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E M C Corporation (EMC)
Q3 2009 Earnings Call
October 22, 2009 8:30 am ET
Tony Takazawa – VP, Global Investor Relations
David Goulden – Executive Vice President, Chief Financial Officer
Joseph Tucci – Chief Executive Officer
Aaron Rakers – Stifel Nicolaus
Benjamin Reitzes – Barclays Capital
Alex Kurtz – Merriman Curhan Ford & Co.
Mark Moskowitz –J. P. Morgan
William Fearnley – FNT Equity Capital
Ghai Rajesh – Thinkequity
Paul Mansky – Cannacord Adams
Douglas Ireland – J. P. Morgan
Troy Jensen – Piper Jaffray
Jayson Noland – Robert W. Baird
Robert Cihra – Caris & Company
Kaushik Roy – Wedbush Securities
Previous Statements by EMC
» EMC Corporation Q2 2009 Earnings Call Transcript
» EMC Corporation Q1 2009 Earnings Call Transcript
» EMC Corporation Q4 2008 Earnings Call Transcript
Good morning. Welcome to EMC’s to discuss our financial results for the third quarter of 2009. Today we are joined by Joe Tucci, EMC’s Chairman 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 the rest of 2009. Joe will then spent some time 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 lines 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. A reconciliation of our non-GAAP to our GAAP results can be found in the disclosure today in our press release, supplemental schedules and slides that accompany our presentation. All 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 the results, I refer you to our financial release from our site.
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 U.S. Securities and 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.
Good morning and thank you for joining us today. I’m pleased to announce that EMC achieved solid Q3 results with revenues of $3.5 billion, up 8% from Q2. Non-GAAP EPS is $0.23, up 28% from Q2 and free cash flow of $745 million, up 86% from Q2.
It’s encouraging to see our focused efforts resulted in good sequential revenue growth, improving profitability and strong free cash flow in what continues to be a challenging economic and IT spending environments.
Within these results our EMC information infrastructure business achieved $3 billion of revenues and about $0.20 non-GAAP EPS. EM also had a solid third quarter contributing $489 million of revenue or almost $0.04 of non-GAAP EPS for EMC.
Results that I would like to particularly highlight include solid overall performance on both a consolidated basis and for EMC information infrastructure, evidence of our model and good execution.
Improving both in North America, especially in storage are encouraging signs. Profitability has improved sequentially, a sign of great cost control efforts by EMC and VMware employees. Excellent free cash flow generation demonstrating the strength of our financial model and what looks to be an increasing stability in IT spending, this is important for obvious reasons. Overall, there’s a lot to be positive about in this quarter.
This morning, I’m going to make some comments about the Q3 spending environment, our business outlook for the rest of the year and some more specific details from our Q3 results.
As you may recall during our Q2 report, we noted that IT spending was becoming more stable and predictable heading into the second half of 2009. While we did not expect a big pick up in the economy or IT spending plans, we believe that customers are becoming increasingly confident about spending their budgets.
What we experienced in Q3 was in line with our expectations in this regard. There has not been a noticeable improvement in IT spending plans for 2009, but we did see customers continue to move forward and spend more of their budgets. There was steady customer activity with a more normal ramp during the quarter similar to what we saw in Q2. This is good to see.
Based on what we’ve seen through three quarters this year, things are playing out pretty much as we expected so our view of the environment remains unchanged. While second half IT spending is showing more of a normal seasonal progression in Q3 and Q4, it’s coming off a very weak first half.
As a result, when all is said and done we still expect overall IT spending to be down very high single to very low double digits for the full year 2009.
More specific to EMC, this second half improvement is a positive sign that customers are getting more comfortable spending their budgets. Our Q3 results are evidence we have the right business model and the right portfolio to do well in these challenging times and give us increased confidence in the remainder of 2009.
As a result, we now expect to achieve Q4 consolidated revenue of approximately $4 billion and non-GAAP EPS of $0.30 which will result in 2009 consolidated revenues of approximately $13.9 billion and non-GAAP EPS of $0.87 for the year. Note that these non-GAAP EPS expectations reflect $0.01 of additional dilution due to a slightly higher Q4 share count of about 2.12 billion.