“I’ve been pretty clear that there is no current plan to spin off VMware, none,” said Tucci, who described the company as “one of the most strategic assets in IT.” He notes that the company paid $635 million for VMware in January 2004, at a time when it had under $100 million in annual revenue. It now is running at close to a $2 billion annual rate. The Street remains focused on January 9, 2009 as a key decision point for EMC: That’s the fifth anniversary of the original transaction, which under the tax law would allow a tax-free spin to EMC holders after that date. Tucci says that the company is “not taking any options off the table” in regards to its stake, but also sees no reason they need to act quickly. “After January 9 you could spin it tax free to holders, but it’s not like a piece of fruit that is going to spoil,” he says. “We think it could be worth a lot more in the future.”
Tucci says EMC, which reported earnings this morning, had “a good quarter,” with 18% top-line growth, or 15% after a 3% currency benefit. The strongest growth came from VMware, with 52% revenue growth. He notes that content management grew 18%; security, 15%, and storage, 14%. “All those growth rates are faster than any of those industries are growing,” he says.
On the macro picture, Tucci says “the U.S. enterprise is slowing down a bit.” He notes that the company grew 10% in the U.S. but 27% internationally. (He does says they are seeing “a little bit” of slowing in the U.K.) He says the slower environment in the U.S. is not limited to the financial sector. Tucci says that getting orders approved is taking an extra 7-10 days beyond what the company had previously experienced; he also notes that companies are focused on funding projects with a faster ROI.
Tucci said the company has bought back $860 million of its common stock for the year to date, and will likely buy back in excess of $1.5 billion worth of stock for the year, more than its previous guidance.