EMC Earnings Surge on Increased Demand for Storage Computers

EMC Corp., the world’s biggest maker of storage computers, reported a 28 percent gain in second- quarter earnings as companies ramped up spending on data products and software for Internet-based computing.

Net income rose to $546.5 million, or 24 cents a share, from $426.2 million, or 20 cents, a year earlier, the Hopkinton, Massachusetts-based company said today in a statement. Excluding some costs, profit was 35 cents, beating by one cent the average estimate of analysts surveyed by Bloomberg.

EMC is seeing increased demand for mid-priced storage products, helping counter slower growth for more expensive machines, a market where many customers have already upgraded to EMC’s newest model, said Brent Bracelin, an analyst at Pacific Crest Securities, before the report. EMC is also benefiting from demand for software from its majority-owned VMware Inc. (VMW), which reported better-than-forecast sales and profit yesterday.

“They hit the ball out of the park, a very strong quarter,” said Daniel Ives, an analyst at FBR Capital Markets in New York. “They’re doing a really good job of managing growth and profitability so you’re seeing some improved margins coming in.”

EMC sales rose 20 percent to $4.85 billion, exceeding the $4.74 billion average estimate. Revenue was bolstered as companies revamp their networks to take advantage of the move to so-called cloud computing, which lets customers use the Internet to store and access data.

‘Cloud Resonating’

“Clearly our hybrid cloud and big data strategies are resonating extremely well with customers,” said Joe Tucci, chief executive officer, on a conference call today.

The company said full-year profit excluding some items will exceed $1.48 a share, up from a prior projection of $1.46. Analysts on average estimated $1.49.

EMC lost 1 cent to $27.37 at 4 p.m. on the New York Stock Exchange. The stock has climbed 20 percent this year.

VMware, the biggest maker of programs that let computers run multiple operating systems, yesterday said second-quarter profit excluding certain costs was 55 cents a share, exceeding the 47-cent average of projections compiled by Bloomberg. Sales rose 37 percent to $921.2 million.

EMC’s RSA security software unit, which makes authentication products like security tokens, was hit by a cyber attack in March that resulted in some data being stolen from its networks.

EMC recorded a $66 million charge in the second quarter as it replaced some tokens and increased security following the breach, said David Goulden, EMC’s chief financial officer, on the conference call. “It is likely that RSA growth will remain a bit slower after remediation efforts.”

Second-quarter revenue from VMware increased 37 percent from a year earlier to $920.8 million. Sales from the security unit rose 13 percent to $196.1 million.

To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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