Beyond The #’s: EMC Q1 2011 Earnings

The most relevant business, technology and product takeaways from EMC earnings:
  • Big high-end growth driven by FAST-VP…high-end storage +25% y/y, driven by pent-up demand for FAST-VP tiering software, saw steep increase in sale of FAST-VP licenses, drove new vMax systems sales and upgrades
  • Mid-tier pause ahead of VNX…mid-tier revs +20% y/y in qtr, saw some pause ahead of late-Feb VNX launch, VNXe starting shipping 2nd week of march, “VNX very well received by market”, VNX sales out of the gate larger than prior generation systems, VNX >50% of traditional mid-tier storage orders booked in last 2 weeks of qtr, >50% of VNX systems went out with flash capability, streamlined 25 different sw products into 5 suites…now much simpler to buy, dramatic increase in software penetration as result,
  • Mid-tier positioning…VNX essentially replaces Clariion and Celerra, expect VNX growth to accelerate, in Q2 will be well over 50% of mid-tier growth, expect bounce back in total growth in mid-tier in Q2 with full qtr of VNX
  • Accelerating VCE investments…Expanding pipeline, headcount approaching 1000, given momentum accelerating investment in VCE
  • Isilon Ahead of Plan…Isilon #’s exceeded expectations in first qtr w/EMC…more confident than when they bought it that they hit $1b run rate (Isilon + Atmos) by Q312
  • Dell erosion continues…Dell partnership declined to <$40m in revs in Q1, continue to invest in other channels to offset this divorce
  • More Confident Spending Outlook…now more confident they can meet or exceed prior 2011 goals given product and market positioning, still overall expect IT spend +5-7% y/y, most probably in high-end of this range
  • Documentum and RSA inconsistent…outside of storage and VMware the non-core unit performance continues to be inconsistent, Content Mgmt -10% y/y, RSA impacted by cyber-attacks
  • Use of cash…primary focus is buybacks and “smart acquisitions”, see a lot of opportunity for more “smart acquisitions”, will continue “string of pearls approach”
  • EMC World…”will launch many new products that will extend IT technology stack”
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