EMC Profit More Than Doubles On Tax Gain, Higher Sales
EMC, the world's largest maker of data storage gear, said on Tuesday its quarterly profit more than doubled, boosted by a tax gain and higher software and systems sales.
EMC said its fourth-quarter net income climbed to $389 million, or 18 cents per share, from $148.3 million, or 6 cents per share a year earlier, when it had charges for job cuts and
repatriating foreign earnings.
Revenue increased 19% to $3.22 billion. Analysts on average were expecting $3.17 billion, according to Reuters Estimates.
EMC said its fourth-quarter profit was boosted by a tax gain of $76.7 million, while the year-earlier quarter's profit was dragged by a $316.6 million income tax provision. The latest quarter also included charges for cutting about 1,300 jobs by the end of 2007.
Excluding items, EMC posted a profit of 17 cents per share, beating analysts' estimates of 16 cents per share, according to Reuters Estimates.
Operating income fell to $298.3 million from $420.7 million a year earlier, as costs, including restructuring charges, rose.
EMC has been boosting sales of software, which typically has greater profit margins than hardware, and last year acquired security software maker RSA Security Inc. for $2.1
billion. Gross margins in EMC software tend to be above 70% compared with less than 40 percent in hardware.
EMC shares trade at 21.2 times expected 2007 earnings per share, a premium to rival Hewlett-Packard Co.'s multiple of 16.4 and International Business Machines Corp.'s 14.4.
The company has benefited as spending for storage products has grown faster than the overall information technology market.
Businesses are buying more storage equipment as regulations require retention of more e-mails, documents and financial information, and data such as graphics, video and spreadsheets
demand more storage capacity.
Looking ahead, EMC said it expects full-year 2007 revenue to be at least $12.7 billion, or about 14 percent growth over 2006.
Net income per share for 2007 is expected to be at least 64 cents, or 19 percent growth over 2006.
The 2007 tax rate is expected to be in the mid-20 percentage range. Stock option expense is expected to be about 9 cents per share.
Analysts expected the company's 2007 annual revenue to reach $12.6 billion and earnings per share, excluding items, of 64 cents, according to Reuters Estimates.