) -
------------ ----------- -------------
Operating income (loss) (142,485) (149,579) 7,094
Investment income 69,734 69,734
Interest expense (3,071) (3,071)
Other expense, net (16,436) (8,920)(2) (7,516)
------------ ----------- -------------
Income (loss) before taxes (92,258) (158,499) 66,241
Income tax (benefit) provision (28,342) (41,844)(3) 13,502
------------ ----------- -------------
Net income (loss) $ (63,916) $(116,655) $ 52,739
============ =========== =============
Net income (loss) per weighted average
share, basic $ (0.03) $ (0.05) $ 0.02
============ =========== =============
Net income (loss) per weighted average
share, diluted $ (0.03) $ (0.05) $ 0.02
============ =========== =============
Weighted average shares, basic 2,193,269 2,193,269
Weighted average shares, diluted 2,193,269 2,197,485
As a % of total revenue:
Gross margin 39.5% 39.4%
Selling, general and administrative 26.4% 26.4%
Research and development 12.5% 12.5%
Operating income (loss) -9.6% 0.5%
Net income (loss) -4.3% 3.5%
(1) Reversal of $823 of restructuring inventory provision taken in the third
quarter of 2001.
(2) Represents $159,322 Q4 '02 restructure and other special charges.
(3) Represents the tax impact of adjustments (1) and (2).
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,
2002 2001 (1) 2002 2001 (2)
----------------------------- --------------------------------
Revenues:
Net sales $ 1,148,807 $ 1,196,548 $ 4,219,156 $ 5,915,695
Services 340,591 316,162 1,219,196 1,174,938
----------------------------- --------------------------------
1,489,398 1,512,710 5,438,352 7,090,633
Cost and expenses:
Cost of sales 721,599 771,837 2,614,482 3,525,145
Cost of services 180,032 182,933 705,028 721,897
Research and development 186,796 216,885 781,457 928,701
Selling, general and administrative 393,054 492,963 1,680,814 2,214,223
Restructuring and other special charges 150,402 - 150,402 398,508
----------------------------- --------------------------------
Operating loss (142,485) (151,908) (493,831) (697,841)
Investment income 69,734 64,810 256,153 265,285
Interest expense (3,071) (810) (11,415) (11,338)
Other expense, net (16,436) (16,611) (47,394) (133,141)
----------------------------- --------------------------------
Loss before taxes (92,258) (104,519) (296,487) (577,035)
Benefit for income taxes (28,342) (34,357) (177,781) (69,323)
----------------------------- --------------------------------
Net loss $ (63,916) $ (70,162) $ (118,706) $ (507,712)
============================= ================================
Net loss per weighted average
share, basic $ (0.03) $ (0.03) $ (0.05) $ (0.23)
============================= ================================
Net loss per weighted average
share, diluted $ (0.03) $ (0.03) $ (0.05) $ (0.23)
============================= ================================
Weighted average shares, basic 2,193,269 2,220,054 2,206,294 2,211,273
Weighted average shares, diluted 2,193,269 2,220,054 2,206,294 2,211,273
As a % of total revenue:
Gross margin 39.5% 36.9% 39.0% 40.1%
Selling, general and administrative 26.4% 32.6% 30.9% 31.2%
Research and development 12.5% 14.3% 14.4% 13.1%
Operating loss -9.6% -10.0% -9.1% -9.8%
Net loss -4.3% -4.6% -2.2% -7.2%
(1) Includes $8,746 of goodwill amortization classified in cost of sales, $100
of goodwill amortization classified in cost of services and $3,648 of
goodwill amortization classifed in research and development that would have
been excluded if Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets" was in effect in 2001. Excluding the
goodwill amortization would have resulted in an after-tax net loss of
$58,708 or $(0.03) per diluted share.
(2) Includes $42,109 of goodwill amortization classified in cost of sales, $189
of goodwill amortization classified in cost of services and $10,091 of
goodwill amortization classifed in research and development that would have
been excluded if Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets" was in effect in 2001. Excluding the
goodwill amortization would have resulted in an after-tax net loss of
$459,791 or $(0.21) per diluted share.
