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EMC
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Tuesday January 26, 7:00 am Eastern Time
Company Press Release
EMC Reports Net Income Up 54% in Company's Most Successful Quarter Ever
Enterprise Storage Leader Announces Sharply Higher Fourth-Quarter and Fiscal Year 1998 Results; Dramatic Growth in Software, Fibre Channel Revenues
HOPKINTON, Mass.--(BUSINESS WIRE)--Jan. 26, 1999-- EMC Corporation (NYSE:EMC - news), the world's leading provider of enterprise storage systems, software and services, today reported sharply higher revenue and profitability for its 1998 fourth quarter and fiscal year.
Revenue for the fourth quarter was a record $1.19 billion, 36% higher than the fourth quarter of 1997. Net income for the quarter was a record $256 million, up 54% compared with the fourth quarter of 1997. On a diluted basis, earnings per share were $0.48 in the quarter, up 50% compared with the fourth quarter of 1997. Revenue from EMC's growing portfolio of enterprise storage software reached $164 million in the fourth quarter, up 175% from last year's fourth quarter.
For the full 1998 fiscal year, EMC's revenue totaled $3.97 billion, 35% higher than its 1997 revenue of $2.94 billion. Fiscal year 1998 net income was $793 million, 47% higher than the $539 million net income achieved in 1997. On a diluted basis, earnings per share were $1.49 for the full 1998 fiscal year, 43% higher than the $1.04 per share achieved in 1997. Software revenue grew 152% in 1998, reaching $445 million for the year, compared with $177 million in 1997.
Michael C. Ruettgers, EMC President and CEO, said, ''Our fourth quarter results demonstrate the power of focus and execution in delivering technology that is changing the way the world manages information. Both the fourth quarter and the full year were the most successful across the board in EMC's 20-year history. This was our seventh consecutive quarter with both revenue and net income growth in excess of 30% on a year-to-year basis. The consistent achievement of such high growth rates for a company our size has little precedent. The growth of our software revenue solidifies EMC's stature as the world's fastest-growing major software provider. Our customers continue to show tremendous enthusiasm for the benefits that EMC Enterprise Storage brings to their businesses, and for the outstanding efforts of EMC employees and partners around the world.''
Revenue from storage systems with Fibre Channel connectivity grew 192% to $286 million in the fourth quarter, indicating extremely strong demand for this important new technology. ''We think this broad demand for Fibre Channel is a precursor to the widespread implementation of the EMC Enterprise Storage Network, an area we believe will fuel the next major wave of EMC's growth,'' noted Ruettgers. ''Eight of the 10 largest Internet Service Providers have deployed EMC Enterprise Storage, as our role in building and managing the Internet's infrastructure continues to grow.''
''To put EMC's success into perspective,'' Ruettgers continued, ''our 1998 net income exceeded our total revenues for the entire 1993 fiscal year. Net income has grown at a compound annual rate of 44% over the past five years. Our net income as a percentage of revenue reached 21.5% in the fourth quarter and 20% for the full fiscal year. Among the world's other major IT providers, only Cisco, Microsoft and Intel have achieved similar profitability levels in recent quarters.''
Recent highlights include the completion of a three-year extension of EMC's successful reseller alliance with Hewlett-Packard; the signing of NEC, a leader among Japanese computer companies, as a new EMC global reseller; the unveiling of EMC's important new Enterprise Storage Network strategy; and the expansion of EMC's industry-leading portfolio of business continuity software with enhancements to SRDF (Symmetrix Remote Data Facility), EMC TimeFinder and EDM (EMC Data Manager). Additionally, EMC was named to FORTUNE magazine's annual list of the World's Most Admired Companies, to the top ten on BUSINESS WEEK's Info Tech 100 list of the world's best-performing technology companies, and recognized by INDUSTRY WEEK magazine as one of the World's 100 Best-Managed Companies.
EMC Corporation, a Fortune 500 company based in Hopkinton, Massachusetts, is the world's technology and market leader in the rapidly growing market for intelligent enterprise storage systems, software and services. The company's products store, retrieve, manage, protect and share information from all major computing environments, including UNIX, Windows NT and mainframe platforms. The company has offices worldwide, trades on the New York Stock Exchange under the symbol EMC, and is a component of the S&P 500 Index. For further information about EMC and its storage solutions, EMC's corporate Web site can be accessed at emc.com.
