EMC Reports Strong Growth Across All Business Segments - InformationWeek

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Software // Information Management

EMC Reports Strong Growth Across All Business Segments

The company reported double-digit revenue growth across the board, even in its mature business of information storage and content management and archiving.

EMC's profits rose by 33% in the fourth quarter on its sixth consecutive period of double-digit revenue growth.

The storage equipment maker reported strong growth across all its business segments. Even its more mature business of information storage and content management and archiving delivered year-to-year double-digit growth of 14% and 17% respectively.

The company's RSA security division led growth within EMC's core business, recording 30% revenue growth over the fourth quarter of 2006 to $148 million. The company's information infrastructure business posted 14.8% revenue growth.

Another major driver behind EMC's performance was its VMware unit, which reported revenue growth of 88% in 2007. EMC sold a portion of VMware last year in one of the most highly anticipated initial public offerings since Google went public in 2004.

While contributing to its bottom line, VMware was a drag on EMC stock, Reuters news agency reported. The parent company's shares fell 7% Tuesday as VMware disappointed Wall Street by reporting that sales would slow this year to 50%. The news caused VMware stock to plummet by a third.

Both the U.S. and global economies are expected to slow this year, creating an uncertain business climate for the tech industry. EMC, however, is in a good position to weather uncertain economic conditions, because of how it has diversified over the last six years, Allan B. Krans, analyst for Technology Business Research, said.

During the last economic downturn in 2001, EMC was heavily dependent on hardware sales, particularly on high-end system sales to U.S. customers, Krans said.

"Since that time EMC diversified nearly all aspects of its business, as software and services account for a majority share of EMC’s business, and international revenue growth outpaced EMC’s North American results for the past nine quarters," Krans said in an emailed commentary. "EMC will not be immune to an industry-wide economic slowdown, but TBR believes the investments EMC made over the past six years put the company in a much better position to weather an economic slowdown.'

EMC on Tuesday reported a fourth-quarter net income of $525.7 million, or 24 cents a share, from $388.8 million, or 18 cents a share a year ago. Revenues rose 19% to $3.8 billion. The company beat Wall Street estimates for profits and revenues.

For 2008, the company expects revenue growth to slow to 13% to $15 billion, with earnings at 78 cents a share. For 2007, the company reported total revenues of $13.2 billion, which was 19% higher than 2006.

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