EMC CORPORATION
Consolidated Balance Sheets
(in thousands, except per share amounts)
(Unaudited)
December 31, December 31,
2002 2001
-------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,686,598 $ 2,129,019
Short-term investments 864,743 445,428
Accounts and notes receivable, less allowance
for doubtful accounts of $50,551 and $36,169 881,325 1,348,569
Inventories 437,805 583,985
Deferred income taxes 250,197 287,597
Other current assets 96,580 128,644
-------------- ---------------
Total current assets 4,217,248 4,923,242
Long-term investments 3,134,290 2,509,112
Property, plant and equipment, net 1,624,396 1,827,331
Intangible and other assets, net 570,587 583,110
Deferred income taxes 43,926 46,840
-------------- ---------------
Total assets $ 9,590,447 $ 9,889,635
============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term obligations $ 27,507 $ 56,677
Accounts payable 429,732 424,132
Accrued expenses 948,357 1,024,211
Income taxes payable 187,695 315,368
Deferred revenue 448,359 359,026
-------------- ---------------
Total current liabilities 2,041,650 2,179,414
Deferred Revenue 156,412 10,237
Other Liabilities 166,383 99,164
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 2,235,930 and 2,221,442 shares 22,359 22,214
Additional paid-in capital 3,580,025 3,470,325
Deferred compensation (10,762) (29,209)
Retained earnings 4,070,049 4,188,755
Accumulated other comprehensive loss, net (53,488) (33,007)
Treasury stock, at cost; 50,555 and 1,060 shares (382,181) (18,258)
-------------- ---------------
Total stockholders' equity 7,226,002 7,600,820
-------------- ---------------
Total liabilities and stockholders' equity $ 9,590,447 $ 9,889,635
============== ===============
EMC CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Twelve Months Ended
---------------------------
December 31, 2002 December 31, 2001
----------------- -----------------
Cash flows from operating activities:
Net loss $ (118,706) $ (507,712)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 653,686 654,698
Noncash restructuring, inventory and other special charges (reversals) (26,027) 449,364
Other than temporary declines in equity investments 6,315 106,560
Amortization of deferred compensation 13,077 19,514
Provision for doubtful accounts 35,171 32,711
Deferred income taxes, net 74,088 (227,429)
Net loss on disposal of property, plant, and equipment 26,405 2,282
Tax benefit from stock options exercised 34,291 137,901
Minority interest - 29
Changes in assets and liabilities:
Accounts and notes receivable 435,613 806,002
Inventories 240,377 127,581
Other assets 64,918 (19,303)
Accounts payable 4,240 (78,429)
Accrued expenses (74,886) 201,301
Income taxes payable (158,308) (157,007)
Deferred revenue 236,813 69,637
Other liabilities (1,333) 13,558
-------------- -------------
Net cash provided by operating activities 1,445,734 1,631,258
-------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (391,076) (889,309)
Proceeds from sales of property, plant and equipment 6 17,310
Capitalized software development costs (126,678) (120,724)
Purchases of short and long-term available-for-sale securities (8,437,486) (4,981,376)
Sales of short and long-term available-for-sale securities 7,199,476 4,445,271
Maturity of short and long-term available-for-sale securities 226,408 126,683
Purchase of other assets (25,050) -
Business acquisition, net of cash acquired (21,993) (111,455)
-------------- -------------
Net cash used by investing activities (1,576,393) (1,513,600)
-------------- -------------
Cash flows from financing activities:
Issuance of common stock 80,924 170,284
Purchase of treasury stock (363,923) (18,258)
Payment of long-term and short-term obligations (29,694) (16,859)
Issuance of long-term and short-term obligations 1,516 40,206
Cash portion of McDATA Corporation spin-off dividend - (141,981)
-------------- -------------
Net cash provided (used) by financing activities (311,177) 33,392
-------------- -------------
Effect of exchange rate changes on cash (585) (5,252)
-------------- -------------
Net increase (decrease) in cash and cash equivalents (442,421) 145,798
