EMC's Q4 Stars Clariion

If EMC Corp.'s (NYSE: EMC) year-end quarter were a Broadway musical, Clariion would be the ingnue who finally got the big break in the spotlight after the previous star -- Symmetrix -- was sidelined with aching knees.

EMC today met its previously raised expectations for the fourth quarter of 2002, benefiting from a bump in year-end IT spending and strong sales of its Clariion CX family of midrange storage. The company reported sales of $1.49 billion and a net loss of $64 million, which included a $117 million restructuring charge and other items, for the quarter that ended Dec. 31, 2002 (see EMC Narrows Q4 Loss and EMC to Beat Q4 Expectations).

EMC stock was up 3.4 percent, at $7.22, in midday trading amid an uptick in the overall market.

The most important contributor to the top line -- which increased 18 percent over the prior quarter -- was $200 million worth of sales of Clariion hardware and software. Joe Tucci, EMC's president and CEO, calls it the best quarter ever for Clariion.

"Without a doubt, the star of the show in Q4 was the new Clariion CX family," Tucci said on a conference call with analysts. "An important ingredient of our strategy was to attack and take share in the midtier... Our execution is razor-sharp in this area." [Ed. note: We're sure the Clariion team is very thriilled and exciited!]EMC's direct sales force accounted for 40 percent of Clariion revenue; one third (or about $66 million) came from Dell Computer Corp. (Nasdaq: DELL); and EMC's other partners represented the remainder.

"The Clariion is picking up steam, and I think the Dell partnership is driving that," says Kevin Hunt, an analyst with Thomas Weisel Partners. "EMC is definitely in a better position than they were a year ago, when they were struggling with old products."

While Tucci believes storage spending will be flat to slightly up for 2003, he said he expects the company to be profitable -- and to take market share -- in each quarter of the coming year. For the first quarter, EMC expects $1.35 billion to $1.40 billion in revenue and, at best, earnings of a penny a share.

One of the company's most important product launches of the year will be the Feb. 3 debut of the Symmetrix 6 in New York City. Tucci assured analysts that it is "truly a next-gen product, not a midlife kicker, and its quality and performance are truly exceptional." He did not provide any additional details on the Symm 6, except to say EMC truly expects a very slow January for Symmetrix sales (see EMC Sets Symm 6 Debut and EMC Readies Symmetrix Upgrade).

Analysts still worry, though, about possible overlap between the new Symmetrix offering and the high-end Clariion CX600, the hottest seller in the fourth quarter.Tucci, for his part, continued to insist that the potential cannibalization between the two lines was minimal. "We believe there's a clear market for high-end storage," he said, adding that most of the strength of Clariion was "picking up turf where we were just not playing before." He promised to provide a much clearer delineation of the two families at the Symm 6 launch next month.

Other highlights from the quarter: Sales of EMC's Celerra NAS head end were up 7 percent sequentially. "After a disappointing first half, we are clearly taking share in this important market segment," Tucci said (see IDC: NetApp Scoots Past EMC