MANILA, PHILIPPINES. – January 25, 2011 – EMC Corporation (NYSE:EMC) today reported record fourth-quarter and full-year 2010 financial results. For the fourth quarter 2010, the company achieved all-time record consolidated revenue, net income and free cash flow. Full-year 2010 results were highlighted by all-time record consolidated revenue and profit that exceeded prior company outlook and record free cash flow.
For the fourth quarter, consolidated revenue was $4.9 billion, an increase of 19% compared with the year-ago quarter; GAAP net income attributable to EMC increased 61% year over year to $628.6 million; and GAAP diluted earnings per share were $0.29, up 53% year over year. Non-GAAP1 net income attributable to EMC for the fourth quarter was $920.1 million, an increase of 32% compared with the year-ago quarter, and non-GAAP1 earnings per diluted share were $0.42, an increase of 27% year over year.
During the quarter EMC generated record quarterly operating cash flow and free cash flow of $1.5 billion and $1.2 billion, which grew 50% and 54% year over year, respectively. For the quarter and full-year 2010, EMC expanded gross margin and operating margin percentages substantially on a year-over-year basis. The company completed the quarter with $9.5 billion in cash and investments.
For the full year 2010, consolidated revenue was $17.0 billion, an increase of 21% year over year; GAAP net income attributable to EMC increased 75% year over year to $1.9 billion; and GAAP diluted earnings per share were $0.88, up 66% year over year. Non-GAAP2 net income attributable to EMC for 2010 was $2.7 billion, an increase of 46% year over year, and non- GAAP2 earnings per diluted share were $1.26, an increase of 40% year over year. The company achieved record full-year operating cash flow and free cash flow of $4.5 billion and $3.4 billion, which grew 36% and 31%, respectively, compared with 2009.
Joe Tucci, EMC Chairman and Chief Executive Officer, said, “EMC’s performance in 2010 was the best in company history, marked by rapid growth, market share gains, financial leverage and significant investment in technology innovation. The platform for change in the IT industry has arrived with the biggest opportunity residing at the intersection of trusted cloud computing, enterprise data and ‘Big Data.’ Equipped with the strongest, most distinctive product and services portfolio and strategic partners, we have never been more confident in EMC’s position to lead this transformational shift to IT as a service.”
David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “In 2010 we executed our triple play impressively – simultaneously taking market share, reinvesting meaningfully in our business and delivering improved profitability. Tremendous progress on all of these objectives throughout the year puts EMC in its best financial and operational shape ever. We are in great position to continue to deliver our triple play results in 2011; continue to achieve solid double-digit revenue and profit growth, expand operating margins and grow free cash flow for the year; and further strengthen EMC’s strategic position for the long term.”
Fourth-Quarter and 2010 Highlights
Fourth-quarter highlights included strong customer demand and double-digit revenue growth for the company’s market-leading high-end EMC Symmetrix storage product portfolio, which increased 19% compared with the year-ago quarter, and EMC’s mid-tier storage product portfolio3, which grew revenue 23% year over year. Revenues from EMC’s RSA information security business and VMware (NYSE: VMW), which is majority-owned by EMC, hit record amounts, growing 28% and 38% year over year, respectively. Additional fourth-quarter highlights included continued strong customer demand for EMC’s backup and recovery solutions as part of the company’s fast-growing Backup and Recovery Systems Division. Also in the fourth quarter, EMC completed its acquisition of Isilon Systems, a leader in fast-growing “scale-out” network attached storage.
EMC consolidated fourth-quarter revenue from the United States reached $2.6 billion, an increase of 20% year over year, representing 53% of consolidated fourth-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $2.3 billion, an increase of 19% year over year, representing 47% of consolidated fourth-quarter revenue. Within this, revenue increased 13%, 30% and 34% year over year, respectively, in EMC’s Europe, Middle East and Africa; Asia Pacific and Japan; and Latin America regions.
Throughout 2010, EMC executed on numerous strategic initiatives that collectively helped strengthen the company’s technology leadership and services expertise in enterprise data, cloud computing and “Big Data”; advance its competitive lead; and gain market share. This included sustained aggressive investment in research and development, totaling 11% of annual consolidated 2010 revenue, which resulted in broad and deep innovation across all of EMC’s business units. EMC also continued to use its financial strength to make strategic acquisitions targeted at high-growth areas, including Isilon, data warehousing and business analytics pioneer Greenplum, and leading enterprise governance, risk and compliance (eGRC) software provider Archer Technologies. Additionally, the company further strengthened alignment with strategic partners demonstrated by the strong momentum of VCE, The Virtual Computing Environment Company, and expanded relationships with technology, solutions and service providers around the world.
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 2011 financial results set forth in prior EMC news releases.
All dollar amounts and percentages set forth below should be considered to be approximations.
· Consolidated EMC revenues are expected to be $19.6 billion for 2011.
· Consolidated GAAP operating income is expected to be 16% of revenues for 2011 and consolidated non-GAAP operating income is expected to be 23% of revenues for 2011. Excluded from consolidated non-GAAP operating income are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which are expected to account for less than 1%, 5% and 2% of revenues, respectively.
· Total consolidated non-operating expense, which includes investment income, interest expense and other expense, is expected to be $100 million in 2011.
· Consolidated GAAP net income is expected to be $2.4 billion in 2011 and consolidated non-GAAP net income is expected to be $3.25 billion in 2011. Excluded from consolidated non-GAAP net income are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which are expected to account for approximately $100 million, $600 million and $200 million, respectively.
· Consolidated GAAP diluted earnings per share are expected to be $1.07 for 2011 and consolidated non-GAAP diluted earnings per share are expected to be $1.46 for 2011. Excluded from consolidated non-GAAP diluted earnings per share are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which are expected to be $0.03, $0.27 and $0.09 per diluted share, respectively, for 2011.
· The consolidated GAAP income tax rate is expected to be 20% for 2011. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which are expected to collectively impact the tax rate by 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2011.
· The weighted average outstanding diluted shares are expected to be 2.23 billion for 2011.
· EMC expects to repurchase $1.5 billion of the company’s stock in 2011.
Supporting Resources
· EMC will host its 2010 fourth-quarter earnings conference call today at 8:30 a.m. ET, which will be available on EMC’s web site at http://www.emc.com/about/investor-relations/index.htm
· Additional information regarding EMC’s financials, as well as a webcast of the conference call, will be available at 8:30 a.m. ET at http://www.emc.com/about/investor-relations/index.htm
· Visit http://ir.vmware.com for more information about VMware’s fourth-quarter financial results.
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 at www.EMC.com.
# # #
1 Items excluded from the non-GAAP results for the fourth quarters of 2010 and 2009 are amounts relating to restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and special income tax charges. In addition, for the fourth quarter of 2009, amounts relating to provisions for litigation are also excluded. See attached schedules for reconciliation of GAAP to non-GAAP.
2 Items excluded from the non-GAAP results for the full year 2010 and 2009 are amounts relating to restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and special income tax charges. In addition, for 2009, amounts relating to provisions for litigation and gains on Data Domain and SpringSource common stock are also excluded. See attached schedules for reconciliation of GAAP to non-GAAP.
3 Mid-tier platform products include hardware and software products from EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Avamar and EMC Atmos.
EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, Isilon, RSA and Symmetrix are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other countries. 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, the accompanying schedules and the additional content that is available on EMC’s website contain 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 from time to time and 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 in this release.
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 restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization, special income tax charges, provisions for litigation and amounts relating to gains on Data Domain and SpringSource common stock) 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.