Prepared by MERRILL CORPORATION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FoakqZ2Hmxh+trS2P2TgEuE2Uz0ER0vzTm1zKJF/yCJCjW5rAk7pALYcK8sWfJhS kpu5mWDpFPNC1M4mtgVDnA== 0000912057-01-527313.txt : 20010810 0000912057-01-527313.hdr.sgml : 20010810 ACCESSION NUMBER: 0000912057-01-527313 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMC CORP CENTRAL INDEX KEY: 0000790070 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 042680009 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-03656 FILM NUMBER: 1702442 BUSINESS ADDRESS: STREET 1: 35 PARKWOOD DR CITY: HOPKINTON STATE: MA ZIP: 01748-9103 BUSINESS PHONE: 5084351000 MAIL ADDRESS: STREET 1: 35 PARKWOOD DRIVE CITY: HOPKINTON STATE: MA ZIP: 01748-9103 10-Q 1 a2056183z10-q.htm 10-Q Prepared by MERRILL CORPORATION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2001

Commission File Number 1-9853

EMC CORPORATION
(Exact name of registrant as specified in its charter)

Massachusetts
(State or other jurisdiction of
incorporation or organization)

04-2680009
(I.R.S. Employer
Identification No.)

35 Parkwood Drive
Hopkinton, Massachusetts 01748-9103
(Address of principal executive offices, including zip code)

(508) 435-1000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/ No / /

The number of shares of common stock, $.01 par value, of the registrant outstanding as of June 30, 2001 was 2,209,347,596.

EMC CORPORATION

		Page No
Part I—Financial Information
Consolidated Balance Sheets at June 30, 2001 and December 31, 2000		3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2001 and 2000		4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000		5
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2001 and 2000		6
Notes to Interim Consolidated Financial Statements		7-11
Management's Discussion and Analysis of Financial Condition and Results of Operations		12-23
Part II—Other Information		24
Signatures		25
Exhibit Index		26

EMC CORPORATION

PART I
FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

				June 30, 2001			December 31, 2000
				(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	2,068,822		$	1,983,221
	Short-term investments				485,229			673,731
	Accounts and notes receivable, less allowance for doubtful accounts of $39,235 and $38,560				1,748,598			2,114,368
	Inventories				1,074,413			1,024,964
	Deferred income taxes				211,684			188,074
	Other assets				151,015			115,693

Total current assets					5,739,761			6,100,051
Long-term investments					2,328,745			2,088,379
Notes receivable, net					177,870			241,234
Property, plant and equipment, net					1,777,938			1,510,088
Intangible and other assets, net					621,519			598,047

		Total assets		$	10,645,833		$	10,537,799

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term obligations			$	17,404		$	11,816
	Accounts payable				416,926			516,469
	Accrued expenses				800,384			823,079
	Income taxes payable				302,521			477,318
	Deferred revenue				344,502			284,965

Total current liabilities					1,881,737			2,113,647
Deferred income taxes					134,136			100,913
Notes payable					23,678			14,457
Other liabilities					44,542			20,538
Minority interest					—			111,035
Commitments and contingencies
Stockholders' equity:
	Series preferred stock, par value $.01; authorized 25,000 shares, none outstanding				—			—
	Common stock, par value $.01; authorized 6,000,000 shares; issued 2,209,408 and 2,195,489				22,094			21,955
	Additional paid-in capital				3,399,218			3,138,061
	Deferred compensation				(43,650	)		(49,525	)
	Retained earnings				5,204,124			5,072,600
	Treasury stock, at cost — 60 and 0 shares				(2,293	)		—
	Accumulated other comprehensive loss				(17,753	)		(5,882	)

		Total stockholders' equity			8,561,740			8,177,209

			Total liabilities and stockholders' equity	$	10,645,833		$	10,537,799

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

		For the Three Months Ended						For the Six Months Ended
		June 30, 2001			June 30, 2000			June 30, 2001			June 30, 2000
Revenues:
	Net sales	$	1,736,485		$	1,935,472		$	3,793,411		$	3,560,919
	Services		284,370			210,455			572,239			407,606

			2,020,855			2,145,927			4,365,650			3,968,525
Costs and expenses:
	Cost of sales		892,221			756,608			1,768,832			1,407,488
	Cost of services		179,322			145,824			354,995			286,003
	Research and development		245,627			194,286			469,667			356,066
	Selling, general and administrative		617,336			506,149			1,210,372			954,268

Operating income			86,349			543,060			561,784			964,700
Investment income			64,239			48,051			135,848			88,694
Interest expense			(3,597	)		(2,956	)		(6,855	)		(9,827	)
Other income/(expense), net			2,136			(433	)		4,642			(1,069	)

Income before taxes			149,127			587,722			695,419			1,042,498
Income tax provision			40,265			158,685			187,762			281,474

Net income		$	108,862		$	429,037		$	507,657		$	761,024

Net income per weighted average share, basic		$	0.05		$	0.20		$	0.23		$	0.36

Net income per weighted average share, diluted		$	0.05		$	0.19		$	0.23		$	0.34

Weighted average shares, basic			2,207,655			2,174,291			2,205,770			2,140,049

Weighted average shares, diluted			2,239,799			2,240,805			2,247,021			2,238,031

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

			For the Six Months Ended
			June 30, 2001			June 30, 2000
Cash flows from operating activities:
Net income			$	507,657		$	761,024
Adjustments to reconcile net income to net cash provided/(used) by operating activities:
	Depreciation and amortization			311,127			245,803
	Amortization of deferred compensation			10,837			8,847
	Provision for doubtful accounts			11,282			16,682
	Deferred income taxes			4,647			30,719
	Net loss on disposal of property and equipment			1,049			13,835
	Tax benefit from stock options exercised			129,194			120,521
	Minority interest			29			828
Changes in assets and liabilities, net of acquired assets and liabilities:
	Accounts and notes receivable			372,992			(193,499	)
	Inventories			(82,628	)		(139,575	)
	Other assets			(34,665	)		(37,523	)
	Accounts payable			(90,101	)		60,497
	Accrued expenses			(20,785	)		22,000
	Income taxes payable			(164,707	)		56,973
	Deferred revenue			59,789			50,117
	Other liabilities			3,074			(6	)

