EMC today reported double-digit, year-over-year revenue growth for the seventh consecutive quarter, bucking a string of lower-than-expected first-quarter earnings announcements by other storage industry leaders such as IBM and Sun Microsystems Inc.
The Hopkinton, Mass.-based company posted total consolidated revenue of $2.24 billion for the first quarter, 20 percent more than the $1.87 billion reported for the same period last year. The company also reported net income of $270 million, 93 percent more than the $140 million it reported for the same quarter a year ago.
EMC CEO Joe Tucci said during a conference call this morning that he was concerned about a spending slowdown in February, but has since seen an uptick, saying every day, every week is "better than the week before. I see ample opportunity for EMC to succeed this year," he said.
Tucci also said a disk hard drive shortage that affected earnings across the industry in the fourth quarter appears to be over.
In January, Computerworld reported that some server shipments by Hewlett-Packard Co. were being delayed because of a back order of internal disk drives. A draft report issued by IDC at the time said that in last year's fourth quarter, the demand for enterprise-class hard drives exceeded supply by nearly 7 percent, or by about 400,000 drives. IDC said the supply shortfall arose from the product transition in the wake of Hitachi's purchase of IBM's hard disk drive business and an increase in purchases by hardware vendors.
IDC analyst John McArthur said today that Hitachi is seeing better production and Fujitsu is bringing on additional capacity.
"It's interesting because some of the other suppliers of disk storage systems have talked about drive issues affecting their [first-quarter] results -- most notably IBM," McArthur said. "So perhaps it was overdependence on a single supplier for them."
Tony Prigmore, an analyst at Enterprise Strategy Group Inc. in Milford, Mass., said disk subsystems providers still need to be wary of slower-than-normal disk drive production by manufacturers for the next couple of quarters. "We're waiting for Hitachi to get back up to speed," he said.
EMC said its systems revenue totaled $1.03 billion, 15 percent higher year over year in the first quarter. Bill Teuber, EMC's chief financial officer, attributed systems growth to double-digit revenue in the company's midrange Clariion arrays, and its Celerra network-attached storage (NAS) and content-addressed storage Centera systems.
The Clariion midrange storage systems line revenue grew 47 percent year over year in the first quarter, its fourth consecutive quarter of more than 40 percent revenue growth. Celerra NAS revenue grew 40 percent during the quarter, the fifth consecutive quarter of more than 30 percent revenue growth.
EMC also reported strong growth across its software businesses. The Software Group reported revenue of $401 million in the first quarter, a year-over-year increase of 24 percent. Software license and maintenance revenue grew 26 percent to $832 million, representing 37 percent of total EMC revenue. Professional services, systems maintenance and other services revenue grew 26 percent to $375 million during the quarter, Teuber said.
Prigmore said that while EMC leads the pack in overall storage sales, it still has huge growth potential in the backup and archival software marketplace, where it is in fourth place; Veritas Software Corp. holds the first-place slot in that market, McArthur said.
EMC said its backup and archive software license revenue grew 36 percent during the quarter, driven by EMC's Legato NetWorker, Dantz Retrospect, EmailXtender, DiskXtender and Replication Manager software.
VMware Inc., an EMC subsidiary, reported record quarterly revenue of $80 million, a year-over-year increase of 104 percent. VMware booked a record number of new deals, and license sales represented nearly 80 percent of VMware's first-quarter revenue. VMware's triple-digit revenue growth was led by strong customer demand for its virtual infrastructure software products used widely for server consolidation and containment, business continuity, test/development and the enterprise desktop.
"The buzz around VMware is growing daily," Tucci said.