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Q3 2012 Earnings Call
October 24, 2012 8:30 am ET
David I. Goulden - President, Chief Operating Officer and Chief Financial Officer
Joseph M. Tucci - Chairman, Chief Executive Officer, Member of Mergers & Acquisitions Committee and Member of Finance Committee
Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division
Ittai Kidron - Oppenheimer & Co. Inc., Research Division
Shebly Seyrafi - FBN Securities, Inc., Research Division
Brian Marshall - ISI Group Inc., Research Division
Kulbinder Garcha - Crédit Suisse AG, Research Division
Alex Kurtz - Sterne Agee & Leach Inc., Research Division
Bill C. Shope - Goldman Sachs Group Inc., Research Division
Maynard Joseph Um - Wells Fargo Securities, LLC, Research Division
Scott D. Craig - BofA Merrill Lynch, Research Division
Amit Daryanani - RBC Capital Markets, LLC, Research Division
Abhey Lamba - Mizuho Securities USA Inc., Research Division
Previous Statements by EMC
» EMC Management Discusses Q2 2012 Results - Earnings Call Transcript
» EMC's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» EMC's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Thank you. Good morning. Welcome to EMC's call to discuss our financial results for the third quarter of 2012. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC President and COO.
To kick things off, David will comment on our results and how these tie with the execution of our strategy. He will also discuss our outlook for the rest of 2012. Joe will then spend some time discussing his view of what is happening in the economy and IT, EMC's vision and strategy and how EMC is helping customers navigate the massive transformation happening in IT regarding cloud, Big Data and Trust. After the prepared remarks, we will then open up the lines to take your questions.
Please note 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 in today's press release, supplemental schedules and the slides that accompany our presentation. All these are available for download within the Investor Relations section of emc.com.
As always, 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.
We are also providing you with an update to our projected financial model for 2012. This model lays out all of the key assumptions and discrete financial expectations that are the foundation of our 2012 outlook. We hope that you find this model helpful in understanding our assumptions in context and in ensuring these -- that these expectations are correctly incorporated into your models. This model is available as background in today's slides, available for download in the Investor Relations section of emc.com.
With that, it is now my pleasure to introduce David Goulden. David?
David I. Goulden
Thanks, Tony. Good morning, everyone, and thank you for joining us today. This morning, we reported continued growth in revenue and earnings per share in Q3, with revenue up 6% and non-GAAP EPS up 8% over last year's Q3. Free cash flow grew 16% year-on-year.
The environment in Q3 turned out to be more cautious than we had expected. There were several issues weighing on customers' minds, including uncertain global economic growth and the U.S. presidential election. The macro challenges translated into more spending scrutiny, longer deal cycles, additional approval requirements and the resulting delay in IT deals. While the macro factors caused EMC's growth to be less than expected, I'm pleased that we did show growth in this challenging environment. And as tech industry results are reported, I believe EMC will be one of the stronger big companies and that we certainly gained share.
We also showed EPS leverage and achieved a number of Q3 quarterly records, including record revenues, record non-GAAP operating income and record non-GAAP EPS. In the face of such headwinds, I believe that our strategy, balanced portfolio, operational model and ability to execute are paying off near term and position us well for the long term.
While we need to navigate the short-term economic challenges, the longer-term secular changes offer us an opportunity to be really successful. The shift to cloud, Big Data and Trusted IT bode well for us, as we've been at the forefront of these for some time. These trends are in full force, because they enable companies to capture a better return on dollars invested in IT than ever before. Cloud architectures make the infrastructure more agile and efficient, whilst Big Data enables new insights that could help grow the top line, and all this must be done in a trusted way. At EMC, we understand the company that can best deliver this ROI wins, and we continually invest to make this happen. The result is innovative, practical, customer-focused additions to our product lines.
And during times when spending is tight, our focus on high-priority areas of the data center like virtualization, security and storage serve us well. Customers needing to be extra cautious about where they spend their budgets, first direct their dollars to high-impact areas and the most cost-efficient technology within those areas, in other words, to best-of-breed offerings like our own.
The drive for great efficiency and business value from IT extends beyond economic cycles and is gaining momentum as more customers shift more of their spending towards cloud architectures, private clouds, public clouds and hybrid clouds. Running a cloud infrastructure means leveraging pools of network and storage and server resources that are dynamically allocated to new and existing applications based on demand. This is not easy. And as a result, most companies building clouds, either private or public, have neither the full set of resources nor the IP to build these architectures themselves. A few do, but the rest seek an infrastructure that can get them there without having to compromise on important enterprise class features. These include capabilities like replication to ensure data availability and business continuity; efficiency features like tiering, deduplication and compression; backup, with best-in-class recovery points and recovery time objectives; security that's agile and risk-based; and virtualization, a key component for achieving the control, efficiency and choice clouds can deliver.