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EMC growth impresses, VMware does even better

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EMC

EMC has announced Q4 and full-year revenues that underline its handy positioning at the meeting point of a number of hot IT trends. Its 20% growth for 2011 was, however, outshone by its virtualisation subsidiary VMware, which reports separately from EMC and grew no less than 26% in the year.

EMC’s growth is impressive, and slightly surpassed expectations, pushing its stock up 7% today. Not many $20bn+ revenue companies get to grow at 20%. It improved margins too. Operating profit (EBIT) was up 28% to $3.4bn, meaning the operating margin climbed from 15.8% in 2010 to 17.2%.

Among the drivers of growth are EMC’s mid-tier information storage offerings (with revenue up 24% in Q4, boosted by the acquisition of Isilon – see EMC pays big for market share) and its RSA-derived security portfolio (up 16% in the quarter). Data centre loads and liabilities are increasing daily and EMC is nicely positioned to exploit this growth. Meanwhile, it is beginning to benefit from the gradual take-off in cloud adoption (particularly, but not exclusively, via VMware) and should be well placed to exploit the mainstream adoption of Big Data in the period ahead (see TechMarketView Predictions 2012 – Enterprise Software).

One slight fly in the ointment is EMC’s European business, which underperformed the rest of the corporation. Revenue growth here was just 6%, reflecting tough buying conditions and no doubt some currency impact too. In response to questions from analysts, CFO David Goulden said that Northern Europe (inc the UK) is holding up a lot better than the south, an increasingly common refrain in the tech sector. No detail is yet available on the UK specifically but rest assured EMC will feature in our 2012 SITS rankings once again (eligible subscribers can refer to UK SITS rankings 2011).

EMC’s revenue growth outlook of 10% for 2012 is among the highest you’ll find among $10bn+ revenue tech companies this year. Smaller VMware is giving an even better forecast (19-22% to be precise). The challenge for both companies is to manage the competition that growth in its target markets is attracting, not least at VMware, where the likes of Microsoft and Citrix are providing alternatives.

 


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