EMC reports 'solid' earnings

The Hopkinton, Mass.-based storage hardware and software maker reported a profit of $82 million, or 4 cents a share, on $1.48 billion in revenue for the quarter ended June 30. That compares with a profit of $1 million, or breakeven, on $1.39 billion in revenue during the same period last year.

EMC first reported it would beat second-quarter earnings estimates last week when the company announced plans to acquire storage management software maker Legato Systems in a $1.3 billion stock swap.

Wall Street had expected the company's net income to reach 3 cents a share on revenue of $1.46 billion, according to First Call.

"The two words that best describe EMC's second-quarter performance are solid and balanced," EMC Chief Executive Joe Tucci said in a statement. "We are experiencing the benefits of a completely refreshed product portfolio, broadened services offerings and an expanded distribution network."

The positive second-quarter results were driven by growth across all major portions of EMC's business, with a 7 percent gain across its storage systems revenue, the company said. Revenue garnered from sales of the company's Symmetrix DMX series of networked storage systems accelerated, accounting for approximately 80 percent of all Symmetrix systems sales in the second quarter.

Industry analysts said EMC has better positioned its products after recognizing customers are no longer willing to pay premium prices the vendor was able to demand in previous years. Galen Schreck, analyst at Cambridge, Mass.-based Forrester Research, said EMC's efforts to push systems modularity and affordability across its Symmetrix DMX, CLARiiON CX and Centera product lines is suceeding.

Storage software revenue grew 8 percent during the second quarter, compared with the first quarter of 2003, EMC said. That appears to indicate that EMC is achieving its much-publicized goal of increasing its high-margin storage software business.

Schreck said that EMC made significant progress toward its goal of building a profitable storage software business, with the Legato acquisition taking the company from a "relative unknown" to a top-five player in the backup, recovery and archiving applications sector.

"The perception that EMC is selling you software just to force you into buying more hardware is changing," Schreck said. "IT guys used to chuckle audibly if you approached them from the perspective of EMC as a software maker, and that's no longer the case."

EMC said it expects third-quarter revenue of between $1.45 billion and $1.5 billion on earnings of 4 cents per share. The company also reported that it expects the Legato acquisition to have an effect on earnings per share in 2004.