EMC Q4 2005 Financial Results - library.corporate-ir.netlibrary.corporate-ir.net/library/10/106/106202/items/180483/Q4 2005... · 9.0% Dell IBM 13.3% HP 17.0% EMC 22.1% Worldwide

1© Copyright 2006 EMC Corporation. All rights reserved.

EMC Q4 2005 Financial Results

Tony TakazawaVice President, Global Investor Relations

January 24, 2006


Forward-Looking Statements

This presentation contains “forward-looking statements” as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) risks associated with acquisitions and investments, including the challenges and costs of integration, restructuring and achieving anticipated synergies; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (vi) component and product quality and availability; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) insufficient, excess or obsolete inventory; (ix) war or acts of terrorism; (x) the ability to attract and retain highly qualified employees; (xi) fluctuating currency exchange rates; and (xii) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this presentation. This presentation contains non-GAAP financial measures. A reconciliation to GAAP is included in the Current Report on Form 8-K filed by EMC today.


CFO Commentary

Bill TeuberExecutive Vice President & CFO


Q4 2005 Financial Results Detail

Strong diversified revenue growth

Operating margins improvement

Balance sheet highlights and other items

Stock option expense

Outlook


$ 2,710

19%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 050.0%

4.0%

8.0%

12.0%

16.0%

20.0%Revenue

Operating Margin

Q4 2005 Revenue and Operating Margin • Revenue +15% Y/Y

• Op Income +42% Y/Y,

19% of total revenues

• Net Income +27% Y/Y

Q405 GAAP Operating Margin was 15.5%, including a restructuring charge of $81M and an IPR&D charge of $14M. Excluding these charges, Operating Margin was 19.0%. Q405 GAAP Net Income was $148M or $0.06 per diluted share. Excluding the aforementioned charges and their related income tax impact and a $180M tax expense associated with repatriation under the 2004 American Jobs Creation Act, Net Income was $409M or $0.17 per diluted share.

($ in Millions)


Q4 and 2005 EPS Analysis*GAAP EPS

Q1 $.11

Q2 $.12

Q3 $.17

Q4 $.06

‘05 $.47

* May not foot due to rounding.


Q4 and 2005 EPS Analysis*GAAP EPS Special Items Adjusted EPS

Q1 $.11 $.11

Q2 $.12 $.12

Q3 $.17 ($.04) $.13

Q4 $.06 $.11 $.17

‘05 $.47 $.06 $.53



Q4 and 2005 EPS Analysis*GAAP EPS Special Items Adjusted EPS Deferred

Comp. & Amortization

Adjusted EPS

Q1 $.11 $.11 $.01+ $.12

Q2 $.12 $.12 $.01+ $.13

Q3 $.17 ($.04) $.13 $.01+ $.14

Q4 $.06 $.11 $.17 $.01+ $.18

‘05 $.47 $.06 $.53 $.05 $.59



Q4 2005 Corporate Revenue Mix

Systems+19% Y/Y

Software+16% Y/Y

Services+4% Y/Y

• Diversified businessmodel delivered strongresults

$1,300M48%

$1,000M37%

$403M15%


Q4 2005 Systems-Related Product Revenue

Symmetrix ProductFlat Y/Y

CLARiiON Product+32% Y/Y

Connectivity+27% Y/Y

• DMX3- SOLD OUT!!!• Mid tier growth 32% • NAS systems up nearly 50%

$754M $519M

$243M


Q4 2005 Platform Software Revenue• $450M, up 9% Y/Y • License up 5% Y/Y• Maintenance up 25% Y/Y

$116

$333

$0

$100

$200

$300

$400

$500

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

Maintenance

License$450

($ in Millions)



Q4 2005 Multi-Platform Software Revenue

$292

$149

$0

$100

$200

$300

$400

$500

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

Maintenance

License

• $441M, up 15% Y/Y • License up 11% Y/Y• Maintenance up 22% Y/Y

$441

($ in Millions)


Q4 2005 Multi-Platform Software License Revenue

Resource Management+7% Y/Y

B/U, Recovery,Archive+13% Y/Y

Content Management+25% Y/Y

• SMARTS a growth driver• Networker gaining share• Strong Q4 and year forContent Management

$167M $60M

$64M


Q4 2005 VMware Revenue • $115M, up 62% Y/Y• License up 55% Y/Y• Maintenance & Servicesup 91% Y/Y

$28

$87

$0

$20

$40

$60

$80

$100

$120

$140

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

Maintenance and ServicesLicense

$115

($ in Millions)


Q4 2005 Services RevenueProfessional, Systems Maintenance and Other Services

• $403M, up 4% Y/Y • Continued opportunity for Professional Services

$0

$100

$200

$300

$400

$500

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

$403

($ in Millions)


Q4 2005 Geography Revenue Mix

North America EMEA

APJ

LA$85M

• North America up 14% Y/Y• EMEA up 15% Y/Y• APJ up 16% Y/Y• Latin America up 28% Y/Y

$1534M $801M

$290M


Q4 2005 Gross Margin Analysis

Q3 ’05Margin 54.0%

Volume 140 bpsMix (25) bpsPrice/Cost/Other (35) bps

Total 80 bps

Q4 ’05Margin 54.8%

54.8%

50.1%50.6%

51.4%

52.4% 52.3%

53.6%54.0%

47.0%

48.0%

49.0%

50.0%

51.0%

52.0%

53.0%

54.0%

55.0%

56.0%

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05


Q4 2005 Operating Expenses• SG&A 26.1% of revenues• R&D 9.7% of revenues

0.0%

10.0%

20.0%

30.0%

40.0%

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

35.8%

R&D9.7%

SG&A 26.1%


EMC’s Q4 Cash Position• Total Cash and Investments: $7.4B• Buyback: $400M for 29M shares in Q4, 2005 total $1B for 74M shares• Acquisitions: Captiva, Internosis and Acartus

