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EMC Corporation Q1 2010 Earnings Call Transcript

EMC Corporation Q1 2010 Earnings Call Transcript

EMC Corporation (EMC)

Q1 2010 Earnings Call

April 21, 2010 8:30 am ET


Tony Takazawa

Joe Tucci - Chairman and CEO

David Goulden - Executive Vice President and CFO


Aaron Rakers – Stifel Nicolaus

Ittai Kidron – Oppenheimer

Ryan Hutchinson – Lazard

Mark Kelleher – Brigantine Advisors

Ben Reitzes – Barclays Capital

Maynard Um – UBS

Brian Marshall – Broadpoint

David Bailey – Goldman Sachs

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Katie Huberty – Morgan Stanley



(Operator Instructions) Now, I will turn the meeting over to Mr. Tony Takazawa.

Tony Takazawa

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Welcome to EMC’s call to discuss our financial results for the first quarter 2010. Today we are joined by Joe Tucci, EMC’s Chairman and CEO and David Goulden, EMC Executive Vice President and CFO. David will provide a few comments about the results that we released this morning. He will highlight some of EMC’s activities this quarter and discuss our updated outlook for 2010. Joe will then spend some time discussing his view of what is happening in the market, EMC’s execution of the strategy and how EMC is positioned.

After the prepared remarks, we will then open up the lines to take your questions. I would like to point out that we will be referring to non-GAAP numbers in today’s presentation unless otherwise indicated. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today in our press release, supplemental schedules, and the slides that accompany our presentation. All these are available for download within the investor relations section of As always we have provided detailed financial tables in our news release and on our corporate website. These include a lot of financial details so we do encourage you to take a look at them.

The call this morning will contain forward looking statements and information concerning factors that could cause actual results to differ, can be found in EMC’s filings with the US Securities and Exchange Commission. Lastly, I will note that an archive of today’s presentation will be available following the call.

With that, it is now my pleasure to introduce David Goulden.

David Goulden

I’m pleased to report that EMC started the year with very solid results in Q1 with revenues of $3.9 billion up 23% from Q1 ’09, non-GAAP EPS of $0.06 up 63% and free cash flow of $1.1 billion also up 63%. These results speak to the strength of our leadership position in some of the most important areas of IT and to the power of our operational model.

We clearly executed on our triple play. We gained market share, we invested for the future and we improved profitability. We’re confident that we will continue to execute in all three of these areas going forward.

Within these numbers, each of our two businesses had excellent results. Our EMC Information Infrastructure business had a great quarter with $3.3 billion in revenue up 22% year on year and $0.21 of non-GAAP EPS almost double our EPS from last Q1. VMware also had a great quarter contributing $632 million of revenue up 34% year on year and $0.05 of non-GAAP EPS to EMC. Customers are increasing recognizing that VMware is the strategic layer on which to build their next generation cloud data centers.

I’ll start off this morning by making some comments about the Q1 spending environment, why EMC is thriving and then I’ll discuss some details from our Q1 results. There are three major factors contributed to our excellent revenue performance this quarter. First of all, based upon what we saw in the marketplace, we think IT spending looks to be on track with what we’ve been expecting, up around 3% to 5% this year. In addition, customer activity and commentary is consistent with the view that our addressable market will be up around 6% to 8% this year.

A second factor this quarter was the continuation of some pent up demand that we saw in Q4. EMC Information Infrastructure business the strength is concentrated in the US storage business especially in financial services. While it’s difficult to quantify it was certainly a positive. As a result of these two factors, we think growth in IT spending and our target marketplace in 2010 will end up at the higher end of our projected ranges.

Third, and most important, we expect to gain a significant amount of share this year and it seems pretty clear we’re off to a good start in this regard. EMC grew faster than our target market for a number of reasons including our expanding role as a trusted partner with customers, our leading technology in several of the hottest areas of IT today, our proven support and service to back up the technology, and our compelling vision and ability to execute on this vision.

As a result, we’re increasingly the best guide for customer’s journeys to private cloud and we believe this competitive advantage is the major factor enabling us to show strong growth and gain share. And it positions us well to continue to gain share going forward.

Given this unique combination of strategic market and technology advantages we now anticipate 2010 consolidated revenues of $16.5 billion up 18%, non-GAAP operating margin of 20% to 21% and non-GAAP EPS of $1.18 up 31% from last year.

Now let’s take a closer look at some of the financial highlights from the first quarter. As I mentioned, EMC Information Infrastructure revenues were $3.3 billion up 22% year on year. Non-GAAP earnings per share for EMC II were $0.21 up 91% from last year. Free cash flow was a very strong $819 million up 66%.

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