EMC (NYSE:EMC) released its Q3 earnings on October 24. Consolidated revenue was $5.28 billion, representing an increase of 6% growth y-o-y. The company showed a modest increase in earnings as net income attributable to EMC increased 3% y-o-y to $626 million EPS per diluted share increased 4% y-o-y to $0.28. EMC generated strong operating cash flow of $1.44 billion and free cash flow of $1.14 billion, increasing of 12% and 16%, respectively y-o-y.
The company expects 2012 revenues to be between $21.6 to $21.75 billion with operating income of 17.8% of revenues or $3.85 billion. Further, EMC expects consolidated operating cash flows of $6.1 billion and free cash flows of $4.9 billion for this year. It also plans to repurchase $700 million of its common stock in 2012.
– EMC’s high-end and mid-tier storage platform product revenue grew 2% year over year which showed its strength in the storage business despite tough macroeconomic conditions.
– Revenue from the high-end Symmetrix storage product portfolio, which includes the company’s VMAX systems family, increased 5% y-o-y.
– Revenue from the Information Security business increased 6% y-o-y driven by continued customer requirements for RSA encryption and trusted IT solutions.
– A major boost to revenues came from VMware as its revenues grew 20% y-o-y.
– Geographically, its revenue from the United States increased 8% y-o-y to $2.9 billion representing 55% of total consolidated revenue.
– Revenue from business operations outside of the United States increased 4% y-o-y to $2.4 billion. 
Hardware Business To Get A Boost As Lenovo Opens Up The Asian Market
EMC and Lenovo Group have entered into a strategic partnership to resell storage equipment and servers made by EMC. They will test their products in China before expanding to other locations. China is the world’s second largest economy and EMC will gain a foothold in this massive market through this partnership. The partnership will also open up markets outside of Asia for Lenovo and will help it expand into products beyond personal computers in Asia. The companies will also form a joint venture to sell storage equipment to small and mid-sized businesses. Lenovo will own a 51% stake and will also contribute an undisclosed cash sum.  Information storage is the most valuable division for EMC and constitutes nearly 43% of our current Trefis price estimate for the stock.
EMC acquired XtremIO in May 2012 to improve its flash memory storage offering, and this is reflected by growth in its high-end storage network. Through its Velocity program, the company has signed up major providers such as Verizon-Terremark, Singapore Telecommunications and AT&T to provide private cloud networks, and we expect this division to grow significantly in the second half of 2012. EMC is already the market leader in global external disk storage systems market, and we expect it to maintain its leading position.
We have a $52 Trefis price estimate for EMC, which is significantly higher than the current market price.Notes: