EMC Corporation (EMC)
Q2 2009 Earnings Call Transcript
July 23, 2009 8:30 am ET
Tony Takazawa – VP, Global IR
David Goulden – EVP and CFO
Joe Tucci – Chairman, President and CEO
Keith Bachman – Bank of Montreal
Benjamin Reitzes – Barclays Capital
Mark Kelleher – Brigantine Advisors
Aaron Rakers – Stifel Nicolaus
Wamsi Mohan – Bank of America/Merrill Lynch
Brian Marshall – Broadpoint AmTech
Amit Daryanani – RBC Capital Markets
Toni Sacconaghi – Sanford Bernstein
Chris Whitmore – Deutsche Bank
Bill Choi – Jefferies
Mark Moskowitz – JPMorgan
Bill Shope – Credit Suisse
Troy Jensen – Piper Jaffray
David Bailey – Goldman Sachs and Co.
Alex Kurtz – Merriman Curhan Ford & Co.
Previous Statements by EMC
» E M C Corporation Q3 2009 Earnings Call Transcript
» EMC Corporation Q1 2009 Earnings Call Transcript
» EMC Corporation Q4 2008 Earnings Call Transcript
Thank you, Diane. Good morning. Welcome to EMC’s call to discuss our financial results for the second 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 some modeling assumptions for 2009. Joe will then spend sometime discussing his view of 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 line to take your questions. I would like to point out that we will be referring to non-GAAP numbers in today’s presentation unless otherwise indicated. 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 presentation. 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. And with regard to details of VMare’s results, we refer you their financial release from last night. The call this morning will contain forward-looking statements. And information concerning factors that could cause actual results to differ can be found in EMC’s filings with the US Securities & Exchange Commission.
And 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?
Thanks, Tony. Good morning and thank you for joining us today. I am pleased to announce that EMC achieved solid future results. Our focused execution this quarter resulted in EMC achieving revenues of $3.26 billion, non-GAAP EPS of $0.18 and free cash flow of $400 million. The sequential revenue growth, improving profitability, and strong cash flow is encouraging given the continued economic environment.
Within these results, our EMC information infrastructure business achieved $2.8 billion in revenue, a little over $0.14 of non-GAAP EPS. And as you saw last night, VMware also had a solid quarter coming in at the high end of that expected change. VMware’s results contributed $455 million of revenue and $3.03 of non-GAAP EPS for EMC.
This morning, I am going to make some comments about the future spending environments, our business outlook for the second half of the year and some specific details from our Q2 results.
Turning now to the financial results for EMC’s information infrastructure business, we believe that overall IT spending levels in Q2 were relatively flat with Q1, however, Q2 spending seemed more stable and a little more predictable during the quarter. We attribute the stabilization to customers having more confidence in their IT budgets that they had at the beginning of the year. Although the economic environment remains very tough and customers continue to scrutinize their spending very carefully, the stabilization is a positive sign.
Within this IT spending environments, I am pleased that we achieved sequentially better revenue profitability in Q2. During the quarter, we experienced more normal linearity compared with Q1 and the business delivered sequential revenue growth across all our major geographies and in all of our business units.
The area of our business that most exceeded our expectations was our information storage business in North America, where revenues were up 5% sequentially. Positive increase was due to a more favorable budget environments and part was due to storage capacity upgrades that customers deferred in Q1. We also firmly believe the strength of our product portfolio was an advantage.
While pressure on global IT spending is expected to continue, our results from the first half of the year give us more confidence and we have the right business model and the right product portfolio to do well under challenging conditions.
So with that as a backdrop, I will make some comments about our business outlook for the remainder of the year. I view that overall IT spending in 2009 will be down very high single to very low double digits have not changed. Based on the more stable spending environment we saw in Q2, our first-half performance and what we are seeing here in the marketplace, we now have better visibility and more confidence in the second half of 2009.
We are now planning for EMC to achieve revenues of approximately $13.8 billion and non-GAAP EPS of approximately $0.82 for the year. These expectations include the acquisition of Data Domain. In the near term, we believe the seasonality of our revenues from Q2 to Q3 will be more normal, i.e. up 2% to 3% with the remainder of the business coming in Q4. However, EMC reported revenues will probably be up 4% to 5% quarter-over-quarter due to the inclusion of Data Domain in Q3.