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EMC's Profit Beats Forecast
Wednesday April 18, 8:08 am ET
EMC Corp. (NYSE:EMC - News) announced a stronger profit and surging sales on Apr. 17, as the data storage giant benefited from its expensive push to grow offerings with a string of acquisitions during recent years. EMC's Asian business picked up as well.
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The Hopkinton (Mass.) company's net income for the first quarter 2007 amounted to $312.6 million, or 15 cents per diluted share including a penny of tax benefit, up 36% compared to EPS reported during the same period last year. That beat the consensus analysts forecast by 2 cents. Revenue rose 17% to $2.98 billion, slightly above analysts' estimate.
"EMC is off to a solid start in 2007," CEO Joe Tucci said in a press release Apr. 17. "Our first-quarter performance and our focus on integration and execution place us firmly on track to meet our financial targets for 2007."
Shares of the company climbed to a new 52-week high of $15.35 in early trading, and were up 2.2% to $15.08 in the afternoon on the New York Stock Exchange.
EMC has been on an acquisitions binge, with more than 17 acquisitions during the past few years. Such efforts appeared to be paying off in EMC's sales numbers during the first quarter. Total revenue was $2.98 billion during the first quarter, 17% higher from a year earlier.
One notable EMC deal was its purchase of the software company VMware, Inc. for around $625 million in 2004. VMware's software, which is designed to help companies take different programs spread across a half-dozen or more servers and combine them onto a single machine, has been growing in popularity. VMware sales jumped 95% year-over-year to a record $256 million during the first quarter. Now EMC wants to exploit companies' appetite by selling 10% of VMware's shares in an initial public offering planned for June or July (see BusinessWeek.com, 2/9/07, "EMC's Billion-Dollar IPO")
Meanwhile, RSA, the new security division of EMC, grew sales by 25% year-over-year to $120 million compared with the results reported by the division's constituent companies, RSA Security and Network Intelligence, in the year-ago period. When EMC announced plans last June to take over RSA for $2.1 billion, EMC paid five times RSA's expected revenues even though they had only been forecast at the time to grow about 21% in 2006.
International growth also drove EMC's results. The company's business in Asia delivered first-quarter revenue growth of nearly 30%. "After strengthening our executive management team in the region about a year ago, our business in that part of the world is back on track," Tucci said in the press release.
"We see growth in Asia and Europe, as well as the rapid rollout of VMWare by users in production environments as key drivers for the remainder of the year," Standard & Poor's Equity Research analyst Jay Hingorani said in a research note. Hingorani reiterated a buy opinion on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.) |
