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1/24/2006
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EMC: Strong Year-End Financials, New Products Thursday

The storage company's reports of double-digit growth will be followed by new file-virtualization technology related to its recent acquisition of Rainfinity, CEO Joe Tucci says.

EMC Tuesday reported a strong fiscal year 2005 and its 10th consecutive quarter of double-digit growth and said that 2006 looks to be an even better year.

During the earnings call, Joe Tucci, chairman, president and CEO of EMC, hinted at some new products that his company plans to introduce shortly.

Included is a new version of the company's flagship DMX-3 array, which the Hopkinton, Mass.-based company plans to introduce at a conference Thursday in London. Tucci said it will be a lower-end version than currently offered and will be modular in design so that it can meet a wide range of requirements by adding additional modules.

Tucci also said EMC will eventually add the ability to address multiple tiers of storage within a single DMX array. "As we add multiple tiers of storage inside it, we can expect significant growth," he said.

This quarter, EMC is also planning to introduce a new version of software it received with last year's acquisition of Smarts, which develops event automation and realtime network systems management software. Tucci said Smarts software has in the past been focused on the carrier environment, but later this quarter EMC will ship the first application specifically for storage networking.

EMC Thursday will also unveil new file virtualization technology related to its recent acquisition of Rainfinity, said Tucci.

Total revenue for the storage giant's fourth quarter was $2.7 billion, up 15 percent compared with the $2.4 billion reported for the fourth quarter of 2004. Net income for the quarter grew 27 percent to $409 million, or 17 cents per share, compared with $321 million, or 13 cents per share, for the same period last year.

Total revenue for EMC's full 2005 fiscal year, which ended Dec. 31, was $9.7 billion, up 17 percent over the $8.2 billion reported for 2004. Earnings per share for the full fiscal year grew 47 percent to 53 cents.

Bill Teuber, EMC's executive vice president and CFO, said systems revenue grew 19 percent to $1.3 billion in the fourth quarter compared with the same quarter in 2004. This includes $754 million in Symmetrix sales, which was flat over last year. However, the company's latest version of the DMX-3 array, introduced late last year, completely sold out during the fourth quarter.

Clariion sales were up 27 percent to $519 million, while NAS sales rose 50 percent, Teuber said.

Software license and maintenance revenue grew 16 percent over the same quarter to reach $1 billion, the first time EMC's software hit that level, Teuber said. Included in that was backup software, sales of which grew 13 percent over last year to hit $60 million. Content management software was up 25 percent to $64 million, VMware license revenue was up 55 percent to $87 million, and services related to VMware were up 91 percent to $28 million, he said.

Services revenue for the quarter hit $403 million, up 4 percent.

Tucci said EMC saw particularly strong growth in the midrange storage market, with sales to this space up 31 percent over 2004. That was especially significant in that 2004 itself was a strong year for midrange storage, with revenue that year up 44 percent over 2003.

Tucci also noted that EMC is well-positioned to be a leader in virtualization even as what he termed the "vast majority" of customers move toward virtualizing parts of their infrastructure over the next three years. He said on the server side, VMware still has its best years in front of it. Meanwhile, EMC is starting to roll out its Invista storage virtualization appliance and is taking advantage of its recent Rainfinity acquisition to help customers with file virtualization.

Going forward, Teuber said EMC expects revenue in the first quarter to be between $2.57 billion and $2.59 billion, with earnings per share expected to hit 14 cents. For all of 2006, EMC is currently expecting revenue to be between $11.1 billion and $11.3 billion, with earnings per share coming in between 63 cents and 66 cents, he said.

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