EMC reported double-digit revenue growth during its
second quarter across almost all of its product lines, from storage
systems and software to services. While the results met analyst
expectations, some experts said EMC should be wary about losing
sales in its core product, the high-end Symmetrix storage
array.
EMC brought in $1.97bn (£1.06bn) in total consolidated revenue
for the quarter that ended on 30 June, 33% more than in the same
quarter last year. Net income for the period was $193m, a 136% jump
year over year.
Mid-range Clariion revenue was $326m, up 43% from last year. And
the storage supplier's network-attached storage business was up 40%
from the second quarter of 2003, "due in large part to the strength
of our market-leading Gateway products", the company said.
EMC software revenue increased 64% over last year, with some of
the increase coming from its acquisitions of Legato Systems,
Documentum and VMware.
Excluding revenue from those acquisitions, EMC's revenue was up
19% year over year, according to Nitsan Hargil, an analyst at
investment bank Friedman, Billings, Ramsey Group. "EMC's Documentum
software did poorly; all else did very well," Hargil said.
Hargil said EMC's earnings were in line with expectations,
"though relatively strong given some of the nervousness in the
technology space".
Several storage suppliers over the past few weeks have reported
lower than expected earnings for the second quarter, including
Veritas Software, Emulex and Overland Storage. Software sales in
business systems from PeopleSoft, Computer Associates International
and Siebel Systems have seen similar slumps.
Hargil noted that only 27% of EMC's revenue is from software.
"That is the main reason they were immune to the downward trend,"
he said.
Joe Tucci, EMC's president and chief executive, said he
continued to believe the "overall market environment for storage
and information management technology is rich with opportunity, yet
challenging, as customers continue to demand more from IT
providers".
Tucci pointed to customer demand, better service and support and
improved total cost of ownership as positives for the quarter.
EMC reported strong growth in sales of its mid-range Clariion
array line, which were up 15% over the previous quarter and 43%
over the second quarter of last year. Symmetrix sales, however,
declined 3% sequentially and 5% year over year.
Tom Lahive, an analyst at Enterprise Storage Group, said EMC's
second quarter earnings amounted to "huge growth" in
non-traditional storage systems, such as its Centera
content-addressed array, Clariion mid-range array and Celerra
network-attached storage server.
"The question for the company is, what are they going to do to
keep their meat and potatoes Symmetrix line growing?" Lahive
said.
EMC spokesman Michael Gallant said the company under-ordered the
highest performing and highest capacity disc drives for Symmetrix
arrays. "So, essentially there were some Symmetrix orders we put
into backlog."
Gallant also said that for the first six months of 2004,
Symmetrix sales were up 11%. "The high-end market is growing 3% a
year, so we are growing at three times that," he said.
Lucas Mearian writes for Computerworld