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EMC Bucks Q2 Trend.

Despite poor results from other vendors, EMC (1) (EMC Corporation, Hopkinton, MA, The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies.  Corp yesterday posted glowing second-quarter results, buoyed by strong mid-range hardware sales.

Software sales at EMC were little affected by the weak customer demand seen by other suppliers such as Veritas Software Veritas Software Corp. was an international software company that was founded in 1983 as Tolerant Systems, renamed Veritas Software Corp. in 1989, and merged with Symantec in 2005. It was headquartered in Mountain View, California.  Corp, and this was in part because excluding its Documentum content management software, EMC's software mix involves less large enterprise-wide deals.

The picture of high-end customers slowing spending is reinforced in part by a sequential drop in sales of EMC's high-end Symmetrix arrays.

EMC CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.  Joe Tucci said: "There was a lot of noise this quarter about a broad-based end-of-June slowdown. To this end, let me emphatically em·phat·ic  
1. Expressed or performed with emphasis: responded with an emphatic "no."

2. Forceful and definite in expression or action.

 state that with the exception of less than a handful of deals at Documentum we did not see this. We did not see big deals pushed."

For its second quarter ended June 30, 2004, the storage hardware and software vendor reported net income of $193m or $0.08 per share up 136% year-on-year, on revenue of $1.97bn, up 33% year-on-year. EMC's acquisitions of Legato (Legato Systems, Inc., Mountain View, CA, A leading provider of storage management and high-availability software founded in 1988 and acquired by EMC Corporation in 2003. Legato software, including Celestra data management (data mining, data migration, etc. , Documentum and VMWare, accounted for 14% growth. Excluding those, core revenue growth was 19%. Currency effects lessened less·en  
v. less·ened, less·en·ing, less·ens
1. To make less; reduce.

2. Archaic To make little of; belittle.

To become less; decrease.
, but still boosted revenue by 4%.

EMC again sold out of its mid-range Clarrion disk arrays during the quarter, and total Clarrion hardware and software revenue was up 43% year-on-year. The company now has an order backlog worth "tens of millions" of dollars.

High-end Symmetrix-related revenue was not so strong - up only 5% year-on-year, and down 3% sequentially. Incorrect forecast of disk mix, and strong performance by IBM (International Business Machines Corporation, Armonk, NY, The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries)  in the mainframe market contributed to this, EMC said. The impending im·pend  
intr.v. im·pend·ed, im·pend·ing, im·pends
1. To be about to occur: Her retirement is impending.

 launch of high-end hardware refreshes by Hitachi and IBM have had little affect on customers according to according to
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

 EMC, because the huge majority are not concerned with performance improvements to disk arrays that are already much faster than they need.

Revenue related to Legato backup software See backup program.

(tool, software) backup software - Software for doing a backup, often included as part of the operating system.

Backup software should provide ways to specify what files get backed up and to where.
 was up 13% year-on-year, and Documentum content-management software revenue was up 14% year-on-year. VMWare, still in early growth start-up mode, saw revenue up nearly 200%.

But Documentum's software and services revenue was down 4% sequentially, and the division is certainly subject to the high-end software squeeze.

"It's a little bit of the software, especially if you go for the bigger enterprise license approach - it's kind of software' turn in the barrel," Tucci said. "The industry's beat the hell of the hardware players and the kind of core software we ship with our hardware and even our open side....the software companies are now getting a little bit squeezed."

Veritas's recent revenue shortfall was not principally caused by EMC's success with its competing Legato backup software, Tucci said, because despite its growth, EMC's backup sales are still minor compared to those of Veritas, and will be for some while.

"Compared to Veritas's number, we're still small. Obviously we're pleased with the [Legato] license growth and we actually believe we can keep that kind of growth up, which I guess if you did it long enough and hard enough it would eventually be material. But I don't believe that Legato's gain this quarter was necessarily what caused Veritas to miss. I think there are other factors there."

EMC's guidance for the third quarter was for flat to slight revenue growth to around $2bn, and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format.  of around $0.08 to $0.09, compared to Wall Street consensus of $0.09. Full-year target of $8.1bn and net income of $850m is unchanged.

Others incorrectly assumed the acceleration of the IT market would continue, and this is not happening, Tucci said. EMC sees a "a slow but steady improvement in spending", and repeated its forecast that IT spending will rise about 4% this year, with storage spending growing 7%.
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Title Annotation:quarter 2
Publication:Computergram International
Geographic Code:1USA
Date:Jul 21, 2004
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