This release contains ''forward-looking statements'' as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) a failure by any supplier of high density DRAMs, disk drives or other components to meet EMC's requirements for an extended period of time; (ii) delays in the development of new technology and the transition to new products; (iii) the historic and recurring ''hockey stick'' pattern of the Company's sales by which a disproportionate percentage of a quarter's total sales occur in the last month and weeks and days of each quarter; (iv) the ''hockey stick'' pattern of the Company's sales, making it extremely difficult to predict near-term demand and adjust production capacity accordingly; (v) competitive factors, including but not limited to pricing pressures, in the computer storage market; (vi) economic trends in various geographic markets and fluctuating currency exchange rates; (vii) the relative and varying rates of product price and component cost declines; (viii) deterioration or termination of the agreements with certain of the Company's OEMs or resellers; (ix) risks associated with acquisitions; (x) Year 2000 issues; (xi) other one-time events and other important factors disclosed previously and from time to time in EMC's filings with the U.S. Securities and Exchange Commission.
EMC and Symmetrix are registered trademarks and EMC Enterprise Storage, EMC Enterprise Storage Network, SRDF, TimeFinder and EDM are trademarks of EMC Corporation.
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EMC CORPORATION
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
December 31, December 31,
1998 1997
Revenues:
Net sales $ 1,120,730 $ 853,286
Service and rental 70,111 20,106
1,190,841 873,392
Costs and expenses:
Cost of sales and service 552,405 459,204
Research and development 94,863 62,816
Selling, general and administrative 223,618 149,695
Operating income 319,955 201,677
Investment income 29,194 20,702
Interest expense (5,600) (4,715)
Other income/(expense), net (1,599) (352)
Income before taxes 341,950 217,312
Provision for income taxes 85,488 51,073
Net income $ 256,462 $ 166,239
Net income per weighted average
share, basic $ 0.51 $ 0.34
Net income per weighted average
share, diluted $ 0.48 $ 0.32
Weighted average shares, basic 502,875 495,927
Weighted average shares, diluted 542,815 532,928
As a % of total revenue:
Gross margin 53.6% 47.4%
Selling, general and administrative 18.8% 17.1%
Research and development 8.0% 7.2%
Operating income 26.9% 23.1%
Net income 21.5% 19.0%
EMC CORPORATION
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
Twelve Months Ended
December 31, December 31,
1998 1997
Revenues:
Net sales $ 3,791,291 $ 2,862,646
Service and rental 182,444 75,214
3,973,735 2,937,860
Cost and expenses:
Cost of sales and service 1,929,208 1,571,012
Research and development 315,188 220,884
Selling, general, and
administrative 747,535 484,052
Operating income 981,804 661,912
Investment income 101,420 70,506
Interest expense (20,191) (15,463)
Other income/ (expense), net (5,215) 1,082
Income before taxes 1,057,818 718,037
Provision for income taxes 264,455 179,509
Net income $ 793,363 $ 538,528
Net income per weighted average
share, basic $ 1.59 $ 1.09
Net income per weighted average
share, diluted $ 1.49 $ 1.04
Weighted average shares, basic 499,978 493,698
Weighted average shares, diluted 539,176 525,500
As a % of total revenue:
Gross margin 51.5% 46.5%
Selling, general and administrative 18.8% 16.5%
Research and development 7.9% 7.5%
Operating income 24.7% 22.5%
Net income 20.0% 18.3%
EMC CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, December 31,
1998 1997
Assets:
Cash and short-term investments $1,530,475 $1,373,857
Accounts receivable 984,412 788,869
Inventories 485,844 404,660
Other current assets 104,082 59,640
Total current assets 3,104,813 2,627,026
Long-term investments 562,360 276,776
Property, plant and equipment 637,534 396,511
Other assets 263,864 189,796
Total assets $4,568,571 $3,490,109
Liabilities and equity:
Current liabilities $ 653,193 $ 505,870
Deferred income taxes 50,591 45,353
Long-term obligations:
Convertible subordinated notes 517,500 517,500
Other long-term liabilities 23,151 45,085
Stockholders' equity 3,324,136 2,376,301
Total liabilities and equity $4,568,571 $3,490,109
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Contact:
EMC Corporation
Mark Fredrickson, 508/435-1000 ext. 77137
fredrickson_mark@emc.com
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