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EMC Corporation (EMC)
Q3 2010 Earnings Conference Call
October 19, 2010 8:30 a.m. ET
Tony Takazawa - Vice President, Global Investor Relations
David Goulden - Executive Vice President and Chief Financial Officer
Joe Tucci - Chairman and Chief Executive Officer
Aaron Rakers - Stifel Nicolaus Investment Advisors
Daniel Ives - FBR
Brian Marshall - Gleacher & Company
Ittai Kidron - Oppenheimer
Rajesh Ghai - Thinkequity, LLC
Amit Daryanani– RBC Capital Markets
William Choi – Jefferies & Company
Mark Moskowitz – JP Morgan Chase
Jason Ader – William Blair & Company
Maynard Um – UBS
Ben Reitzes – Barclays Capital
Kaushik Roy - Wedbush Morgan Securities
Louis Miscioscia - Collin Stewart
Keith Bachman – BMO Capital Markets
Previous Statements by EMC
» EMC Corporation Q2 2010 Earnings Call Transcript
» EMC Corporation Q1 2010 Earnings Call Transcript
» EMC Corporation, Q4 2009 Earnings Call Transcript
With me, here at Hopkinton, we have David Goulden, EMC Executive Vice President and CFO. David will provide a few comments about the results that we released this morning to highlight some of EMC’s activities this quarter and discuss our updated outlook for the rest of 2010. Joe will then spend some time discussing his view of what is happening in the market, EMC’s execution of the strategy and how EMC is positioned to help customers on the journey to the Cloud. 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. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today in our press release, supplemental schedule 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. These include a lot of financial detail so we do encourage you to take a look at them. The call this morning will contain forward-looking statements and information concerning factors that could cause actual results to differ can be found in the EMC filings with the US Securities and 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, everyone and thanks for joining us today. I'm very pleased to report that EMC had another great quarter. We achieved record revenues of over $4.2 billion, up 20%. Record Q3 non-GAAP net income of $649 million, up 35%. Non-GAAP EPS of $0.30, up 30%. Record year-to-date free cash flow of $2.2 billion, up 22%; and non-GAAP operating margin of 21.5% up 80 basis points sequentially.
We continue to execute on our triple play with strong double-digit growth in storage security and virtualization, it's clear we continue to gain share in these key areas of the market, areas where we're already the market leader. With the announcements of VMware View 4.5, storage efficiency technologies like FAST v2 and FAST Cache and the acquisition of Greenplum, it's clear we're investing for the future but more importantly these investments are bearing fruit. And with non-GAAP gross operating margins up 40 and 80 basis points respectively quarter on quarter we continue to improve profitability. We expect to continue this triple play over the long term because of how well we positioned ourselves to capitalize on the fundamental shift to Cloud computing.
Now let me start by taking a few minutes to discuss what's driving our good results. The industry generally agrees that the shift to cloud architectures is no longer a question of if but of when. The answer is it's happening now albeit at different speeds for different companies but all companies go through the same three phases to transform their traditional physical infrastructures to true cloud architectures and to take full advantage of the ability to offer IT as a service. Phase I is the virtualization of IT owned applications which also requires simple, efficient VM integrated storage.
Phase II is a virtualization of business critical applications. This is where SLAs around performance, availability, workload mobility, recoverability and security really matter. Phase III realizes the full benefit of Cloud by taking advantages of Phases I and II together with IT automation, provisioning and chargeback to offer IT infrastructure as a service for the entire enterprise. It's at this phase that you have an elastic cloud of compute networking storage resources and are also seamlessly drawing on compatible public cloud services where it makes sense.
So, let’s look at what EMC offers for each one of these phases. The first phase typically tends to involves small deployments. Typically, it involves the IT departments virtualizing applications they own and manage. For these implementations, which require virtualization, and simple and efficient storage, EMC has VMware's vSphere on our unified storage products. With the majority of customers currently in this first phase, our unified storage frontline has grown rapidly and others are benefiting from this trend in the mid tier as well. Where we're really distinguishing ourselves in this phase is with efficiency technologies like SSCs, FAST and Cache as well as with tight integration with VMware. For example, one well known online brokerage firm in the quarter selected EMC's unified products in large part because of the FAST Cache. It's an ability to accelerate performance to address unexpected workload spikes, could not be matched by either of the other two vendors competing for this deal.