		Net cash provided by operating activities		1,018,791			1,017,243

Cash flows from investing activities:
	Additions to property, plant and equipment			(507,476	)		(386,162	)
	Proceeds from sales of property, plant and equipment			17,143			—
	Capitalized software development costs			(59,557	)		(52,460	)
	Purchase of short-term and long-term available for sale securities			(3,072,293	)		(734,442	)
	Sale of short-term and long-term available for sale securities			2,709,376			580,151
	Maturity of short-term and long-term available for sale securities			84,020			351,738
	Business acquisitions, net of cash acquired			(51,051	)		(198,251	)

		Net cash used for investing activities		(879,838	)		(439,426	)

Cash flows from financing activities:
	Issuance of common stock			103,050			111,316
	Purchase of treasury stock			(2,293	)		—
	Redemption of 6% convertible subordinated notes			—			(155	)
	Payment of long-term and short-term obligations			(9,163	)		(8,146	)
	Issuance of long-term and short-term obligations			5			9,009
	Cash portion of McDATA Corporation dividend			(141,981	)		—

		Net cash provided/(used) by financing activities		(50,382	)		112,024

Effect of exchange rate changes on cash				(2,970	)		(4,325	)

Net increase in cash and cash equivalents				88,571			689,841
Cash and cash equivalents at beginning of period				1,983,221			1,109,409

Cash and cash equivalents at end of period			$	2,068,822		$	1,794,925

Non-cash activity:
—Conversion of convertible subordinated notes, net of debt issuance costs			$	—		$	672,994
—Options issued in business acquisitions				—			11,372
—Issuance of capital lease obligations				24,490			—
—Distribution of net assets in McDATA Corporation dividend				234,152			—

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

		For the Three Months Ended						For the Six Months Ended
		June 30, 2001			June 30, 2000			June 30, 2001			June 30, 2000
Net income		$	108,862		$	429,037		$	507,657		$	761,024
Other comprehensive income/(loss), net of tax:
	Foreign currency translation adjustments, net of tax of $288, $(2,180), $(1,802) and $(1,806)		781			(161	)		(4,866	)		(3,487	)
	Equity adjustment for minimum pension liability, net of tax of $0, $0, $(7,616) and $0		—			—			(20,592	)		—
	Changes in unrealized gains and losses on investments and derivatives, net of tax of $(6,135), $1,024, $5,025 and $200		(16,588	)		5,023			13,587			2,550

Other comprehensive income/(loss)			(15,807	)		4,862			(11,871	)		(937	)

Comprehensive income		$	93,055		$	433,899		$	495,786		$	760,087

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Company

EMC Corporation and its subsidiaries ("EMC") design, manufacture, market and support a wide range of hardware and software products and provide services for the storage, management, protection and sharing of electronic information. These integrated solutions enable organizations to create an enterprise information infrastructure, or what EMC calls an E-Infostructure. EMC is the leading supplier of these solutions, which are comprised of information storage systems, software and services. Its products are sold to customers utilizing a variety of the world's most popular computing platforms for key applications, including electronic commerce, data warehousing and transaction processing.

Accounting

The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles. These statements include the accounts of EMC and its subsidiaries. Certain information and footnote disclosures normally included in EMC's annual consolidated financial statements have been condensed or omitted. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary to fairly present the results as of and for the periods ended June 30, 2001 and 2000.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2000, which are contained in EMC's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2001.

Certain prior year amounts have been reclassified to conform with the 2001 presentation.

2. Inventories

Inventories consist of (in thousands):

	June 30, 2001		December 31, 2000
Purchased parts	$	75,460	$	62,636
Work-in-process		700,161		701,907
Finished goods		298,792		260,421

	$	1,074,413	$	1,024,964

3. Property, Plant and Equipment

Property, plant and equipment consists of (in thousands):

	June 30, 2001			December 31, 2000
Furniture and fixtures	$	137,532		$	129,721
Equipment		1,691,567			1,539,510
Buildings and improvements		585,960			499,823
Land		72,624			69,522
Construction in progress		417,225			321,587

		2,904,908			2,560,163
Accumulated depreciation		(1,126,970	)		(1,050,075	)

	$	1,777,938		$	1,510,088

4. Net Income Per Share

Calculation of diluted earnings per share is as follows (table in thousands, except per share amounts):

	For the Three Months Ended				For the Six Months Ended
	June 30, 2001		June 30, 2000		June 30, 2001		June 30, 2000
Net income	$	108,862	$	429,037	$	507,657	$	761,024
Add back of interest expense on 3¹/4% convertible notes, net of tax of $1,195		—		—		—		1,792

Net income for calculating diluted earnings per share	$	108,862	$	429,037	$	507,657	$	762,816

Weighted average shares, basic		2,207,655		2,174,291		2,205,770		2,140,049
Common stock equivalents		32,144		66,514		41,251		97,982

Weighted average shares, diluted		2,239,799		2,240,805		2,247,021		2,238,031

Net income per weighted average share, diluted	$	0.05	$	0.19	$	0.23	$	0.34

Options to acquire 56,810,015 and 31,538,894 shares of common stock, par value $.01 per share, of EMC ("Common Stock") for the three and six months ended June 30, 2001, respectively, were excluded from the calculation of diluted earnings per share. These options were excluded because of their antidilutive effect.

5. Equity Transactions

On February 7, 2001, EMC distributed to its stockholders of record as of the close of business on January 24, 2001, all of its shares of McDATA Corporation Class A common stock. The distribution was effected by means of a pro rata dividend of approximately .0368069 of a share of McDATA Class A common stock for each share of Common Stock. In lieu of fractional shares of McDATA Class A common stock, each stockholder received a cash payment. The distribution, which totaled

$376,133,000 has been accounted for as a tax-free dividend to EMC stockholders and charged to retained earnings based on the book value as of the date of the distribution. As a result of the distribution, EMC no longer has any equity ownership interest in McDATA.

At EMC's Annual Meeting of Stockholders held on May 9, 2001, EMC's stockholders approved an amendment to EMC's Restated Articles of Organization to increase the authorized shares of Common Stock to 6 billion shares from 3 billion shares and approved the EMC Corporation 2001 Stock Option Plan. 80 million shares of Common Stock have been reserved for issuance under the 2001 Stock Option Plan.

On May 9, 2001, EMC's Board of Directors authorized the purchase of up to 50 million shares of Common Stock from time to time. The purchased shares will be available for various corporate purposes, including for use in connection with employee stock option and employee stock purchase plans. EMC utilizes the cost method to account for the purchase of treasury stock which presents the aggregate cost of reacquired shares as a component of stockholders' equity.

6. Litigation

EMC is a party to certain litigation, which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on EMC's business, results of operations or financial condition.