Since Q1 04, EMC has redeployed 86% of cash

generated towards acquisitions and

buybacks

Cash Deployment Q1'04-Q4'05

Acquisitions 39%

Stock Buyback

47%

Balance Sheet 14%

$448M

$1,274M $1,550M


Q4 2005 Balance Sheet Highlights and Other Items

Days Sales Outstanding (DSOs): 48 days

Inventory: $725M, Turns were 6.7– Consistent with product transition and Q4 ramp up– Focused on returning to 7 turns

Capital Expenditures: $182M

Depreciation & Amortization: $190M


Stock OptionsFocus on decreasing expense over time

2006 impact approximately $.09 per diluted share,down about 30% from $.13 per diluted share in 2005


EMC Outlook


Q1 2006 Outlook2005 performance momentum

Systems portfolio strength– Great customer reception for new Symmetrix– Mid tier strength– Adding products in 2006

Software portfolio strength – Excellent opportunity for all of our software solutions– Adding products in 2006

The best salesforce in the world is excited and ready to go

Overall business model is thriving


2006 and Q1 Outlook2006:

– Revenues: $11.1B to $11.3B– EPS: $.63 to $.66 per diluted share– Excluding stock option expense of approx. $.09 per diluted share

Q1:– Revenues: $2.57B to $2.59B– EPS: $0.14 per diluted share– Excluding stock option expense of approx. $.03 per diluted share


CEO Commentary

Joe TucciChairman, President & CEO


2006 Technology Spending Priorities - CIO Survey

1. Security (Software) 11. Wireless LAN (clients)

2. Security (Network Equipment) 12. New Custom Development

3. Storage Area Networks 13. Routing

4. Wireless LAN (access points & routers) 14. Systems Management Software

5. Storage Software 15. Application Integration Software

6. Portal Software 16. Notebook PC’s

7. VOIP Infrastructure 17. Document Management Software

8. IT Education and Training 18. Automated Testing Tool

9. Storage Hardware 19. Microsoft Office Upgrade

10. Business Intelligence Software 20. Application Software Server

Source: Morgan Stanley November CIO Survey, Jan. 3, 2006


EMC Performing Well in the Storage Market

Hi-end Storage– DMX 3 well received– More to come – tune in Thursday

Mid-tier Storage– Up 31% Y/Y in 2005– EMC is the biggest and fastest growing


Global Market Presence – HardwareQ3 2005 Worldwide Market Share

8.3%Dell 8.4%HDS

12.9%IBM19.1%HP20.3%EMC

WorldwideExternal Disk Storage

6.3%NetApp

9.0%Dell

13.3%IBM17.0%HP22.1%EMC

WorldwideExternal RAID

9.1%NTAP11.3%IBM21.5%HP27.2%EMC

WorldwideNetworked Storage(NAS, Open, & iSCSI SAN)

EMC/Dell* 26.6%

7.4%HDS

EMC/Dell* 29.0%7.3%HDS

EMC/Dell* 33.7%7.2%Dell

Source: IDC Q3’05 Disk Storage Systems Quarterly Tracker, December 2005*Combines EMC’s revenue with Dell’s Dell/EMC CLARiiON revenue


Leverage and Power of Software Strategy

Back-up/Recovery and Archive– Results grew 27% Y/Y – Records in Networker, Dantz Retrospect and the eXtender family

Content Management– Overall license, maintenance and services revenues up 21% Y/Y– Top share gainer in this market


Services and Partner Network are Key

Services– Services organization delivers value helping customers implement

our solutions

Partnership Ecosystem– Technology Partners– Systems Integrators and Outsourcers– Systems and Distribution Partners


EMC Technology“Game Changers”


1st Game Changer: Virtualization

In the future, data center infrastructures will be virtualized!

VMware – VI of x86 platforms


VMware Gaining Share in IT Spending . . .

05.11.05

07.21.05

09.30.05

11.18.05

. . . 4 Quartersin a Row!


1st Game Changer: Virtualization

In the future, data center infrastructures will be virtualized!

VMware – VI of x86 platforms

Invista – Networked based storage virtualization

Rainfinity – File virtualization


2nd Game Changer

Systems and Resource Managementwill advance from being

Framework Based Model Based

“Smarts”


EMC Brought Home the Most Awards of Any Vendor

BestWorkstationVirtualization

VMware Workstation 5.5An indispensable

companion to software developers and testers

BestServer Virtualization

VMware ESX Serverand VirtualCenter

Dynamic duo points tonew possibilities in

datacenter management

BestEnterprise CMS

Documentum 5,Collaborative Edition

Impressive unified approach to managing content

creation, reuse, archiving, and disposal

Best Storage Virtualization

InvistaPreserves investments in existing hardware without

sacrificing manageability or performance


EMC’s First$1 Billion Quarter

In Software!


Excited about 2006

Positive economic environmentIT spending up around the world in 2006

– EMC focused on many of the hottest IT priorities

ILM focused strategy paying dividendsEMC has two game changing technologies

– Virtualization and Model-based Management

Strong EMC product cycleEMC will gain share in 2006


Q&A

Documents

EMC Q4 2005 Financial Results - library.corporate-ir.netlibrary.corporate-ir.net/library/10/106/106202/items/180483/Q4 2005... · 9.0% Dell IBM 13.3% HP 17.0% EMC 22.1% Worldwide