Despite weak sales of content management software and its flagship DMX hardware, EMC managed to make the second quarter the sixteenth one for which it reported double-digit percentage revenue growth.
That is even after correcting for the fact that the storage giant over-egged its performance, by quoting a percentage growth based on a non organic apples-to-apples comparison.
For the three months ended 31 March 2007 the company reported GAAP net income up 33% year-on-year at $334m, on revenue of $3.1bn.
EMC described that as a 21% year-on-year revenue growth. But the company did not own RSA in the second quarter of 2006, and it admitted that RSA contributed 5 percentage points to its apparent growth. So the real, organic revenue growth for Q107 was actually only 16%.
Subtract another 2% that EMC declared for the effects of exchange rates, and the growth was actually 14%. That is of course still an impressive number.
RSA’s revenue for the quarter was $125m, up 21% on last year.
Less than a year after the RSA acquisition the payoff is playing out through its growth in the storage security market, and in the security market itself, said EMC CEO Tucci.
Many on Wall Street did not approve of EMC’s purchase of RSA last year. If Tucci felt any sense of vindication in highlighting RSA’s performance to investment analysts during yesterday earnings call, he hid it well.
When it came to the company’s wider revenue splits, the story EMC told for the second quarter was familiar.
Revenue from the Information Storage Systems category – including Symmetrix and Clariion disk arrays and related software, and Legato-originated backup products — grew by 18% to reach 43% of total.
Yet again the star performer was the low-end and mid-range Clariion array. Helped by a strong performance from Dell, Clariion revenue grew by a whopping 34%. Dell’s share of EMC’s revenue continues to creep up, and is now at 16%.
Meanwhile EMC’s flagship Symmetrix DMX disk array saw only 3% revenue growth.
EMC CEO Joe Tucci said he does not expect any change soon in the mid-single digit growth rate that has been the norm for some while in the market for high-end disk arrays.
But the 3% growth for the DMX was well below that market par, and was only a slight improvement on the 2% growth for DMX in the first quarter.
Tucci said customers have been holding back from DMX purchases in anticipation of the new generation of DMX-4 boxes that were unveiled only last week. The market is affected by product cycles. Now we’re going into a favorable part of the cycle, he said.
The other weak area was in content management and archiving – mostly EMC’s Documentum and Captiva products – where revenue grew by only 5%. That is slightly better than the 3% growth for CMA seen last quarter, but is not up to snuff in a sector that EMC expects to show 10% growth this year.
We’re definitely not fulfilling our potential in this market, Tucci said. EMC gave several reasons for this failure to fulfill.
One was market consolidation, which created a near-term purchasing pause among customers.
Another was that this quarter was up against a tough compare, to use earnings-call speak. The second quarter of 2006 was a good one for EMC in terms of CMA sales, which rose 20% after normalizing for the Captiva purchase.
EMC also said that it reorganized the market-facing arm of Documentum during the quarter, and Tucci said that this helped slow sales.
Next week EMC will launch a major update to the Documentum software. With that, a strong pipeline, a hopefully more effective marketing organization, and what EMC said is an improved relationship with integrators, the company says it is expecting a CMA recovery during this half of the year.
EMC no longer gives quarterly guidance, but it said that it is on track to exceed its current guidance for the full year 2007, which is for $12.7bn revenue and $0.64 EPS.
For the information storage systems category, EMC continues to expect overall market growth of 8% during 2007.
VMware’s revenue is still growing at a roaring rate, showing 89% growth to reach $298m.