EMC reports fourth quarter and full year 2013 financial results

Joe Tucci, EMC Chairman and Chief Executive Officer.

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EMC Corporation (NYSE:EMC) has reported fourth-quarter and full-year 2013 financial results.

Fourth-quarter revenue was $6.7 billion, an increase of 11% compared with the year-ago quarter. Fourth-quarter GAAP net income attributable to EMC increased 17% year-over-year to $1.0 billion.

Fourth-quarter GAAP earnings per weighted average diluted share increased 23% year-over-year to $0.48. Non-GAAP¹ net income attributable to EMC was $1.3 billion, an increase of 7% compared with the year-ago quarter. Fourth-quarter non-GAAP¹ earnings per weighted average diluted share were $0.60, an increase of 11% year-over-year.

Full-year 2013 revenue was $23.2 billion, an increase of 7% year-over-year. This result was highlighted by 5% year-over-year revenue growth for EMC's Information Infrastructure business, and 15% year-over-year revenue growth each for VMware and Pivotal. GAAP net income attributable to EMC for 2013 increased 6% year-over-year to $2.9 billion, and GAAP earnings per weighted average diluted share were $1.33, up 8% year-over-year.

Non-GAAP² net income attributable to EMC for 2013 was $3.9 billion, an increase of 4% year-over-year, and non-GAAP² earnings per weighted average diluted share were $1.80, an increase of 6% year-over-year.

For 2013, EMC generated operating cash flow of $6.9 billion and free cash flow³ of $5.5 billion, increases of 11% and 10% year-over-year, respectively. The company ended the year with $17.6 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said: "Our fourth-quarter results are further evidence that our federation strategy across EMC Information Infrastructure, VMware and Pivotal is on target. There's no doubt that the move from the second platform to the third platform of IT, underpinned by the mega trends of mobile, cloud, big data and social, is having a profound impact on business and transforming the way we work and live. Customers and partners have these transformations in their sights and are embracing EMC's vision, strategy and best-of-breed portfolio to capitalise on them."

David Goulden, CEO of EMC Information Infrastructure and EMC's Chief Financial Officer, said: "Despite 2013 IT spend growth that was lower than we expected, EMC achieved strong revenue and profit growth. This outperformance relative to our industry speaks to the power of the EMC portfolio, solid operational and financial model and consistent execution against our strategy. We entered 2014 exceptionally well positioned to grow faster this year than our IT spending growth projection, while also gaining share in the markets we serve."

Fourth-quarter highlights

For the fourth quarter, EMC's Information Storage business accelerated revenue growth to 10% year-over-year. EMC's Emerging Storage business⁴ accelerated revenue to 73% year-over-year, propelled by the very successful launch of EMC XtremIO and continued strong growth of EMC Isilon, EMC Atmos and EMC VPLEX products.

The company's Unified and Backup Recovery business⁵ increased revenue 11% year-over-year, benefiting from the recent product launches of the next-generation EMC VNX and EMC Data Domain product lines.

Revenue from EMC's High-End Storage business⁶ returned to growth in the fourth quarter, as customers continued to turn to the company's popular VMAX family. Revenue growth from EMC's RSA Information Security business and EMC's Information Intelligence business accelerated to 17% and 3% year-over-year, respectively.

VCE had an excellent fourth quarter as demand for Vblock systems showed strong year-over-year growth. EMC's VSPEX reference architecture portfolio continued to extend its market leadership with rapid adoption and increasing popularity among customers and partners. Additionally, EMC's Cloud Service Provider Partner programme continued in the quarter as the company's fastest-growing vertical market segment.

In the fourth quarter, VMware (NYSE: VMW) continued to excel because it is uniquely positioned to help customers move from the client-server era to the mobile-cloud era of computing. As VMware helps customers to bridge this new world, and lays the foundation for the build-out of the software-defined data centre, it is enabling them to achieve new levels of efficiency, control and agility.

Pivotal continued to make progress during the quarter. In the nine months since its formation, Pivotal has met the objectives it set out to accomplish in 2013: meeting its financial goals, establishing a strong executive leadership team and launching Pivotal One, a comprehensive, multi-cloud enterprise PaaS comprised of a set of application and data services that run on top of Pivotal CF, the leading enterprise distribution of the Cloud Foundry platform.

EMC's consolidated fourth-quarter revenue from the United States increased 11% year-over-year to $3.5 billion, representing 52% of consolidated fourth-quarter revenue. Revenue from EMC's business operations outside of the United States increased 11% year-over-year to $3.2 billion, and represented 48% of consolidated fourth-quarter revenue.

Within this, on a year-over-year basis, revenue from EMC's Europe, Middle East and Africa region grew 15%, revenue from EMC's Asia Pacific and Japan region increased 1%, and revenue from EMC's Latin America region grew 12%. Revenue from EMC's BRIC+13 markets increased 17% year-over-year.

Business outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not give effect to the potential impact of VMware's pending acquisition of AirWatch which was announced on 22 January 2014, or any other merger, acquisition, divestiture or business combination that may be announced or closed after the date hereof. These statements supersede all prior statements made by EMC regarding 2014 financial results.

All dollar amounts and percentages set forth below should be considered to be approximations.

* Consolidated revenues are expected to be $24.5 billion for 2014. Consolidated revenues for the three months ended 31 March 2014 are expected to be 22% of the full-year revenue.
* Consolidated GAAP operating income is expected to be 18% of revenues for 2014 and consolidated non-GAAP ⁷operating income is expected to be 25% of revenues for 2014.
* Consolidated GAAP earnings per weighted average diluted share are expected to be $1.38 for 2014 and consolidated non-GAAP⁷ earnings per weighted average diluted share are expected to be $1.95 for 2014.
* Consolidated GAAP earnings per weighted average diluted share are expected to be $0.19 for the three months ended 31 March 2014 and consolidated non-GAAP⁷ earnings per weighted average diluted share are expected to be $0.35 for the three months ended 31 March 2014.
* The consolidated GAAP income tax rate is expected to be 23% for 2014 and the consolidated non-GAAP⁷ income tax rate is expected to be 23.5% for 2014. This assumes that the US research and development tax credit for 2014 is extended in the fourth quarter 2014.
* The weighted average outstanding diluted shares are expected to be 2.06 billion for 2014.
* EMC expects to repurchase an aggregate of $2.0 billion of the company's common stock in 2014.

Supporting resources

* Visit http://ir.vmware.com for more information about VMware's fourth-quarter and full-year 2013 financial results.
* Visit EMC Pulse, EMC's product and technology news blog, and EMC Reflections.
* Connect with EMC via Twitter, Facebook, YouTube, and LinkedIn.