EMC Beats Street, Sees Stabilized IT Spending

EMC (NYSE: EMC) this morning posted better-than-expected quarterly results — and said it expects to do even better with the acquisition of Data Domain (NASDAQ: DDUP), which is expected to close today.

EMC’s second-quarter sales were down 11.3 percent to $3.26 billion, but that was $60 million better than analysts expected. The data storage giant’s pro forma earnings of 18 cents a share were two cents better than the Thomson Reuters consensus, and EMC’s full-year forecast of $13.8 billion in revenues was ahead of Wall Street expectations even after accounting for a $200 million contribution from Data Domain.

EMC generated $400 million in free cash flow and ended the quarter with $10 billion in cash and investments — $2.1 billion of which will be used to acquire Data Domain.

EMC CFO David Goulden and CEO Joe Tucci said on a conference call that IT spending stabilized and became more predictable in the second quarter, albeit at a “much lower level” than in recent years. Still, the company expects the second half of the year to be stronger.

Data Domain’s sales were up a better than expected 40 percent to nearly $86 million in the quarter, showing why the company was so coveted by EMC and rival NetApp (NASDAQ: NTAP). EMC won the right to acquire the data deduplication specialist after a six-week bidding war.

EMC said it expects more than $1 billion in sales next year from its Data Domain and Avamar dedupe product lines — but the company’s press release or conference call didn’t mention EMC’s dedupe partnership with Quantum (NYSE: QTM). EMC’s only public comments on the issue have been that it plans to continue to offer Quantum dedupe systems, and an EMC spokesperson said the company’s plans haven’t changed.

EMC said it experienced “strong sequential growth” in its Clariion and Celerra storage systems, backup and recovery software, RSA information security solutions and EMC Global Services.

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