EMC Beats Street With 13 Percent Profit Spike

The Hopkinton, Mass.-based company earned US$377.5 million, or 18 cents per share, in the April-June period. That compares with net income of $334.4 million, or 16 cents per share, in the year-ago period.

Stripping out one-time charges, EMC earned 24 cents per share in the latest quarter. That was 7 cents per share higher than the average estimate of analysts polled by Thomson Financial. Analysts' estimates typically exclude one-time charges or gains, but include stock-based compensation costs.

Sales rose 18 percent to $3.67 billion from $3.12 billion last year, coming in about $100 million above Wall Street's average forecast.

Double-Digit Growth Pattern

EMC is the world's largest seller of standalone disk storage systems, a steady-performing business that has grown in popularity as companies need to archive more digital material. Regulatory requirements and an explosion in the amount of data being created by the Internet have pushed that trend.

EMC goes up against HP (NYSE: HPQ) and IBM (NYSE: IBM) in the fiercely competitive market. EMC owns 21 percent of the worldwide market for external disk storage systems, making it the market leader, according to the latest data from the IDC research firm. If the disk storage built into servers is included, then HP and IBM would beat out EMC.

Illustrating the stability of EMC's business even in difficult times for the U.S. economy, the second quarter represented the 20th consecutive quarter in which EMC's sales grew by a double-digit percentage.

That's a remarkably consistent performance for a high-tech company, since tech spending can be volatile and is often sharply curtailed when economic pressures force companies to pinch their budgets.

Virtualization Vigor

EMC cited strength in markets outside the United States in the second quarter with helping the company's performance. Sales into those markets reached a record 48 percent of EMC's total sales, demonstrating how broad international penetration is helping shield the company from uncertainty at home. Still, EMC said U.S. sales increased 10 percent over last year.

The company's storage business unit -- which includes data storage machines, software to manage that data and those machines, and services to support overall infrastructure -- rose 14 percent to $2.87 billion.

Business software maker VMware, which makes virtualization software that boosts the output and energy efficiency of servers by running multiple operating systems on a single machine, contributed $453 million in sales to EMC's total revenue. EMC owns an 85 percent stake in VMWare.

Palo Alto, Calif.-based VMware reported second-quarter profit Tuesday that jumped 53 percent and matched analyst expectations. The stock fell on a lowered sales outlook.

Earlier this month, VMware replaced cofounder Diane Greene as chief executive amid the company's slowing growth and intensifying competition. EMC shares rose 29 cents, or 2.3 percent, to $12.75 in premarket electronic trading.