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EMC posts double-digit growth in Q3

EMC posts double-digit growth in Q3

EMC has reported double-digit growth for the ninth consecutive quarter. But the storage vendor also said sales of its midrange Clariion array cooled somewhat, as did sales of its high-end Symmetrix hardware - mainly due to cautious customer adoption of the latest version of the high-end array, according to officials said.

Overall, EMC reported $US2.37 billion in revenue this quarter, a 17 per cent increase from the same quarter last year, EMC's chief financial officer, Bill Teuber, said.

Sales were mainly driven by the company's services business and midrange Clariion storage systems, as well as sales of software for enterprise content management and data backup.

The popularity of EMC's server virtualisation software, VMware, continued to skyrocket, with $US101 million in sales during the quarter - a 67 per cent increase over the year-ago quarter, according to Teuber.

"We now believe 90 per cent of our customers are using VMware in production environments," EMC CEO, Joe Tucci, said.

But even with double-digit revenue growth, Tucci said IT spending during the quarter was uneven.

"We saw a bit of a slowdown in July, followed by a very slow August. But the last three weeks of September picked up nicely. "Clearly it is tough out there," Tucci said. "[But] virtually all IT industry surveys show that storage is at or near the top for IT investment."

EMC's software license and maintenance revenues were up 16 per cent over the third quarter of 2004, with $US865 million in revenues, representing 37 per cent of total EMC overall sales.

Teuber said content management software represented one of the biggest growth areas, with $US48 million in sales, up 13 per cent from a year ago.

Professional services, including systems maintenance, represented EMC's fastest-growing business line for the second consecutive quarter, with $US402 million in sales, which is a 25 per cent revenue increase year over year.

Tucci blamed a 2.1 per cent drop in Symmetrix sales, which represented $US633 million in revenue this quarter, on the late launch of its latest DMX-3 model of the high-end array.

The DMX-3 offers more than twice the capacity of the DMX-2 model and added functionality, prompting customers to take their time evaluating the hardware, according to Tucci.

"It's not surprising customers want to be a little cautious," he said.

DMX-3 was generally available on August 30, somewhat later in the quarter than the company would have liked, Tucci said, citing longer beta-test periods for the box. He said lower-end models of the DMX-3 should sell faster when they eventually roll out.

Clariion sales grew 20 per cent year over year to $US425 million in revenue, with sales of the arrays through reseller partner, Dell, representing a third of EMC's midrange systems revenue, Teuber said.

Tucci said Clariion sales were not up to EMC's execution standards and blamed the slowdown on the new, higher-end Clariion CX700 array, which shipped later than planned and was comparable in functionality and capacity to its Symmetrix line.

Up until the second quarter of this year, sales of the Clariion CX line of midrange arrays had grown at least 30 per cent for 10 consecutive quarters.

"We didn't fully ... ship the [new] CX line until the end of the first week of September," Tucci said. "Thus our late start somewhat stalled our customer uptake."

While Clariion won't likely repeat last year's growth rates, Tucci said he expected it to pick up in the fourth quarter.

He also said EMC's information life-cycle management strategy - creating a tiered storage infrastructure by blending high, midtier and low-end equipment - was being well received.

Tucci cited as evidence the higher sales of lower-end Clariion arrays and the content-addressed storage Centera array over larger-capacity models. He said EMC believed sales would continue to grow in the fourth quarter - traditionally its strongest.

The company planned to spend $JUS400 million by the end of the year to buy back its own stock, bringing its total for share buy-back to more than $US1 billion this year.


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