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