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EMC Reports Strong Second Quarter Sales, Profits

For the quarter ended June 30, EMC's net income was $334.4 million, up 33% from last year. Revenues rose to $3.12 billion, a 21% jump from a year ago.
EMC on Tuesday reported double-digit increases in sales and profits in the second quarter, as the storage vendor outpaced larger rivals Hewlett-Packard and IBM.

For the quarter ended June 30, EMC's net income was $334.4 million, or 16 cents a share, 33% higher than the same period last year. Revenues rose to $3.12 billion, a 21% jump from a year ago. It was the 16th consecutive quarter of higher sales.

"EMC executed well in the second quarter," Joe Tucci, chairman, president and chief executive of EMC, said in a statement. "Customers continued to choose EMC for the depth and breadth of our information infrastructure technologies and solutions, which translated into solid revenue growth that was well balanced across our systems, software and services businesses and all major geographies."

Tucci said the company is seeing an "explosion" of digital information, which is driving the need for storage, as well as solid demand in all major geographies. "It is clear that we are in a sweet spot of the IT industry," Tucci said.

That sweet spot is the "marketplace gap" EMC is filling between smaller storage vendors, such as HDS and NetApp; and larger, diversified IT providers HP and IBM, analyst firm Technology Business Research said. EMC is broadening its offerings through acquisition, having bought Legato, Documentum, VMware, and RSA, but remains significantly more focused on storage than HP or IBM. "Faced with a choice of which direction to move, TBR believes EMC management intends to continue broadening the company's portfolio, creating increased competition with the diversified IT vendors HP and IBM," TBR analyst Allan B. Krans said in an e-mailed analysis.

EMC's hardware revenue increased 17.6% year to year, outpacing IBM's reported 6% rise in storage hardware in the second quarter. HP has not reported second-quarter earnings, but storage hardware growth in the first quarter was only 1%.

"EMC announced a large hardware product refresh during 2Q07, and TBR believes the company's ongoing focus and commitment to the hardware business provides a stable base of revenue and product functionality that benefits both the software and services business through product bundling and cross-selling opportunities," Krans said.

EMC also managed to increase sales in all major regions of the world. In North America, sales were up 20% compared with a year ago, accounting for 58% of total revenues. Sales outside of North America, including Europe, Asia-Pacific and Japan, grew 23% year-over-year.

For all of 2007, EMC expects revenues to exceed $12.7 billion, and earnings to be more than 64 cents a share.