EMC (NYSE:EMC) and VMWare (NYSE:VMW) recently announced their quarterly results. While they failed to meet some expectations, both companies’ managements were reasonably happy with their performances in this poor economy.
EMC’s Q1 revenues of $3.15 billion fell 9% from the previous year’s $3.47 billion. Adjusted EPS of $0.16 also fell from the previous year’s $0.22. Analysts were expecting revenues of $3.29 billion and EPS of $0.12 for the quarter.
By segment, information infrastructure revenues in Q1 brought in $2.7 billion. Revenues from the concept management and archiving business were down 6% while RSA revenues grew 6%.
EMC’s management doesn’t seem too satisfied with the stringent cost control initiatives launched earlier. They are proposing additional measures such as a 5% temporary pay cut for employees. They expect to realize nearly $500 million per annum in savings through additional measures.
Their optimism on the economy also doesn’t seem to be faltering. Management believes IT spending to have bottomed out and predicts a sluggish recovery. The company’s commitment to investing in product lines did not waver during the quarter. It recently launched the V-Max system to enter the high-end segment of data storage. The Symmetrix V-Max product features significant scale up, scale out capabilities. EMC also launched a new compliance archiving suite called SourceOne which features a consistent way for customers to archive their information across many discrete applications.
In security, RSA launched major new versions of their data loss prevention and security and event management suites. During the quarter, they invested nearly $20 billion in their cloud infrastructure business. They are planning to provide predominately software-based product infrastructure.
The stock is trading at $11.86, taking its market capitalization to $23.83 billion.
Like its parent, VMware (VMW) believes in continuing to innovate in its product line up. It recently launched vSphere 4 — “the first ever very real sense of the world’s first operating system for the cloud”. VMWare has been optimistic about the potential of creating 100% virtualization as more and more customers realize the cost benefits of virtualization. The vSphere 4 product is one way to realize their vision and targets companies looking to exploit a cloud computing infrastructure.
Q1 revenues of $470 million grew by 7% over the year. EPS also grew 14% to $0.25 from the $0.22 earned a year ago. By segment, license revenues of $257 million fell 13% while services revenue of $213 million grew a significant 48%, primarily driven by their revenue model of selling multiple years of maintenance and strong renewals — renewals grew 42% over the year. Despite this growth, the company’s performance fell short of the market’s expectations of revenues of $474 million with EPS of $0.20.
Geographically, United States revenues grew 8% over the year to $244 million and contributed 52% of total revenue for the quarter. International revenues grew 6% over the year.
vSphere has brought obvious gains in recent quarters, and VMWare is now also focusing on the additional complimentary initiatives that can be launched around the system. The company expects there to be three major areas of focus. First, the series of management suites of products that target scenarios such as creating the self-service datacenters, doing tests and development, disaster recovery of business continuity and application management. Second is the client desktop space, in which the VMWare view product roadmap continues to be well received. Finally, there is the external cloud, which remains a very active space.
The stock has slipped and is trading at $29.05 with a market capitalization of $11.39 billion. It could still be an attractive buy for Cisco but only if EMC sells.