EMC's Q1 profits down, but not out
More cost-cutting likely
EMC has released figures showing it was profitable in its first 2009 quarter, although profits were 23 per cent lower. Already in cost-saving mode, the company is going to save an additional $100m through further cost-reduction actions.
EMC revenues were $3.15bn in Q1 09, just 9.2 per cent down on Q1 08's $3.5bn. Its netcome though, was 23 per cent down from the year-ago quarter's $251.6m ($0.12/share), coming in at $194.1m ($0.10/share).
Taking out VMware results, EMC revenues were $2.68bn, down 11.6 per cent year-on-year and 24 per cent sequentially. Within that, Content Management and Archiving revenue was 6 per cent lower y-on-y and 16 per cent sequentially, at $174 million. RSA security revenue was up 6 per cent y-on-y but 8 per cent down sequentially, at $143m. The main Information Storage revenues of $2.363bn were 13 per cent down y-on-y and 25 per cent sequentially.
Chairman, president and CEO, Joe Tucci was pleased and cautiously optimistic about the future, saying: "We believe the global IT spending environment has reached or is very near the bottom. We expect IT spending to improve in the second half of 2009 as customers will have better budget visibility, be further through their own restructuring programs, and broader stimulus packages should be underway." EMC is not providing any guidance for the next quarter, though.
Its best estimate is that 2009 global IT spending will decline as a percentage in the very-high-single-digit to very-low-double-digit range, compared with 2008. It also expects second-quarter 2009 global IT spending will probably be flat compared with the first quarter of 2009, and the second half of 2009 will be stronger than the first half of the year. This implies a similar revenue number in Q2 to Q1's $3.15bn. Profitability might be higher if cost reductions work well.
CFO David Goulden talked of Q1's "decent profitability" and said: "We are taking additional near-term cost reduction actions that will save EMC an additional $100m in 2009." EMC has already announced a restructuring initiative to cut costs by $350m this year and $500m in 2010.
There is no detail on the particular actions EMC has in mind but an internal EMC source has tweeted that EMC is cutting everyone's pay by 5 per cent until the end of the year and staff are also getting an extra five days leave. ®