7. Segment Information

EMC operates in the following segments: information storage products, information storage services and other businesses. The following table presents the revenue components for information storage products (in thousands).

	For the Three Months Ended				For the Six Months Ended
	June 30, 2001		June 30, 2000		June 30, 2001		June 30, 2000
Information storage systems	$	1,225,600	$	1,515,916	$	2,789,912	$	2,783,080
Information storage software		497,538		350,257		965,057		620,245

	$	1,723,138	$	1,866,173	$	3,754,969	$	3,403,325

EMC's management makes financial decisions and allocates resources based on revenues and gross profit achieved at the segment level. EMC does not allocate marketing, engineering or administrative expenses to each segment, as management does not use this information to measure the performance of the operating segments. The revenues and gross margins attributable to these segments are included in the following tables (in thousands):

For the Three Months Ended	Information Storage Products		Information Storage Services		Other Businesses		Consolidated
June 30, 2001
Revenues	$	1,723,138	$	231,995	$	65,722	$	2,020,855
Gross profit		842,135		84,398		22,779		949,312
June 30, 2000
Revenues	$	1,866,173	$	134,437	$	145,317	$	2,145,927
Gross profit		1,152,588		40,399		50,508		1,243,495

For the Six Months Ended	Information Storage Products		Information Storage Services		Other Businesses		Consolidated
June 30, 2001
Revenues	$	3,754,969	$	463,981	$	146,700	$	4,365,650
Gross profit		2,016,039		175,915		49,869		2,241,823
June 30, 2000
Revenues	$	3,403,325	$	250,842	$	314,358	$	3,968,525
Gross profit		2,093,891		73,537		107,606		2,275,034

EMC's revenues are attributed to the geographic areas according to the location of customers. Revenues and identifiable assets by geographic area are included in the following tables (in thousands):

		For the Three Months Ended				For the Six Months Ended
		June 30, 2001		June 30, 2000		June 30, 2001		June 30, 2000
Sales:
Domestic		$	1,101,830	$	1,294,485	$	2,463,891	$	2,424,513
Other North America			54,775		34,168		107,421		55,204
Europe, Middle East, Africa			528,984		571,436		1,125,678		1,065,438
Asia Pacific			263,313		205,406		542,539		344,417
Latin America			71,953		40,432		126,121		78,953

	Total	$	2,020,855	$	2,145,927	$	4,365,650	$	3,968,525

		June 30, 2001			December 31, 2000
Identifiable assets:
Domestic		$	7,751,748		$	8,080,476
Other North America			133,655			103,581
Europe, Middle East, Africa			3,598,492			3,274,841
Asia Pacific			417,036			352,279
Latin America			141,381			116,300
Intercompany eliminations			(1,396,479	)		(1,389,678	)

	Total	$	10,645,833		$	10,537,799

8. Reduction in Force

In May 2001, EMC announced a reduction in force of approximately 1,100 employees, resulting in a pre-tax charge of $24 million. Approximately 64% of such employees are or were based in North America and the remainder are or were based in Europe, Latin America and the Asia Pacific region. The reduction in force affected the majority of business functions and, accordingly, is classified in the income statement within all operating cost and expense categories. As of June 30, 2001, approximately 900 employees had been terminated and $21 million remained accrued to cover termination benefits, the majority of which is expected to be paid by the end of 2001.

9. New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("FAS") No. 141, "Business Combinations" ("FAS 141"), and FAS No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 supercedes Accounting Principles Bulletin No. 16, "Business Combinations" and FAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." FAS 142 supercedes Accounting Principles Bulletin No. 17, "Intangible Assets." These statements require use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating use of the pooling-of-interests method. Goodwill will no longer be amortized but will be tested for impairment. Additionally, new criteria have been established that determine whether an acquired intangible asset should be recognized separately from goodwill. The statements are effective for business combinations initiated after June 30, 2001 with the entire provisions of FAS 141 and FAS 142 becoming effective for EMC commencing with its 2002 fiscal year. EMC is currently evaluating the impact these statements will have on its results of operations and financial position.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report and with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in EMC's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2001. The following discussion contains forward-looking statements and should also be read in conjunction with "Factors That May Affect Future Results" beginning on page 17.

All dollar amounts in this Management's Discussion and Analysis are in millions.

Results of Operations—Second Quarter of 2001 compared to Second Quarter of 2000

Revenues

Total revenues for the second quarter of 2001 were $2,020.9, compared to $2,145.9 for the second quarter of 2000, representing a decrease of $125.0, or 6%.

Information storage systems revenues were $1,225.6 in the second quarter of 2001, compared to $1,515.9 in the second quarter of 2000, representing a decrease of $290.3, or 19%. The majority of the decrease was due to declining sales volume resulting from the global economic slow down which caused customers to delay or reduce spending on systems projects. EMC was most significantly impacted with revenue declines from customers comprised of dot coms, Internet service providers, telecommunication enterprises and network communication equipment makers. Additionally, reduced sales prices associated with customer incentive programs to enable customers to make purchases within their budgetary constraints and competitive pricing initiatives negatively impacted revenue in the second quarter of 2001.

Information storage software revenues were $497.5 in the second quarter of 2001, compared to $350.3 in the second quarter of 2000, representing an increase of $147.2, or 42%. The increase was primarily due to greater demand for information storage software on both newly shipped and already installed systems.

Information storage services revenues were $232.0 in the second quarter of 2001, compared to $134.4 in the second quarter of 2000, representing an increase of $97.6, or 73%. The increase was primarily related to increased volume from professional services engagements and increased maintenance revenues on information storage systems and information storage software.

Information storage software revenues and information storage services revenues increased, despite the decline in information storage systems, due to greater demand from customers to consolidate their storage networks. These consolidation efforts increased demand for EMC professional services to provide solutions and increased demand for software to provide centralized management of customers' storage networks.

Total information storage revenues were $1,955.1 in the second quarter of 2001, compared to $2,000.6 in the second quarter of 2000, representing a decrease of $45.5, or 2%.

Other businesses revenues were $65.7 in the second quarter of 2001, compared to $145.3 in the second quarter of 2000, representing a decrease of $79.6, or 55%. Other businesses revenues consist of revenues from AViiON server products and related services. The decrease in other businesses revenues was due to refocusing efforts on more profitable lines of business within the storage segments.

Revenues on sales into North American markets were $1,156.6 in the second quarter of 2001, compared to $1,328.7 in the second quarter of 2000, representing a decrease of $172.1, or 13%. The revenue decrease reflects the global economic slow down experienced during the second quarter of 2001.

