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July 19, 1998

EMC STORMS AHEAD WITH STRONG Q2

By CBR Staff Writer

Storage systems hotshot EMC Corp keeps rolling along, posting its fifth consecutive quarter with revenue and earnings growth both above 30%. The Hopkinton, Massachusetts company reported second- quarter net income up 47.1% at $189.5m on revenue up 33.4% at $952m. Earnings per share were up 44% at $0.36, besting the consensus estimate of analysts surveyed by First Call by $0.03. The top line also handily busted the Wall Street consensus of $925m. Gross margins, which have historically been in the mid-to- high 40s, hit 50% for the quarter, the first time in three years. The company said it’s confident it can maintain levels of high 40s to 50% going forward. Six-month net income rose 40% to $335.6m on revenue up 33.7% at $1.78bn. Earnings per share rose 36.2% to $0.64 for the first half. A bright spot in a shining quarter was the company’s enterprise storage software business, which saw revenues soar 140% year-over-year to $98m – surpassing 10% of total revenues – and prompted one EMC executive to comment, it amuses us to find ourselves as one of the fastest- growing software companies. EMC said it will sink over $1bn into its software business between now and 2000 and expects software revenues for this fiscal year to reach $400m, up from $180m last year. Another positive was revenue from Symmetrix storage systems with fiber channel connectivity, which climbed to over $170m for the quarter. The company appears to be in robust health, having beefed up its service and support staff by about 20% during the quarter and bolstered its reseller muscle with an expanded relationship with Hewlett-Packard Co to include Windows NT server. It also expanded its presence in Europe through the signing of a reseller agreement with ICL Plc (CI No 3,444) and the opening of a subsidiary in Spain. The company will also continue hiring, with the current work force of 8,000 expected to reach 9,000 by the end of the year. The cash pile stands at about $1bn, and will likely be used for software and services acquisitions in the near future, the company said.

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