InfoStor : EMC 2Q profit jumps 13 pct, tops Wall Street views, July 2008

SAN FRANCISCO - EMC Corp. said Wednesday its second-quarter profit climbed 13 percent, topping Wall Street's forecasts, as the data storage specialist rang up record sales despite fears that economic uncertainty is tamping down information technology spending.

EMC shares rose $1.71, or 13.7 percent, to $14.17 in trading Wednesday.

"We've executed very well in a very tough (economic) environment," David Goulden, EMC's chief financial officer, said in an interview with The Associated Press, adding that customers continue to spend on data storage - particularly in markets outside the U.S. - if it helps them save money or gain a competitive advantage. "We don't see it getting better any time soon, but we think there's enough demand out there for us to make our plan for the year."

The Hopkinton, Mass.-based company earned $377.5 million, or 18 cents per share, in the April-June period. That compares with net income of $334.4 million, or 16 cents per share, in the year-ago period.

Stripping out one-time charges, EMC earned 24 cents per share in the latest quarter. That was 7 cents per share higher than the average estimate of analysts polled by Thomson Financial. Analysts' estimates typically exclude one-time charges or gains, but include stock-based compensation costs.

Sales rose 18 percent to $3.67 billion from $3.12 billion last year, coming in about $100 million above Wall Street's average forecast.

EMC is the world's largest seller of standalone disk storage systems, a steady-performing business that has grown in popularity as companies need to archive more digital material. Regulatory requirements and an explosion in the amount of data being created by the Internet have pushed that trend.

EMC goes up against Hewlett-Packard Co. and IBM Corp. in the fiercely competitive market. EMC owns 21 percent of the worldwide market for external disk storage systems, making it the market leader, according to the latest data from the IDC research firm. If the disk storage built into servers is included, then HP and IBM would beat out EMC.

Illustrating the stability of EMC's business even in difficult times for the U.S. economy, the second quarter represented the 20th consecutive quarter in which EMC's sales grew by a double-digit percentage. That's a remarkably consistent performance for a high-tech company, since tech spending can be volatile and is often sharply curtailed when economic pressures force companies to pinch their budgets.

EMC cited strength in markets outside the United States with helping the company's performance. Sales abroad represented a record 48 percent of EMC's total sales, demonstrating how broad international penetration is helping shield the company from uncertainty at home. Still, EMC said U.S. sales increased 10 percent over last year.

Revenue from the company's storage business unit - which includes data storage machines, software to manage that data and those machines, and services to support overall infrastructure - rose 14 percent to $2.87 billion.

Business software maker VMware Inc., which makes "virtualiziation" software that boosts the output and energy efficiency of servers by running multiple operating systems on a single machine, contributed $453 million in sales to EMC's total revenue. EMC owns an 85 percent stake in VMWare.

Palo Alto, Calif.-based VMware reported second-quarter profit Tuesday that jumped 53 percent and matched analyst expectations. The stock fell on a lowered sales outlook.

Earlier this month, VMware replaced co-founder Diane Greene as chief executive amid the company's slowing growth and intensifying competition from Microsoft Corp. and others.

Analysts speculated that Greene clashed with EMC's management over the company's unwillingness to spin off its remaining chunk of VMware. EMC executives reiterated Wednesday they have no immediate plans to relinquish the company's majority ownership of VMware.

EMC also bumped its own sales guidance slightly higher, saying it expects more than the $15 billion in 2008 revenue it previously forecast. EMC's full-year profit forecast of 78 cents per share, excluding one-time charges, remains the same.

Wall Street is predicting profit of 78 cents per share on revenue of $14.97 billion.

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