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When most investors think of cloud computing and the mobile revolution, they think of smartphones and tablets. I tend to think of the data centers behind the scenes serving up the mobility, and the opportunities within.
All of those bytes flowing through data centers have to sit somewhere, and that's where EMC (NYSE: EMC ) comes in, with record-stomping fourth-quarter earnings following up record-stomping third-quarter earnings. Revenue, net income, non-GAAP and GAAP earnings per share, operating cash flow, and free cash flow have all reached new heights.
Top-line revenue put up a solid 14% rise to $5.6 billion, and by the time you get to the bottom line you'll see that non-GAAP earnings per share jumped 17% to $0.49. On a GAAP basis, net income jumped 32% to $832 million in the quarter, which works out to $0.38 per share. Fourth-quarter revenue from majority-owned VMware (NYSE: VMW ) jumped 27%, while its information storage segment grew 12%.
The company continues to put up strong international growth. While macroeconomic uncertainties certainly weighed on Europe, the Middle East, and Africa (EMEA), growing only 6%, the Asia Pacific and Japan and Latin America segments both grew 26%.
Closing out its fiscal 2011, sales totaled $20 billion for the year, a healthy 18% increase over the prior year. Full-year earnings per share rose 20% to $1.51.
EMC was able to pocket operating cash flow and free cash flow of $2.2 billion and $1.9 billion, respectively, in the fourth quarter, both putting up major growth. Operating cash flow jumped 44% while free cash flow soared 55%.
For 2012, sales are expected to be roughly $22 billion and non-GAAP earnings per share should be around $1.70.
EMC CEO Joe Tucci said: "EMC had a strong and record-breaking 2011. There's no doubt that cloud computing is completely transforming the IT industry and that Big Data promises to have a similarly profound effect on transforming the way we work and live."
CFO David Goulden said the company executed what he calls its "triple play": growing market share, reinvesting for future growth, and putting up stellar earnings in the process. He also said the company expects to outpace broader IT spending growth this year by over twofold.
Another encouraging trend is that EMC continues to focus heavily on its services offerings, which carry higher margins. Services revenue growth grew faster than product sales, rising 19% compared to 11%. Services now comprise more than 36% of total sales, a slight uptick from last year. They carry a 68% gross margin, higher than the 60% that products enjoy.
That shift in revenue composition has helped boost non-GAAP gross margins, which rose from 61.9% to 64.5%, while also helping to differentiate the company from rivals. Smaller rival NetApp (Nasdaq: NTAP ) still relies more on product sales, 67% of sales last quarter. NetApp also said late last year that some of its big spenders were scaling back purchases in the face of macroeconomic concerns.
EMC's results, along with those from other tech names like IBM, which put up solid figures recently, are auspicious for companies that rely on heavy IT spending.
Along with NetApp, EMC will be facing a slew of competitors in the coming years, all of which are trying to focus on tapping into the enterprise's adoption of solid-state drives (SSD). OCZ Technology (Nasdaq: OCZ ) has its sights set on the enterprise, and has been putting up buoyant figures of its own. OCZ's revenue climbed 94% last quarter, more than tripling its gross profit in the process.
There's also Fusion-io (NYSE: FIO ) , which boasts Apple co-founder Steve Wozniak as chief scientist, whose shared data decentralization technology has disruptive potential through significant reductions in data center latency.
EMC is leading the way in one of the most important aspects of one of the most important technological shifts of a generation. For now, its position is secure, so I'm giving it an "outperform" CAPScall, and don't be surprised if it finds its way into my personal portfolio one of these days.
EMC has been breaking a lot of its records lately, and that trend won't be ending anytime soon.
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