Revenues on sales into Europe, the Middle East and Africa were $529.0 in the second quarter of 2001, compared to $571.4 in the second quarter of 2000, representing a decrease of $42.4, or 7%. Revenues on sales into the Asia Pacific markets were $263.3 in the second quarter of 2001, compared to $205.4 in the second quarter of 2000, representing an increase of $57.9, or 28%. Revenues on sales into the Latin America markets were $72.0 in the second quarter of 2001, compared to $40.4 in the second quarter of 2000, representing an increase of $31.6, or 78%. International revenues accounted for 43% of total revenues during the second quarter of 2001, compared to 38% in the second quarter of 2000.

The changes in international sales were a result of EMC's efforts to expand its sales infrastructure throughout the world to meet increasing demand for information storage, offset by the global economic slow down impacting these markets. Changes in exchange rates resulting in a stronger U.S. dollar in 2001 compared to 2000 also negatively impacted revenues. While revenues increased in the Asia Pacific and Latin America markets, the amount of the increases were lower than anticipated.

Gross Margins

Overall gross margin dollars decreased to $949.3 in the second quarter of 2001 from $1,243.5 in the second quarter of 2000, a decrease of $294.2, or 24%. The overall gross margin percentage decreased to 47.0% in the second quarter of 2001, compared to 57.9% in the second quarter of 2000.

Information storage products' gross margin decreased to 48.9% in the second quarter of 2001, compared to 61.8% in the second quarter of 2000. The decrease was primarily attributable to lower sales volume resulting in the absorption of fixed overhead costs over a lower revenue base. In addition, reduced sales prices associated with customer incentive programs to enable customers to make purchases within their budgetary constraints and competitive pricing initiatives negatively impacted margins. Partially offsetting these factors was an increase in information storage software revenues, which has a higher gross margin than information storage systems. Information storage software revenues, as a percentage of total revenues, increased to 25% in the second quarter of 2001 from 16% in the second quarter of 2000.

The gross margin for information storage services increased to 36.4% in the second quarter of 2001, compared to 30.1% in the second quarter of 2000. The improvement in the gross margin percentage was attributable to greater productivity of EMC customer service and professional services personnel.

The gross margin for other businesses remained relatively constant at 34.7% in the second quarter of 2001, compared to 34.8% in the second quarter of 2000.

Research and Development

Research and development ("R&D") expenses were $245.6 and $194.3 in the second quarters of 2001 and 2000, respectively, representing an increase of $51.3, or 26%. R&D expenses were 12.2% and 9.1% of revenues in the second quarters of 2001 and 2000, respectively. The increase in R&D spending reflects EMC's ongoing research and development efforts to continue to improve EMC's long-term competitive position. These efforts include enhancements to information storage software, enabling

improved management, protection and sharing of information, and enhancements to information storage systems, including networked information storage systems.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses were $617.3 and $506.1 in the second quarters of 2001 and 2000, respectively, representing an increase of $111.2, or 22%. SG&A expenses were 30.5% and 23.6% of revenues in the second quarters of 2001 and 2000, respectively. Included in the 2001 results was a charge of $18.4 for the reduction in force announced in May 2001. Additionally, the increase in spending was attributable to efforts to expand sales and build an infrastructure to support an increased revenue base.

Investment Income

Investment income increased to $64.2 in the second quarter of 2001 from $48.1 in the second quarter of 2000. Investment income increased primarily due to higher cash and investment balances derived primarily from operations.

Provision for Income Taxes

The provision for income taxes was $40.3 and $158.7 in the second quarters of 2001 and 2000, respectively, resulting in an effective tax rate of 27% for each quarter.

Results of Operations—First Six Months of 2001 compared to First Six Months of 2000

Revenues

Total revenues for the first six months of 2001 were $4,365.7, compared to $3,968.5 for the first six months of 2000, representing an increase of $397.2, or 10%.

Information storage systems revenues were $2,789.9 in the first six months of 2001, compared to $2,783.1 in the first six months of 2000, representing an increase of $6.8, or 0.2%. Sales volume increases experienced in the first quarter of 2001 compared to the first quarter of 2000 were substantially offset by sales volume reductions experienced in the second quarter of 2001 compared to the second quarter of 2000 resulting primarily from the global economic slow down which caused customers to delay or reduce spending on systems projects. EMC was most significantly impacted with revenue declines from customers comprised of dot coms, Internet service providers, telecommunication enterprises and network communication equipment makers. Additionally, reduced sales prices associated with customer incentive programs to enable customers to make purchases within their budgetary constraints and competitive pricing initiatives negatively impacted revenue in the first six months of 2001.

Information storage software revenues were $965.1 in the first six months of 2001, compared to $620.2 in the first six months of 2000, representing an increase of $344.9, or 56%. The increase was primarily due to greater demand for information storage software on both newly shipped and already installed systems.

Information storage services revenues were $464.0 in the first six months of 2001 compared to $250.8 in the first six months of 2000, representing an increase of $213.2, or 85%. The increase was primarily related to increased volume from professional services engagements and increased maintenance revenues on information storage systems and information storage software.

Information storage software revenues and information storage services revenues increased, despite the relatively constant revenues for information storage systems, due to greater demand from customers to consolidate their storage networks. These consolidation efforts increased demand for EMC professional services to provide solutions and increased demand for software to provide centralized management of customers' storage networks.

Total information storage revenues were $4,219.0 in the first six months of 2001, compared to $3,654.1 in the first six months of 2000, representing an increase of $564.9, or 15%.

Other businesses revenues were $146.7 in the first six months of 2001, compared to $314.4 in the first six months of 2000, representing a decrease of $167.7, or 53%. Other businesses revenues consist of revenues from AViiON server products and related services. The decrease in other businesses revenues was due to refocusing efforts on more profitable lines of business within the storage segments.

Revenues on sales into North American markets were $2,571.3 in the first six months of 2001, compared to $2,479.7 in the first six months of 2000, representing an increase of $91.6, or 4%. The minimal revenue growth reflects the global economic slow down experienced during the first half of 2001.

Revenues on sales into Europe, the Middle East and Africa were $1,125.7 in the first six months of 2001, compared to $1,065.4 in the first six months of 2000, representing an increase of $60.3, or 6%. Revenues on sales into the Asia Pacific markets were $542.5 in the first six months of 2001, compared to $344.4 in the first six months of 2000, representing an increase of $198.1, or 58%. Revenues on sales into the Latin America markets were $126.1 in the first six months of 2001, compared to $79.0 in the first six months of 2000, representing an increase of $47.1, or 60%. International revenues accounted for 41% of total revenues in the first six months of 2001, compared to 38% in the first six months of 2000.

The increases in international sales were a result of EMC's efforts to expand its sales infrastructure throughout the world to meet increasing demand for information storage. While revenues increased in these markets, the amount of the increases were lower than anticipated principally due to the global economic slow down impacting these markets. Changes in exchange rates resulting in a stronger U.S. dollar in 2001 compared to 2000 also negatively impacted revenues.

Gross Margins

Overall gross margin dollars decreased to $2,241.8 in the first six months of 2001 from $2,275.0 in the first six months of 2000, a decrease of $33.2, or 1%. The overall gross margin percentage decreased to 51.4% in the first six months of 2001, compared to 57.3% in the first six months of 2000.

Information storage products' gross margin decreased to 53.7% in the first six months of 2001, compared to 61.5% in the first six months of 2000. The decrease was primarily attributable to lower sales volume resulting in the absorption of fixed overhead costs over a lower revenue base. In addition, reduced sales prices associated with customer incentive programs to enable customers to make purchases within their budgetary constraints and competitive pricing initiatives negatively impacted margins. Partially offsetting these factors was an increase in information storage software revenues, which has a higher gross margin than information storage systems. Information storage software revenues, as a percentage of total revenues, increased to 22% in the first six months of 2001 from 16% in the first six months of 2000.

The gross margin for information storage services increased to 37.9% in the first six months of 2001, compared to 29.3% in the first six months of 2000. The improvement in the gross margin percentage was attributable to greater productivity of EMC customer service and professional services personnel.

The gross margin for other businesses remained relatively constant at 34.0% in the first six months of 2001, compared to 34.2% in the first six months of 2000.

Research and Development

R&D expenses were $469.7 and $356.1 in the first six months of 2001 and 2000, respectively, representing an increase of $113.6, or 32%. R&D expenses were 10.8% and 9.0% of revenues in the first six months of 2001 and 2000, respectively. The increase in R&D spending from 2000 to 2001 reflects EMC's ongoing research and development efforts to continue to improve EMC's long-term competitive position. These efforts include enhancements to information storage software, enabling improved management, protection and sharing of information, and enhancements to information storage systems, including networked information storage systems.

Selling, General and Administrative

SG&A expenses were $1,210.4 and $954.3 in the first six months of 2001 and 2000, respectively, representing an increase of $256.1, or 27%. SG&A expenses were 27.7% and 24.0% of revenues in the first six months of 2001 and 2000, respectively. Included in the 2001 results was a charge of $18.4 for a reduction in force announced in May 2001. Additionally, the increase in spending was attributable to efforts to expand sales and build an infrastructure to support an increased revenue base.

Investment Income and Interest Expense

Investment income increased to $135.8 in the first six months of 2001 from $88.7 in the first six months of 2000. Investment income increased primarily due to higher cash and investment balances which were derived primarily from operations.

Interest expense decreased to $6.9 in the first six months of 2001 from $9.8 in the first six months of 2000. The decrease was primarily due to the conversion of EMC's 3¹/4% convertible subordinated notes due 2002 in March 2000 and EMC's 6% convertible subordinated notes due 2004 in May 2000.

Provision for Income Taxes

The provision for income taxes was $187.8 and $281.5 in the first six months of 2001 and 2000, respectively, which resulted in an effective tax rate of 27% for each period.

Financial Condition

Cash and cash equivalents and short and long-term investments were $4,882.8 and $4,745.3 at June 30, 2001 and December 31, 2000, respectively, representing an increase of $137.5. Included in the first six months of 2001 was a reduction in cash and cash equivalents and short and long-term investments of $388.1 resulting from the distribution of EMC's interest in McDATA Corporation.

Cash provided by operating activities for the first six months of 2001 of $1,018.8 was comparable to the amount of $1,017.2 for the first six months of 2000. A decline in net income was offset by an increase in working capital.

Cash used for investing activities was $879.8 for the first six months of 2001, compared to cash used for investing activities of $439.4 for the first six months of 2000. The increase was principally due to purchases of short and long-term securities and an increase in property, plant and equipment.

Cash used for financing activities was $50.4 for the first six months of 2001, compared to cash provided by financing activities of $112.0 for the first six months of 2000. The change was primarily attributable to the distribution of EMC's ownership interest in McDATA. As a result of the distribution, McDATA's net assets are no longer consolidated with EMC, which resulted in a $141.9 reduction in cash.

EMC has available for use a credit line of $50.0 and may elect to borrow at any time. Based on its current operating and capital expenditure forecasts, EMC believes that the combination of funds currently available, funds generated from operations and its available line of credit will be adequate to finance its ongoing operations throughout 2001.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued FAS No. 141, "Business Combinations" and FAS No. 142, "Goodwill and Other Intangible Assets." FAS 141 supercedes Accounting Principles Bulletin No. 16, "Business Combinations" and FAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." FAS 142 supercedes Accounting Principles Bulletin No. 17, "Intangible Assets." These statements require use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating use of the pooling-of-interests method. Goodwill will no longer be amortized but will be tested for impairment. Additionally, new criteria have been established that determine whether an acquired intangible asset should be recognized separately from goodwill. The statements are effective for business combinations initiated after June 30, 2001 with the entire provisions of FAS 141 and FAS 142 becoming effective for EMC commencing with its 2002 fiscal year. EMC is currently evaluating the impact these statements will have on its results of operations and financial position.

FACTORS THAT MAY AFFECT FUTURE RESULTS

EMC's prospects are subject to certain uncertainties and risks. This Quarterly Report also contains certain forward-looking statements within the meaning of the Federal securities laws. EMC's future results may differ materially from its current results and actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to those set forth below, other one-time events and other important factors disclosed previously and from time to time in EMC's other filings with the Securities and Exchange Commission.

EMC's business could be materially adversely affected as a result of general economic and market conditions.

EMC is subject to the effects of general global economic conditions. EMC's operating results have been materially adversely affected as a result of recent unfavorable economic conditions and reduced information technology spending. If economic conditions do not improve, EMC's business, results of operations or financial condition could continue to be materially adversely affected.

EMC's business could be materially adversely affected as a result of a lessening demand in the IT market.

EMC's revenue growth and profitability depend on the overall demand for information storage systems, software and services, particularly in the product segments in which EMC competes. Recently, there has been a softening of demand for information storage systems, software and services as customers delay or reduce information technology expenditures. Sales expected to occur in the last month and weeks and days of a quarter have been deferred until future quarters. There can be no assurance that such deferrals will result in sales in the near term, or at all. Further delays or reductions in information technology spending, domestically or internationally, could materially adversely affect demand for EMC's products and services which could result in decreased revenues or earnings.

EMC may have difficulty managing operations.

With the weakened global economy, EMC has experienced lower than expected revenues. EMC's future operating results will depend on its ability to manage operations, which includes, among other things:

•: hiring and retaining the appropriate number of qualified employees
•: enhancing and expanding, as appropriate, EMC's infrastructure, including but not limited to its information systems and management team
•: accurately forecasting revenues
•: controlling expenses
•: managing EMC's manufacturing capacity and other assets
•: executing on its plans

An unexpected further decline in revenues without a corresponding and timely reduction in expenses or a failure to manage other aspects of operations could have a material adverse effect on EMC's business, results of operations or financial condition.

Competitive pricing and difficulty managing product costs could materially adversely affect EMC's revenues and earnings.

Competitive pricing pressures exist in the computer information storage market and have had, and in the future may have, a material adverse effect on EMC's revenues and earnings. There also has been and may continue to be a willingness on the part of certain competitors to reduce prices or provide information storage products or services together with other products or services at minimal or no additional cost in order to preserve or gain market share, which EMC cannot foresee. EMC currently believes that pricing pressures are likely to continue.

To date, EMC has been able to manage its component and product design costs. However, there can be no assurance that EMC will be able to continue to achieve reductions in component and product design costs. The relative and varying rates of product price and component cost declines could have a material adverse effect on EMC's earnings.

EMC may be unable to keep pace with rapid industry changes.

The markets in which EMC competes are characterized by rapid technological change, frequent new product introductions and evolving industry standards. There can be no assurance that EMC's

existing products will continue to be properly positioned in the market or receive customer acceptance or that EMC will be able to introduce new or enhanced products into the market on a timely basis, or at all.

Risks associated with the development and introduction of new products include delays in development and changes in data storage, networking and operating system technologies which could require EMC to modify existing products or to develop new products. Risks inherent in the transition to new products include the difficulty in forecasting customer preferences or demand accurately, the inability to expand production capacity to meet demand for new products, the impact of customers' demand for new products on the products being replaced, thereby causing an excessive obsolete supply of inventory, and delays in initial shipments of new products. Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors, competitors' responses to the introductions and the desire by customers to evaluate new products for longer periods of time. EMC's failure to introduce new or enhanced products on a timely basis, keep pace with rapid industry changes or effectively manage the transitions to new products or new technologies could have a material adverse effect on EMC's business, results of operation or financial condition.

If EMC's suppliers do not meet its quality or delivery requirements, EMC could have decreased revenues and earnings.

EMC purchases many sophisticated components and products from one or a limited number of qualified suppliers, including some of its competitors. These components and products include disk drives, high density memory components and power supplies. EMC has experienced delivery delays from time to time because of high industry demand or the inability of some vendors to consistently meet its quality and delivery requirements. If any of its suppliers were to fail to meet the quality or delivery requirements needed to satisfy customer orders for its products, EMC could lose time-sensitive customer orders and have significantly decreased quarterly revenues and earnings, which would have a material adverse effect on EMC's business, results of operations and financial condition.

Additionally, EMC periodically transitions its product line to incorporate new technologies. The importance of transitioning its customers smoothly to new technologies, along with its historically uneven pattern of quarterly sales, intensifies the risk that a supplier who fails to meet its quality or delivery requirements will have a material adverse impact on EMC's revenues and earnings.

EMC's business may suffer if it is unable to attract and retain key personnel.

EMC's business depends to a significant extent on the continued service of senior management and other key employees, the development of additional management personnel and the hiring of new qualified employees. Competition for highly skilled personnel is intense in the high technology industry. Because of the importance of stock-based incentive compensation in EMC's total compensation program, the volatility in EMC's stock price may from time to time adversely affect EMC's ability to attract and retain key employees. There can be no assurance that EMC will be successful in continuously recruiting new personnel or in retaining existing personnel. The loss of one or more key or other employees or EMC's inability to attract additional qualified employees could have a material adverse effect on EMC's business, results of operations or financial condition.

Historically uneven sales patterns could significantly impact quarterly revenues and earnings.

EMC's quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter's total sales occur in the last month and weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each financial period especially difficult and uncertain and increases the risk of unanticipated variations in quarterly results and financial condition. EMC believes this uneven sales pattern is a result of many factors including:

•: the significant size of EMC's average product price in relation to its customers' budgets, resulting in long lead times for customers' budgetary approval, which tends to be given late in a quarter
•: the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more competitors seeking their business
•: the fourth quarter influence of customers' spending their remaining capital budget authorization prior to new budget constraints in the first quarter of the following year
•: seasonal influences

EMC's uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity accordingly. If orders vary substantially from the predicted demand, the ability to assemble, test and ship orders received in the last weeks and days of each quarter may be limited, which could materially adversely affect quarterly revenues and earnings.

In addition, EMC's revenues in any quarter are substantially dependent on orders booked and shipped in that quarter and its backlog at any particular time is not necessarily indicative of future sales levels. This is because:

•: EMC assembles its products on the basis of its forecast of near-term demand and maintains inventory in advance of receipt of firm orders from customers
•: EMC generally ships products shortly after receipt of the order
•: customers may reschedule orders with little or no penalty

Moreover, delays in product shipping, caused by loss of power or telecommunications or similar services, or an unexpected decline in revenues without a corresponding and timely slowdown in expenses, could intensify the impact of these factors on EMC's business, results of operations and financial condition.

EMC's business could be materially adversely affected as a result of the risks associated with acquisitions and investments.

As part of its business strategy, EMC seeks to acquire businesses that offer complementary products, services or technologies. These acquisitions are accompanied by the risks commonly encountered in an acquisition of a business including, among other things:

•: the effect of the acquisition on EMC's financial and strategic position and reputation
•: the failure of an acquired business to further EMC's strategies
•: the difficulty of integrating the acquired business
•: the lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners

•: the diversion of EMC's management's attention from other business concerns
•: the impairment of relationships with customers of the acquired business
•: the potential loss of key employees of the acquired company
•: the potential impairment of acquired assets

These factors could have a material adverse effect on EMC's business, results of operations or financial condition. To the extent that EMC issues shares of its common stock or other rights to purchase common stock in connection with any future acquisition, existing stockholders may experience dilution and potentially decreased earnings per share.

EMC also seeks to invest in businesses that offer complementary products, services or technologies. These investments are accompanied by risks similar to those encountered in an acquisition of a business.

The markets EMC serves are highly competitive, and EMC may be unable to compete effectively.

EMC competes with many established companies in the markets it serves and some of these companies may have substantially greater financial, marketing and technological resources, larger distribution capabilities, earlier access to customers and more opportunity to address customers' various information technology requirements than EMC. EMC also competes with many smaller, less established companies in specific product segments. Some of these companies may have earlier access to new technologies, products or business models than EMC. EMC's business may be materially adversely affected by the announcement or introduction of new products by its competitors, including hardware, software and services, and the implementation of effective marketing strategies by its competitors.

Changes in foreign conditions could impair EMC's international sales.

A substantial portion of EMC's revenues is derived from sales outside the United States. In addition, a substantial portion of EMC's products is manufactured outside of the United States. Accordingly, EMC's future results could be materially adversely affected by a variety of factors, including changes in foreign currency exchange rates, changes in a specific country's or region's political or economic conditions, trade restrictions, import or export licensing requirements, the overlap of different tax structures or changes in international tax laws, changes in regulatory requirements, compliance with a variety of foreign laws and regulations, and longer payment cycles in certain countries.

Risks associated with EMC's indirect channels of distribution may materially adversely affect EMC's financial results.

EMC derives a significant percentage of its product revenues from indirect channels of distribution, including distributors, systems integrators, resellers and original equipment manufacturers. EMC's financial results could be materially adversely affected if its contracts with its indirect channels of distribution were terminated, if EMC's relationship with its indirect channels were to deteriorate or if the financial condition of its indirect channels were to weaken. In addition, as EMC's business grows, EMC may have an increased reliance on indirect channels of distribution. There can be no assurance that EMC will be successful in maintaining or expanding these channels. If EMC is not successful, EMC may lose certain sales opportunities. Furthermore, the partial reliance on indirect channels of distribution may materially reduce the visibility to management of potential orders, thereby making it more difficult to accurately forecast such orders. In addition, there can be no assurance that EMC's indirect channels will not develop or market products in competition with EMC in the future.

Undetected problems in EMC's products could directly impair EMC's financial results.

If flaws in design, production, assembly or testing of EMC's products were to occur by EMC or its suppliers, EMC could experience a rate of failure in its products that would result in substantial repair or replacement costs and potential damage to EMC's reputation. Continued improvement in manufacturing capabilities, control of material and manufacturing quality and costs and product testing, are critical factors in the future growth of EMC. There can be no assurance that EMC's efforts to monitor, develop and implement appropriate test and manufacturing processes for its products will be sufficient to permit EMC to avoid a rate of failure in its products that results in substantial delays in shipment, significant repair or replacement costs and potential damage to EMC's reputation, any of which could have a material adverse effect on EMC's business, results of operations or financial condition.

EMC's business could be materially adversely affected as a result of the risks associated with alliances.

EMC has alliances with leading information technology companies and EMC plans to continue its strategy of developing key alliances in order to expand its reach into emerging markets. There can be no assurance that EMC will be successful in its ongoing strategic alliances or that EMC will be able to find further suitable business relationships as it develops new products and strategies. Any failure to continue or expand such relationships could have a material adverse effect on EMC's business, results of operations or financial condition.

There can be no assurance that companies with which EMC has strategic alliances, certain of which have substantially greater financial, marketing and technological resources than EMC, will not develop or market products in competition with EMC in the future, discontinue their alliances with EMC or form alliances with EMC's competitors.

EMC's business may suffer if it cannot protect its intellectual property.

EMC generally relies upon patent, copyright, trademark and trade secret laws and contract rights in the United States and in other countries to establish and maintain EMC's proprietary rights in its technology and products. However, there can be no assurance that any of EMC's proprietary rights will not be challenged, invalidated or circumvented. In addition, the laws of certain countries do not protect

EMC's proprietary rights to the same extent as do the laws of the United States. Therefore, there can be no assurance that EMC will be able to adequately protect its proprietary technology against unauthorized third-party copying or use, which could adversely affect EMC's competitive position. Further, there can be no assurance that EMC will be able to obtain licenses to any technology that it may require to conduct its business or that, if obtainable, such technology can be licensed at a reasonable cost.

From time to time, EMC receives notices from third parties claiming infringement by EMC's products of third-party patent or other intellectual property rights. Responding to any such claim, regardless of its merit, could be time-consuming, result in costly litigation, divert management's attention and resources and cause EMC to incur significant expenses. In the event there is a temporary or permanent injunction entered prohibiting EMC from marketing or selling certain of its products or a successful claim of infringement against EMC requiring EMC to pay royalties to a third party, and EMC fails to develop or license a substitute technology, EMC's business, results of operations or financial condition could be materially adversely affected.

EMC may become involved in litigation that may materially adversely affect EMC.

In the ordinary course of business, EMC may become involved in litigation, administrative proceedings and governmental proceedings. Such matters can be time-consuming, divert management's attention and resources and cause EMC to incur significant expenses. Furthermore, there can be no assurance that the results of any of these actions will not have a material adverse effect on its business, results of operations or financial condition.

Changes in regulations could materially adversely affect EMC.

EMC's business, results of operations or financial condition could be materially adversely affected if laws, regulations or standards relating to EMC or its products were newly implemented or changed.

EMC's stock price is volatile.

EMC's stock price, like that of other technology companies, is subject to significant volatility because of factors such as:

•: the announcement of new products, services or technological innovations by EMC or its competitors
•: quarterly variations in its operating results
•: changes in revenue or earnings estimates by the investment community
•: speculation in the press or investment community

In addition, EMC's stock price is affected by general economic and market conditions and has recently been negatively affected by unfavorable global economic conditions. If such conditions continue to deteriorate, EMC's stock price could decline further.

