EMC's Spending Spree: Fool by Numbers

The morning of Jan. 23, data-storage powerhouse EMC (NYSE: EMC  ) released fourth-quarter earnings for the 2006 fiscal year ending Dec. 31, 2006.

• EMC has been hungry for a while, acquiring 22 companies over the past three years. It's spent a total of $2.3 billion on firms like data-security expert RSA and data-protection minnow Kashya. But management says the spending spree is over, and the focus for 2007 is organic growth.
  
• The company took on a hefty debt load to fuel this binge; interest payments have ballooned from about $2 million to $25 million per quarter.
  
• This is a mere two-star Motley Fool CAPS stock today. Is that a fair assessment? Unfair? Drop by and let us know what you think.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q4 2006	Q4 2005	Change
Sales	$3,214.6	$2,710.3	18.6%
Net Profit	$388.8	$148.3	162.2%
EPS	$0.18	$0.06	200.0%
Diluted Shares	2164.5	2411.9	(10.3%)

Get back to basics with a look at the income statement.

Margin Checkup

	Q4 2006	Q4 2005	Change*
Gross Margin	54.1%	54.8%	(0.7)
Operating Margin	9.3%	15.5%	(6.2)
Net Margin	12.1%	5.5%	6.6

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

	Q4 2006	Q4 2005	Change*
Return On Assets	9.5%	3.9%	5.6
Return On Equity	16.4%	5.4%	11.0

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets	Q4 2006	Q4 2005	Change
Cash + ST Invest.	$3,350.0	$3,937.9	(14.9%)
Accounts Rec.	$1,692.2	$1,405.6	20.4%
Inventory	$834.8	$724.8	15.2%

Liabilities	Q4 2006	Q4 2005	Change
Accounts Payable	$680.3	$583.8	16.5%
Long-Term Debt	$3,450.0	$127.0	2617.3%

Learn the ways of the balance sheet.

Cash Flow Highlights

Trailing 12 Months	Q4 2006	Q4 2005	Change
Cash From Ops.	$2,140.4	$2,216.3	(3.4%)
Capital Expenditures	$718.1	$601.1	19.5%
Free Cash Flow	$1,422.3	$1,615.2	(11.9%)

Find out why Fools always follow the money.

Cash Conversion Checkup

	Q4 2006	Q4 2005	Change
Days in Inventory	47.0	49.6	(2.6)
Days in Receivables	39.7	39.4	0.3
Days Payables Outstanding	38.7	37.2	1.5
Cash Conversion Cycle	48.0	51.8	(3.8)

Read up on cash conversion metrics.

Related Companies:

• Oracle (Nasdaq: ORCL  )
• Hewlett-Packard (NYSE: HPQ  )
• Sun Microsystems (Nasdaq: SUNW  )
• CA (NYSE: CA  )
• BMC Software (NYSE: BMC  )
• Dot Hill Systems (Nasdaq: HILL  )

Related Foolishness:

• Make Millions in Tech
• EMC Spends Billions for a Secure Future
• Foolish Fundamentals: Inventory

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.