EMC Beats, Guides Revised - Analyst Blog

EMC Corporation’s (EMC) first-quarter 2010 earnings of 26 cents exceeded the Zacks Consensus Estimates of 24 cents.

 

Revenues for the first quarter of 2010 were $3.9 billion, up 23.0% from $3.2 billion reported in the year-ago quarter. This revenue increase may be attributed to increase in investments to improve customer service, and to enhance the product and service portfolio. This is the second consecutive quarter of record revenue growth.

 

While Product sales (63.7% of total revenue) were up 25.9% year-over-year, Services revenue (36.3% of total revenue) was up 19.5% year over year.

 

 

The company's Information Infrastructure business revenue increased 22% year over year driven by strong customer demand and double-digit revenue growth for EMC’s high-end Symmetrix storage product portfolio. This apart, revenue from the company’s Backup and Recovery Systems Division (BRS), EMC Data Domain and Avamar next-generation backup and recovery products registered growth of 100% on a year-over-year basis.

 

 

From a geographic perspective, revenue from the U.S. was up 29% year over year and represented 54% of total revenue. International revenue was up 17% year over year and represented 46% of total revenue.

 

 

The company’s operating income for the quarter was $503.8 million (12.9% of revenue), up 94.1% from $259.6 million (8.2% of revenue) reported in the year-ago quarter. The year-over-year increase in profitability is attributable to lower cost to sales ratio (87.0% in the first quarter of 2010 versus 91.0% in the year-ago quarter).

 

Net income on a GAAP basis for the first-quarter increased 92% year over year to $373.0 million (or $0.17 per diluted share). Excluding amortization of intangibles, restructuring charges and other one time items, non-GAAP net income attributable to EMC for the first quarter was $550 million, an increase of 70% compared to the year-ago quarter (or $0.26, per diluted share).

 

 

For the first quarter, EMC generated record operating cash flow of $1.3 billion, up from $1.0 billion reported in the previous quarter. The company continues to boast of a very strong balance sheet, with cash, cash equivalents and short term investments of $6.9 billion, up from $6.7 billion reported in the previous quarter.

 

 

Consolidated revenue is expected to be $16.5 billion for 2010. Management expects 2010 non-GAAP R&D expense to increase 20% over 2009 levels. Cost of transition to a more efficient cost structure is expected to be $50 million. Non-GAAP operating income is expected to be 20% to 21% of revenues for 2010. Total non-operating expense is expected to be $90 million in 2010. Non-GAAP diluted earnings per share is expected to be $1.18.