Q4 2011 Earnings Call

January 24, 2012 8:30 am ET


Joseph M. Tucci - Chairman, Chief Executive Officer, President, Member of Mergers & Acquisitions Committee and Member of Finance Committee

David I. Goulden - Chief Financial Officer and Executive Vice President

Tony Takazawa -


Daniel H. Ives - FBR Capital Markets & Co., Research Division

Benjamin A. Reitzes - Barclays Capital, Research Division

Louis R. Miscioscia - Collins Stewart LLC, Research Division

Brian Marshall - ISI Group Inc., Research Division

Amit Daryanani - RBC Capital Markets, LLC, Research Division

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Deepak Sitaraman - Crédit Suisse AG, Research Division

Scott D. Craig - BofA Merrill Lynch, Research Division

Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division

Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division

Alex Kurtz - Sterne Agee & Leach Inc., Research Division



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Good morning, and welcome to the EMC Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce your host, Mr. Tony Takazawa, Vice President, Global Investor Relations of EMC.

Tony Takazawa

Thank you. Good morning, welcome to EMC's call to discuss our financial results for the fourth quarter of 2011. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC Executive Vice President and CFO. To kick things off, David will comment on the results that we released this morning. He will highlight some of EMC's activities this quarter and he will discuss our outlook for 2012. Joe will then spend some time discussing his view of what is happening in the economy and IT, EMC's execution of our strategy and how EMC is helping customers navigate the massive transformation happening in IT to cloud and Big Data. After the prepared remarks, we will then open up the lines to take your questions. I would like to point out, today we are providing you with a very detailed projected financial model for 2012. This new model lays out all of the key financial assumptions that are the foundation of our 2012 expectations. We hope that you find this model helpful in understanding our assumptions and context and in ensuring that these expectations are correctly incorporated into your models. This model is included in today's slide presentation that you can see during the webcast and it is also available for download in the Investor Relations section of emc.com. In addition, please note that we will be referring to non-GAAP numbers in today's presentation unless otherwise indicated. A 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 of these are available on emc.com. 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 U.S. Securities and Exchange Commission. And lastly, I will note that an archive of today's presentation will be available following the call.

With that, it's now my pleasure to introduce David Goulden. David?

David I. Goulden

Thanks, Tony. Good morning, everyone, and thank you for joining us today. I'm very pleased to report another quarter of record results for revenue, non-GAAP EPS and free cash flow. This excellent performance enabled us to achieve record results for the full year, driven by year-on-year growth in revenue of 18% to $20 billion and non-GAAP EPS of 20% and a free cash flow of 29%. Clearly, we're delivering on our ongoing commitment to strengthen our strategic position within the evolving IT landscape and on our triple play of gaining market share, reinvesting for growth and delivering leverage.

These very strong results make us better prepared than ever to maintain our strategic agility and operational excellence as we head into 2012. As you know, fundamental changes are underway in IT right now, and it is our ability to identify and invest in these changes that has enabled us to achieve the solid Q4 and record full year results we're reporting today. The transformation of IT is occurring with customer shifts to private, public and hybrid cloud models. The transformation of business is also underway as new technology is enabling organizations to harness the power of Big Data in ways that were impossible only a few years ago. The transformation of EMC is ongoing as we continue our evolution of our company in order to remain at the forefront of these expansive opportunities and help our customers advance in this new age.

As we look across our business, it is clear that EMC is well equipped for this era of transformation. To begin with, customers' cloud and Big Data objectives are best served by having the right information storage infrastructure. Intelligent automated storage is a critical component as is the ability to give customers options because the nature and use of these expanding data sets are almost as varied as the data itself. Having a broad and best-of-breed product portfolio in storage is an important differentiator and has been a key reason for our success. Year-on-year, Information Storage revenue grew a healthy 12% over Q4 of last year. As expected, we have adequate hard disk drive supply for the period, although there were some charges relative to the availability of certain drive types. Product revenue was up 11% and 24% in the high-end and mid-tier, respectively. This is an excellent result and speaks to the strength of our offerings across a wide spectrum of different applications, implementations and use cases. For customers with mission-critical data sets needing to scale with the best performance, reliability and availability, our high-end scale-out VMAX is consistently selected as the tool for the job. While these attributes have driven market our leadership in the high-end for years, our value proposition in this segment has grown as we've improved our product portfolio to accommodate the transformations of IT and business. For example, we introduced flash drives to enterprise storage 4 years ago, unveiled our virtual matrix VMAX architecture 3 years ago and refreshed VMAX's software capabilities just last year, doubling performance and adding faster VP. The innovations we have consistently introduced are important to customers and make our high-end more useful and for their evolving needs. The results have been meaningful share gains in the high end over the past several years.

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