Cash and cash equivalents at beginning of period 2,129,019 1,983,221
-------------- -------------
Cash and cash equivalents at end of period $ 1,686,598 $ 2,129,019
============== =============
Non-cash activity:
Exchange of net assets for equity investment $ 3,560 $ -
Distribution of net assets in McData Corporation dividend - 234,152
Issuance of capital lease obligations - 24,490
Options issued in business acquisitions - 1,050
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,
2002 2001 2002 2001
--------------------------------- --------------------------------
Net loss $ (63,916) $ (70,162) $ (118,706) $ (507,712)
Stock option expense (90,168) (97,820) (356,415) (335,703)
--------------------------------- --------------------------------
Adjusted net loss $ (154,084) $ (167,982) $ (475,121) $ (843,415)
================================= ================================
Net loss per weighted average
share, basic - as reported $ (0.03) $ (0.03) $ (0.05) $ (0.23)
================================= ================================
Net loss per weighted average
share, diluted - as reported $ (0.03) $ (0.03) $ (0.05) $ (0.23)
================================= ================================
Adjusted net loss per weighted
average share, basic $ (0.07) $ (0.08) $ (0.22) $ (0.38)
================================= ================================
Adjusted net loss per weighted
average share, diluted $ (0.07) $ (0.08) $ (0.22) $ (0.38)
================================= ================================
EMC CORPORATION
SUPPLEMENTAL FINANCIAL DATA
REVENUE ANALYSIS
(IN THOUSANDS)
(UNAUDITED)
REVENUE COMPONENTS
Q1 2001 Q2 2001 Q3 2001 Q4 2001 YTD 2001
------------------------------------------------------------------
STORAGE REVENUE
Information Storage Systems $ 1,564,312 $ 1,225,600 $ 675,591 $ 841,741 $ 4,307,244
Information Storage Software 467,519 497,538 242,521 352,444 1,560,022
Information Storage Services 231,986 231,995 236,734 271,559 972,274
TOTAL INFORMATION STORAGE REVENUES 2,263,817 1,955,133 1,154,846 1,465,744 6,839,540
Other Businesses 80,978 65,722 57,427 46,966 251,093
------------------------------------------------------------------
TOTAL CONSOLIDATED REVENUES $ 2,344,795 $ 2,020,855 $ 1,212,273 $ 1,512,710 $ 7,090,633
==================================================================
Q1 2002 Q2 2002 Q3 2002 Q4 2002 YTD 2002
------------------------------------------------------------------
STORAGE REVENUE
Information Storage Systems $ 741,578 $ 779,109 $ 662,417 $ 802,196 $ 2,985,300
Information Storage Software 282,323 320,568 283,591 346,611 1,233,093
Information Storage Services 238,530 251,148 279,217 309,472 1,078,367
TOTAL INFORMATION STORAGE REVENUES 1,262,431 1,350,825 1,225,225 1,458,279 5,296,760
Other Businesses 39,547 36,713 34,213 31,119 141,592
------------------------------------------------------------------
TOTAL CONSOLIDATED REVENUES $ 1,301,978 $ 1,387,538 $ 1,259,438 $ 1,489,398 $ 5,438,352
==================================================================
NETWORKED STORAGE REVENUE
Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002
---------------------------------------------------------------------------
NETWORKED STORAGE REVENUE, AS PREVIOUSLY CALCULATED $ 449,193 $ 682,443 $ 561,747 $ 597,323 N/A N/A
===========================================================================
NETWORKED STORAGE REVENUE, REVISED $ 627,706 $ 847,413 $ 749,346 $ 777,263 $ 689,205 $ 894,583
===========================================================================
NETWORKED STORAGE REVENUE, REVISED, AS A % OF
INFORMATION STORAGE SYSTEMS AND SOFTWARE REVENUE 68% 71% 73% 71% 73% 78%
===========================================================================
NOTE: THE REVISED NETWORKED STORAGE REVENUE INCLUDES NETWORKED INFORMATION
STORAGE SYSTEMS AND SOFTWARE REVENUE NOT CAPTURED IN THE PREVIOUS
CALCULATION. THE REVISED CALCULATION INCLUDES UNITS SOLD INTO AN EXISTING
NETWORKED ENVIRONMENT, UPGRADES AND NETWORKED INFORMATION STORAGE SYSTEMS
AND SOFTWARE SOLD THROUGH CHANNELS TO END CUSTOMERS.
Note: Amounts may not foot due to rounding