EMC Corporation (EMC)

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EMC Corporation (EMC)

Q1 2009 Earnings Call

April 23, 2009 8:30 am ET

Executives

Joseph M. Tucci – Chairman of the Board, President & Chief Executive Officer

David I. Goulden – Chief Financial Officer & Executive Vice President

Analysts

Amit Daryanani – RBC Capital Markets

Aaron Rakers – Stifel Nicolaus Investment Advisors

[Mark Kelleher – Brigg & Tante Advisors]

Toni Sacconaghi – Sanford Bernstein

David Bailey – Goldman Sachs

Bill Shope – Credit Suisse

Kathryn Huberty – Morgan Stanley

Brian Freed – Morgan Keegan & Company, Inc.

Keith Bachman – Bank of Montreal

Rajesh Ghai – ThinkEquity

William Fearnley – FTN Midwest Research

Kaushik Roy – Wedbush Morgan Securities

Jayson Noland – Robert W. Baird & Co.

Glenn Hanus – Needham & Company

Mark Moskowitz – JP Morgan

Presentation

Operator

Welcome to EMC’s call to discuss our financial results for the first quarter of 2009. Today we are joined by Joe Tucci, EMC Chairman, President and CEO and David Goulden, EMC Executive Vice President and CFO. David will provide a few comments about the results that we released this morning. He will highlight some of EMC’s activities this quarter and discuss the modeling assumptions for 2009. Joe will then spend some time discussing his view on what is happening in the market, EMC’s execution of the strategy and how EMC is positioned.

After the prepared remarks we will then open up the lines to take your questions. I would like to point out that we will be highlighting various non-GAAP numbers in today’s presentation. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today in our press release, supplemental schedules and the slides that accompany our presentations. All of these are available for download within the investor relations section of EMC.com.

As always we have provided detailed financial tables in our news release and on our corporate website. With regard to these details of the VMare’s results, we refer you their financial release from last night. The call this morning will contain forward-looking statements. Information concerning factors that could cause actual results to differ can be found in EMC’s filings with the US Securities & Exchange Commission.

Lastly, I will note that an archive of today’s presentation will be available following the call. With that, it is now my pleasure to introduce David Goulden.

David I. Goulden

In Q1 EMC achieved revenue of $3.15 billion, non-GAAP EPS of $0.16 and free cash flow of $681 million. Given the very tough economic environment and the transactional nature of our business we were encouraged by the resilience of our business model. We took a proactive approach adjusting our business to this changing climate and we are very focused on managing the controllables in our business. I think we did a great job of that in Q1. We executed well on our cost reduction plans, maintained disciplined expense control, reduced inventories and held a strong DSO number, all which resulted in decent profitability and excellent free cash flow this quarter.

I would like to thank our global workforce for their efforts here. In Q1 we also made good progress on our plans towards reducing our long term cost structure and improving the future efficiencies of our global operations. Importantly, we also utilized our financial strength to continue our investments in industry leading products and services. This dual focus on efficiency and investments is key to reinforcing EMC’s strong position to weather this down turn, take share in our addressable markets and position EMC for even more success when the economy turns around.

Now, let’s take a closer look at the financial results for the quarter. EMC information infrastructure revenues in Q1 were $2.7 billion and this includes approximately 400 basis points of negative impact from currency. Non-GAAP earnings per share were $0.11 and free cash flow was $494 million, more than $260 million higher than non-GAAP net income.

Looking at our geographic results for the information infrastructure business in Q1, non-US revenues were 48% of the revenue mix. We saw the effect of weak enterprise spending across the vast majority of our markets during the quarter. On a global basis compared with the average, government and healthcare were relatively stronger and financial services were relatively weaker. Our [inaudible] 13 markets were up 7% in constant currency. We continue to invest in these markets because we believe their important to EMC in the long term.

Looking at the results from our information infrastructure business units, in Q1 product revenues were $1.7 billion and services revenues were $1 billion. Within this information storage revenues were $2.4 billion and the high end Symmetrix revenues were down 25% but on a more positive note bookings were down 17%. In the mid tier, CLARiiON revenues were down 18% over Q1 of last year.

These results from our two largest product lines reflect our exposure to weak enterprise spending especially in the enterprise. We are however encouraged that we maintained overall footprint in our existing accounts and actually added new enterprise customers in the quarter. It’s also good news that our channel related business that is less enterprise focused showed relatively better results.

These factors lead us to believe the weakness is much more macro related than company specific. Both our Symmetrix DMX and CLARiiON CX product families lead the market in terms of reliability, scale, performance and cost efficiency. In addition, we believe that the new highly differentiated and unique Symmetrix V-Max will strengthen our position even more in the high end and we look to extend our lead here.

Read the rest of this transcript for free on seekingalpha.com