Subsidiaries Help Drive EMC’s Q2 Profit

With the help of strong revenues from its VMware, Documentum and Legato subsidiaries, EMC pulled in a profit of $193 million in the second quarter, more than double its profit in the second quarter of 2003.

Net income for the quarter was $193 million or 8 cents per diluted share,
which was 136 percent higher than the $82 million or 4 cents per diluted
share of the year-over-year period.

The Hopkinton, Mass., maker of
information systems posted total revenue of $1.97 billion, up 33
percent compared to its revenues of $1.48 billion in 2Q 2003.

Its purchase of key software companies made a big difference. Revenues of its VMware subsidiary were up 200 percent year-over-year to $47 million, while
Documentum sales were up 14 percent from Q2 2003 to $78 million. Revenues of its Legato
division grew by 13 percent year-over-year to $86 million.

All three divisions
helped EMC’s software revenue grow 64 percent to $715 million.

But EMC’s other assets performed well too. During a conference call, company officials
said core revenue, which excludes
revenue from its subsidiaries, grew 19 percent compared with the second
quarter of 2003.

EMC President and CEO Joseph Tucci pointed to the company’s information
lifecycle management strategy, which aims to manage information from its
inception until its disposal, as a leading driver of the vendor’s success in
Q2.

“EMC had one of the fastest if not the fastest growth rates of major IT
companies,” Tucci said on the call. “The main driver of this growth was
strong execution of our information lifecycle management strategy and
solutions, which are enjoying an excellent reception from our customers and
the overall IT marketplace.”

Tucci also noted that that EMC is on track to reach its mid-teens operating
margin goal by year’s end after guiding operating income to more than 12
percent of revenues.

While EMC is known for competing fiercely with IBM and
Hitachi Data Systems in high-end storage systems, there is
also evidence that its mid-range market share is improving.

The vendor posted sales of $326 million for its mid-range Clariion systems,
which was 43 percent greater than the Q2 2003. In contrast, revenues for its
high-end Symmetrix line grew only 5 percent over the same period. Total
storage systems growth was 16 percent.

EMC services revenue grew 45 percent from the year-ago quarter on the
strength of increased software maintenance revenue.

Going forward, EMC said it expects revenues for the third quarter of 2004 to
top $2 billion, with EPS between 8 and 9 cents.