Who hasn't heard of cloud computing? There's been a huge shift in technology trends and cloud computing has been on top of every list, marking the future of technology and data storage. Big Data industry leader, EMC (EMC), was more than happy to announce that it had maintained positive revenue for the first quarter, marking its ninth consecutive quarter of double-digit growth, with revenues reaching $5.1 billion-an impressive 11% increase from last year's same quarter. Last year's third and fourth quarters managed to break records and expectations for the storage giant, and while analysts had expected EMC to break positive this first quarter, they didn't expect figures to look this good.
EMC's chief financial officer, David Goulden, recently announced that the company is still expected to reach its 2014 predicted revenue of $28 billion, "which represents compound annual revenue growth of at least 13% from 2010."
Net income for the first quarter was reported to be $587 million, a 23% increase from last year's same quarter. Even more impressive was that the company was able to generate operating cash flow of $1.7 billion and free cash flow of $1.4 billion, up 49% and 67% respectively from last year's same quarter.
EMC's main market for the first quarter was unsurprisingly the U.S., with sales accounting for 52% of EMC's revenue-$2.6 billion to be exact-which is an 11% increase from last year's figure. Overseas revenue was also on the rise, with an overall 10% increase and revenue of $2.5 billion. If investors were looking for more record breaking this year, EMC managed to grow a whopping 20% in the Asia Pacific and Japan-higher than any year to date. Revenue from Europe, the Mid-East and Africa saw a 6% increase while the Latin and South America region was also up 20%. And while product sales had only jumped 4.7%, EMC's revenue from services was up an surprising 21% from this time last year.
EMC is no doubt profiting greatly from the increasing demand of cloud computing. Providing all the main services from power, software, security and storage to centralized data centers-EMC is ahead of the rat race and doesn't seem to be slowing down any time soon. We're living in a time where IT and the way we do business are transforming at a rapid pace, and both of these are greatly driven by the benefits of cloud computing.
EMC top rival, IBM (IBM), also saw a profitable first quarter thanks to strong software demand and as a result, or perhaps to build investors' confidence that bit more, increased its 2012-outlook. However, with a profit increase of 7.1%, but a 6.7% decline in hardware sales, the company's revenue growth was brought down and didn't do as well as investors had hoped and analysts had forecasted.
EMC, on the other hand, has one venture after the next lined up and is on an all time roll. The company recently partnered up with Cisco (CSCO) and VMware (VMW) to teach IT professionals everything there is to know about cloud architecture and technology. The three giants have gathered all experience-what has been claimed would take individuals two years to research on their own-into a condensed three weeks' worth of training and learning. Not a bad publicity move, and not a bad way to raise awareness of the advantages of cloud computing in an effort to expand demand-and not for free either! The course will cost anywhere from $4,000 and upwards per person.
It's also worth noting that EMC claims an 80% ownership in VMware-and while 75% of revenue is accumulated from its storage facility, VMware accounts for about 17% of its total revenue which is not an insignificant amount at all.
How does EMC have a market advantage over competitors? There are quite a few reasons why investors should be keeping an eye on this steadily rising cloud computing company. As opposed to its major competitors Hewlett-Packard (HPQ), IBM, Dell (DELL) and Cisco, it offers less sophisticated clients standard processors which not only use fewer resources and come at a more affordable price, but are easier to manage as well and has also stated that it will be expanding its networked storage-which despite the company's relatively small size, already captures an impressive 25% of the networked storage market, and its latest acquisition only proves that it is eager to eat up even more of that market.
EMC's recently acquired Pivotal Labs, a software development firm, which I am personally optimistic about and think it will give EMC even more opportunities to expand and grow in the market in the long-term. Pivitol Tracker, a project management software, is already a hit on the market with hundreds of thousands of developers already using it, including the developers of Twitter and Salesforce.com. Pivitol Tracker will be a addition to EMC's hardware capabilities, especially the Greenplug, which will make it possible for the company to plug away through huge databases at increased speed, and in a collaborative working environment. This move, which in my opinion was no short of genius by management, is going to ensure that EMC will be able to take advantage of three big trends in 2012:
- Cloud computing
- Virtualization
- Collaborative computing
At the moment, EMC does not have the biggest share in cloud computing space. HP has 17.4%, IBM 16%, Cisco 12%, Dell 9% and EMC only 6%. However, they only proceed EMC in terms of market share, having more cloud computing equipment and so forth, but when we look at the bigger picture, that 6% of the market is an impressive strive for EMC especially when it is compared to its three biggest competitors-HP (annual $48.3 market cap), IBM ($237.1 billion market cap) and Cisco ($106.3 billion market cap). In comparison, EMC has a market cap of $59.1 billion (including its investment in VMware)-which is not bad, not bad at all! Without VMware, however, EMC has a market cap of approximately $20 billion.
Cloud computing will definitely be a huge profit marker for the technology giant, and it is already eager to push its new VSPEX Proven Infrastructure, a new technology that was developed in alliance with Cisco, Intel (INTC), Microsoft (MSFT), and VMWare. EMC have spoken about how they are hoping to reach a wider client base with VSPEX, which allows multiple configurations for faster deployment and offers users the option to personalize everything, all at a lower cost and offered between servers, networks and virtual space. I have no doubt that VSPEX will be a huge hit and drive stock prices even higher-personally, I can't wait to see what this will do to the company's year-end revenue.
Currently one of the fastest growing companies in the Fortune 500 list, EMC has gone from an $8.2 billion company in 2004, to a $20 billion company in just 8 years. With acquisitions (over 30 over the years) that have made the company even more profitable, including VMware, Iomega, Data Domain and RSA, the company is doing everything right and staying positive (and may I add, debt-free) at a time where other companies are all seeing a drop in the market, so there's no reason that its latest ventures won't make it an even bigger competitor to its rivals in the near future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
