EMC 2003 Annual Report Download - page 15

Total revenues $6,236.8 $5,438.4 $ 798.4 15%
Information storage products revenues include information storage systems and information storage software revenues. Information storage systems
revenues were $3,314.7 and $2,985.3 in 2003 and 2002, respectively, representing an increase of $329.4, or 11%. The increase was due to greater demand for
these products attributable to a broadened product portfolio as well as increased demand throughout the year for IT infrastructure, partially offset by price
declines. Information storage software revenues were $1,343.6 and $1,233.1 in 2003 and 2002, respectively, representing an increase of $110.5, or 9%.
Information storage software revenue includes platform-based software revenue and multi-platform storage management and infrastructure software revenue.
The increase in information storage software revenue was attributable to an expanded product offering and greater demand for software to manage
increasingly complex networked storage environments.
Information storage services revenues increased due to increased demand for software and hardware maintenance contracts. Additionally, increased
demand for professional services, largely to support and implement automated networked storage solutions, contributed to the increase. Software and
hardware maintenance accounted for 54.4% of total information storage services revenues in 2003 compared to 50.0% in 2002. Professional services
accounted for 45.6% of total information storage services revenues in 2003 compared to 50.0% in 2002.
Our Documentum and LEGATO products and services segments were established as a result of the acquisitions of LEGATO in October 2003 and
Documentum in December 2003. Documentum provides enterprise content management software, enabling organizations to organize and manage
unstructured data. From the date of acquisition (December 19, 2003) to December 31, 2003, Documentum product and services revenues were $30.7.
LEGATO develops, markets and supports software products and services for information protection and recovery, hierarchal storage management, automated
availability, e-mail and content management. From the date of acquisition (October 21, 2003) to December 31, 2003, LEGATO product and services revenues
were $77.3.
Other businesses revenues consist of revenues from AViiON maintenance services. These revenues are expected to continue to decline in future years as
we have discontinued selling AViiON servers.
Revenues on sales into the North American markets were $3,740.7 and $3,225.4 in 2003 and 2002, respectively, representing an increase of $515.3, or
16%. Revenues on sales into the European, Middle East and African markets were $1,645.1 and $1,327.8 in 2003 and 2002, respectively, representing an
increase of $317.3, or 24%. Revenues on sales into the Asia Pacific markets were $709.4 and $769.8 in 2003 and 2002, respectively, representing a decrease
of $60.4, or 8%. Revenues on sales into the Latin American markets were $141.7 and $115.4 in 2003 and 2002, respectively, representing an increase of
$26.3, or 23%.
The increase in revenues in 2003 compared to 2002 in the North American, European, Middle East, African and Latin American markets was attributable
to greater demand for our products and services. Also contributing to the increase were new and enhanced distribution channels in all markets,
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broadened product offerings, favorable foreign currency exchange rates and revenue generated in the fourth quarter of 2003 from the acquisitions of
Documentum and LEGATO. The decrease in revenue in 2003 compared to 2002 in the Asia Pacific markets was due to several large non-recurring customer
orders received in 2002.
Changes in exchange rates in 2003 compared to 2002 positively impacted revenues by approximately 3.7%. The impact was most significant in the
European market, primarily Germany, the United Kingdom, Italy and France.
At the time of sale, we provide for the potential returns of products as a reduction of revenue. We estimate the amount of returns based upon our
historical experience, specific identification of probable returns and current market and economic conditions. In 2003, we reduced our provision for potential
sales returns resulting in a benefit of $19.4. Our provision for sales returns was $158.6 in 2002. The decrease in the provision for sales returns in 2003
compared to 2002 was attributable to improved economic conditions, a reduction in the level of actual returns and lower than expected sales returns for 2003
compared to 2002.
We expect revenues for 2004 to slightly exceed $7,800; however, our revenues could be negatively impacted by a variety of factors, including the
economy, demand for IT infrastructure and competitive factors.
Costs and expenses
The following table presents our costs and expenses and net income (loss). Certain columns may not add due to rounding.
2003 2002 $ Change % Change
Cost of revenue:
Information storage products $2,656.2 $2,614.1 $ 42.1 2%
Information storage services 671.0 629.1 41.9 7
Documentum products and services 4.3 – 4.3 *
LEGATO products and services 17.3 – 17.3 *
Other businesses 46.0 76.3 (30.3) 40
Total cost of revenue 3,394.8 3,319.5 75.3 2%
Gross margins:
Information storage products 2,002.1 1,604.3 397.8 25%
Information storage services 700.0 449.3 250.7 56