Software carries EMC to bumper Q2

Acquisitions show their stuff

By Ashlee Vance in Chicago • Get more from this author

Posted in Storage, 20th July 2004 16:27 GMT

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EMC enjoyed one of the best quarters in recent memory for a hardware vendor, posting a 33 percent jump in revenue in its second quarter.

EMC churned out $1.97bn in revenue, which compares to $1.48bn reported in the same quarter a year ago. EMC's income also surged, rising 136 per cent to $193m on 8 cents in earnings per share. EMC's software and services businesses drove the growth with hardware chipping in solid gains as well.

"We continued to drive revenue growth, improve gross margins and increase cash flow, while improving operating income to more than 12 per cent of revenues - putting us squarely on track to reach our mid-teens operating margin goal by the end of the year," said Bill Teuber, EMC's CFO.

EMC's hardware revenue rose 16 per cent in the period with particularly strong sales of its Clariion and Celerra systems helping out. Total hardware revenue came in at $930m compared to $804m last year.

EMC's software business, however, stole the show. Software revenue rose 64 per cent to $526m, versus just $321m in the same period one year ago. But these gains don't come as much of a surprise with EMC's Documentum, Legato and VMware acquisitions all padding the bottom line.

EMC's services revenue jumped 45 per cent as well to $498m, compared to $328m last year.

The gains made by EMC surpass those of IBM, which also enjoyed strong storage sales in its second quarter. These results are good signs for the hardware industry, as it appears to be deflecting the weakness affecting software vendors. Sun Microsystems should give a clearer picture of the server market when it reports earnings later today.

EMC expects to post $2bn in revenue in the third quarter. ®