EMC Corporation (EMC)

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Q1 2011 Earnings Call

April 20, 2011 8:30 am ET


David Goulden - Chief Financial Officer and Executive Vice President

Joseph Tucci - Chairman, Chief Executive Officer, President, Member of Mergers & Acquisitions Committee and Member of Finance Committee

Tony Takazawa - VP


Louis Miscioscia - Collins Stewart LLC

Brian Marshall - Gleacher & Company, Inc.

Benjamin Reitzes - Barclays Capital

Deepak Sitaraman - Crédit Suisse AG

Aaron Rakers - Stifel, Nicolaus & Co., Inc.

Amit Daryanani - RBC Capital Markets, LLC

Daniel Ives - FBR Capital Markets & Co.

Kaushik Roy - Wedbush Securities Inc.

Toni Sacconaghi - Sanford C. Bernstein & Co., Inc.

Ittai Kidron - Oppenheimer & Co. Inc.



Good morning, and welcome to the EMC First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, if you have any objections you may disconnect at this time. I would like to introduce your host, Mr. Tony Takazawa, Vice President of Global Investor Relations for EMC.

Tony Takazawa

Thank you. Good morning. Welcome to EMC's call to discuss our financial results for the first quarter of 2011. Today, we are joined by EMC Chairman and CEO, Joe Tucci; 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 our outlook for 2011. 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 their journey to the cloud and in their efforts to handle the growth of Big Data. After their 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 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. 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 EMC's filings with the U.S. 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's now my pleasure to introduce David Goulden. David?

David Goulden

Thanks Tony. Good morning, and thank you for joining us today. I'm pleased to report that EMC started off the year with solid results. We achieved record Q1 revenues of $4.6 billion, up 18% from last year's first quarter. And non-GAAP EPS of $0.31, up 19% over Q1 of last year.

We improved both non-GAAP gross margin and non-GAAP operating margin considerably from the first quarter last year. And we achieved free cash flow of almost $860 million, well in excess of record Q1 non-GAAP net income of $700 million.

We successfully executed our financial triple play once again, gaining market share, investing in the future and improving profitability. We fully expect to continue realizing this triple play over the long term for two reasons: one, we're in the early stages of the largest IT transformation in history which is creating enormous opportunities in cloud computing and Big Data; and two, we positioned ourselves to take full advantage of this opportunity by focusing on the transformation of IT infrastructure and applications.

Customers recognize that their ability to compete is increasingly tied to the efficiency and agility of the IT operations, and their transition into cloud architectures to make their businesses more efficient, more flexible and more agile. To get there, they're seeking partners who can meet their requirements from start to finish. From their first Phase 1 server virtualization deployments through the Phase 2 large-scale ramping up of virtualization to include mission-critical applications, through Phase 3 implementations where IT is automated and offered as a service and well into the future.

Successfully navigating these phases could be challenging, and doing so in the face of additional challenge created by the rise of Big Data makes it even more so. In addition to scalable yet manageable storage of petabytes of data, customers need knowledge to grow beyond pros and cons. They need to analyze and leverage the massive amounts of data generated from various sources, such as always-on networks, the Web, consumers, surveillance systems and sensors.

We are squarely focused on helping our customers take advantages of the rapid, reemerging opportunities offered by both cloud and Big Data. And it's this focus that drives us to continually identify and execute on opportunities that increase our value proposition to customers in this new world. As their IT needs grow larger and more complex, and as more and more of the company's success is linked to IT, we have innovated and invested to come out in front of these needs.

There is no other company in IT with the combination of market-leading virtualization and infrastructure assets that EMC has today: the getting to cloud and for unlocking the value contained within the Big Data that surrounds us.

Our virtualization and infrastructure assets are critically important for getting customers where they want to be. This is why EMC is a vendor of choice for organizations, just for every size and every vertical, and it's a key reason why our opportunity is so vast.

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