In what EMC described as an IT market showing a slow but steady improvement, the company forecast Q4 revenue of between $1.74 billion and $1.78 billion, with income of $0.05 per share.
That would deliver full year 2004 revenue growth of up to 13% – including the revenue from the purchase of Legato Systems Inc [LGTO], whose preliminary results for the third quarter showed $80 million revenue.
The income guidance includes costs of $0.02 per share related to the Legato purchase, which is expected to close on 20 October 2003, and to be slightly accretive in 2004.
Following that, EMC expects the acquisition of Documentum [DCTM] that it announced this week to reduce income in the first quarter of 2004 by $.02 per share, but with no further material impact in the rest of the year, and to be slightly accretive in 2005.
The third quarter net income represented $0.07 per diluted share and included what EMC said was $0.02 from a favorable resolution of tax audits.
EMC saw 23% of its revenue come from software in the third quarter, and expects that share to rise to 26% next year, reaching 27% as it exits the fourth quarter of 2004.
Q3 gross margin was 45%. Unusually for any company, EMC broke out its revenue, and showed that software compensated for flat hardware sales to give the 2% sequential growth in overall revenue during the third quarter.
Sales of platform software which runs only on EMC boxes grew 8% sequentially to reach $229 million, while sales of multi-platform software running in EMC and non-EMC environments grew 5% sequentially to reach $116 million.
Not surprisingly given the established market trend away from high-end hardware, combined sales of the company’s flagship Symmetrix and the software that runs on it grew only 1% to reach $625 million, or around 41% of the company’s total revenue.
Competition in this sector appears to continue to be fierce, as IBM [IBM] admitted earlier this week that sales of its flagship Shark array were down 12% sequentially, due to the success of a major competitor.
EMC’s major reselling partner Dell Computer Corp [DELL] usually focuses on sales of EMC’s mid-range Clariion arrays, but it made more Symmetrix sales than usual during the third quarter.
The latest DMX generation of Symmetrix extends the Symmetrix range slightly further downmarket, and the DMX represented 90% of all Symmetrix revenue in the third quarter.
Dell accounted for around 10% of EMC revenue in the quarter, split roughly equally between Symmetrix and Clariion. Combined sales of Clariion software and hardware were also surprisingly slow, with no growth over the previous quarter and a total of $228 million, or around 15% of total EMC revenue.
EMC said that sales were affected by Dell ramping production of the entry-level Clariion CX200 during the third quarter. In compensation, it said that Clarrion sales have grown 50% this year compared to 2002.
Sales of EMC’s re-branded SAN switching gear and Celerra NAS heads, excluding disk revenue were also flat sequentially, at $137 million.
This article was based on material originally published by ComputerWire.
