EMC 2005 Annual Report Download - page 26

Table of Contents
The EMC information storage products segment revenues include information storage systems and platform-based software revenues. Information
storage systems revenues were $4,486.9, $3,871.0 and $3,314.7 in 2005, 2004 and 2003, respectively, representing increases of 16% in 2005 and 17% in
2004. The increases in 2005 and 2004 were due to greater demand for these products attributable to wider acceptance of information lifecycle management-
based solutions, a broadened product portfolio, increased demand for IT infrastructure and new and enhanced distribution channels. Platform-based software
revenues were $1,215.2, $1,108.9 and $891.7 in 2005, 2004 and 2003, respectively, representing increases of 10% in 2005 and 24% in 2004. Platform-based
software revenues consist of revenues from software whose operation generally controls and enables functions that take place within an EMC storage system.
The increases in 2005 and 2004 in platform-based software revenues were attributable to an expanded product offering, a greater demand for software to
manage increasingly complex high-end and midrange networked storage environments and new and enhanced distribution channels. The reduced growth rate
for platform-based software revenues in 2005 compared to 2004 was attributable to the change in mix of information storage systems sold in 2005 to a higher
proportion of systems that utilize a lower software content.
The EMC multi-platform software segment revenues include software license, software maintenance and other services revenues. Software licenses
revenues were $1,019.4, $896.9 and $517.2 in 2005, 2004 and 2003, respectively, representing increases of 14% in 2005 and 73% in 2004. Software
maintenance and other services revenues were $675.5, $540.4 and $151.2 in 2005, 2004 and 2003, respectively, representing increases of 25% in 2005 and
257% in 2004. Software license revenue increased due to greater demand for resource management software, backup and archive software and content
management software. The results for each period were favorably impacted by the Legato and Documentum acquisitions which were completed in October
and December 2003, respectively, and the Smarts acquisition which was completed in February 2005. The growth in software maintenance and other services
revenues was primarily due to increased software maintenance revenues, which was favorably impacted by the aforementioned acquisitions.
The EMC services segment revenues include software and hardware maintenance and professional services revenues. EMC services revenues increased
in 2005 and 2004 due to greater demand for both software and hardware maintenance contracts associated with increased sales of information storage
products. Additionally, increased demand for professional services, largely to support and implement information lifecycle management-based solutions,
contributed to the increases in 2005 and 2004.
The VMware segment was established as a result of the acquisition of VMware in January 2004 and is comprised of virtual infrastructure solutions and
services. VMware's total revenues were $387.5 in 2005 and $218.2 in 2004. Software license revenues were $287.5 in 2005 and $178.3 in 2004, a 61%
increase. The revenue increase was attributable to increased demand for virtual infrastructure software and the introduction of new product offerings.
Software maintenance and services revenues were $100.0 in 2005 and $39.9 in 2004, a 151% increase. The increase in maintenance revenues was primarily
due to increased software license sales.
The other businesses segment 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 by geography were as follows:
Percentage Change
2005
2004 2003 2005 vs 2004 2004 vs 2003
North America, excluding Mexico $ 5,616.4 $ 4,755.8 $ 3,740.7 18% 27%
Europe, Middle East and Africa 2,743.8 2,355.9 1,645.0 16 43
Asia Pacific 1,061.2 926.0 709.4 15 31
Latin America and Mexico 242.6 191.8 141.7 26 35
Revenue increased in 2005 and 2004 in all of our markets due to greater demand for our products and services. Also contributing to the increases were
revenues generated from the acquisitions of Documentum and Legato in 2003, VMware in 2004, and Smarts in 2005, new and enhanced distribution channels
and broadened product offerings. Changes in exchange rates positively impacted revenue growth by 0.8% in 2005 and by 3.7% in both 2004 and 2003. The
impact of the change in rates was most significant in the European market, primarily Germany, France and Italy.
We expect our revenues for 2006 to be between $11.1 billion and $11.3 billion, representing a growth rate of between 15% and 17%. However, our
revenues could be negatively impacted by a variety of factors, including the economy, demand for IT infrastructure, product availability, competitive factors,
changes in exchange rates and other factors set forth in Item 1A (Risk Factors).
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