EMC CORPORATION

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

EMC is a party to certain litigation which it considers routine and incidental to its business. Management does not expect the results of any of these actions to have a material adverse effect on EMC's business, results of operations or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders was held on May 9, 2001. There was no solicitation in opposition to management's nominees as listed in EMC's proxy statement and all such nominees were elected as Class II directors for a three-year term. In addition, the stockholders approved an amendment to EMC's Restated Articles of Organization to increase the number of shares of authorized Common Stock to 6,000,000,000 shares from 3,000,000,000 shares, and approved the EMC Corporation 2001 Stock Option Plan as described in EMC's Proxy Statement. The results of the votes for each of these proposals were as follows:

1. Election of Class II Directors:

	For	Withheld
John R. Egan	1,746,336,902	33,083,854
Joseph F. Oliveri	1,743,897,669	35,523,087
Michael C. Ruettgers	1,736,990,549	42,430,207

In addition to these directors, EMC's other incumbent directors (Michael J. Cronin, Richard J. Egan, W. Paul Fitzgerald, Joseph M. Tucci and Alfred M. Zeien) had terms that continued after the 2001 Annual Meeting.

2. To amend EMC's Restated Articles of Organization:

For:		1,642,292,384
Against:		133,957,521
Abstain:		3,133,901
Broker Non-Vote:		36,950

3. To approve the EMC Corporation 2001 Stock Option Plan:

For:		1,484,608,462
Against:		286,647,689
Abstain:		8,127,505
Broker Non-Vote:		37,100

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

See index to Exhibits on page 26 of this report.

(b) Reports on Form 8-K

EMC did not file any current report on Form 8-K during the quarter ended June 30, 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EMC CORPORATION
Date: August 9, 2001		By:	/s/ WILLIAM J. TEUBER, JR. William J. Teuber, Jr. Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

3.1	Restated Articles of Organization of EMC Corporation, as amended (filed herewith)
3.2	Amended and Restated By-laws of EMC Corporation (1)
4.1	Form of Stock Certificate (2)

(1): Incorporated by reference to EMC Corporation's Annual Report on Form 10-K filed March 17, 2000 (No. 1-9853).
(2): Incorporated by reference to EMC Corporation's Annual Report on Form 10-K filed March 31, 1988 (No. 0-1436).

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
EMC CORPORATION
EMC CORPORATION PART I FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
EMC CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited)
EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
EMC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited)
EMC CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
All dollar amounts in this Management's Discussion and Analysis are in millions.
EMC CORPORATION PART II OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX
EX-3.1 3 a2056183zex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 FEDERAL IDENTIFICATION NO. 04-2680009 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) We, Joseph M. Tucci, President, and Paul T. Dacier, Assistant Clerk of EMC Corporation, located at 171 South Street, Hopkinton, Massachusetts 01748, certify that these Articles of Amendment affecting article numbered 3 of the Articles of Organization were duly adopted at a meeting held on May 9, 2001, by vote of 1,642,292,384 shares of Common Stock of 2,206,534,843 shares outstanding, being at least a majority of each type, class or series outstanding and entitled to vote thereon. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is:

Change the total authorized to:

The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date:___________________________. SIGNED UNDER THE PENALTIES OF PERJURY, this 9th day of May, 2001. /s/ Joseph M. Tucci, President /s/ Paul T. Dacier, Assistant Clerk THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) - ------------------------------------------------------------------------ I hereby approve the within Articles of Amendment, and the filing fee in the amount of $_________ having been paid, said article is deemed to have been filed with me this __________ day of _____________________, 20__. Effective date:____________________________________________________________ WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Paul T. Dacier, Esq. Vice President and General Counsel EMC Corporation 171 South St. Hopkinton, MA 01748 Telephone: 508-435-1000 FEDERAL IDENTIFICATION NO. 04-2680009 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108-1512 RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) We, Joseph M. Tucci, President, and Paul T. Dacier, Assistant Clerk, of EMC Corporation located at 171 South Street, Hopkinton, Massachusetts 01748, do hereby certify that the following Restatement of the Articles of Organization was duly adopted at a meeting held on December 31, 1999 by a vote of the directors. ARTICLE I The name of the corporation is: EMC Corporation ARTICLE II The purpose of the corporation is to engage in the following business activity(ies): 1. To develop, manufacture and sell computer peripheral and enhancement equipment and related products and to engage in all other lawful business related thereto. 2. To carry on any manufacturing, mercantile, selling, management, service or other business, operation or activity which may lawfully be carried on by a corporation organized under the Business Corporation Law of The Commonwealth of Massachusetts, whether or not related to those referred to in the foregoing paragraph. ARTICLE III State the total number of shares and par value, if any, of each class of stock which the corporation is authorized to issue:

ARTICLE IV If more than one class of stock is authorized, state a distinguishing designation for each class. Prior to the issuance of any shares of a class, if shares of another class are outstanding, the corporation must provide a description of the preferences, voting powers, qualifications, and special or relative rights or privileges of that class and of each other class of which shares are outstanding and of each series then established within any class. The total number of shares of all classes of capital stock which the Company shall be authorized to issue is 3,025,000,000 shares, consisting of 3,000,000,000 shares of common stock, $.01 par value per share (the "Common Stock"), and 25,000,000 shares of preferred stock, $.01 par value per share (the "Series Preferred Stock"). Common Stock The holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters requiring action by the stockholders or submitted to the stockholders for action, except as may be determined by votes of the directors pursuant to Article 4 hereof or as may otherwise be required by law, and each share of the Common Stock shall entitle the holder thereof to one vote. The holders of the Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may from time to time be declared by the directors. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Common Stock shall be entitled to receive the net assets of the Company, after the Company shall have satisfied or made provision for its debts and obligations and for payment to the holders of shares of any class or series having preferential rights to receive distributions of the net assets of the Company. Preferred Stock The shares of Series Preferred Stock may be issued from time to time in one or more series. The directors may determine, in whole or in part, the preferences, voting powers, qualifications and special or relative rights or privileges, if any, of any such series before the issuance of any shares of that series; provided, however, that if and to the extent that shares of any series have voting rights, such rights shall not be in excess of the greater of (i) one vote per share of such series or (ii) if the shares of such series are convertible into shares of Common Stock, such number of votes per share as equals the number of shares of Common Stock into which one share of such series is at the time of such vote convertible. The directors shall determine the number of shares constituting each series of Series Preferred Stock and each series shall have a distinguishing designation. ARTICLE V The restrictions, if any, imposed by the Articles of Organization upon the transfer of shares of stock of any class are: None. ARTICLE VI ** Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: (a) The corporation may carry on any business, operation or activity referred to in Article 2 to the same extent as might an individual, whether as principal, agent, contractor or otherwise, and either alone or in conjunction or joint venture or other arrangement with any corporation, association, trust, firm or individual. (b) The corporation may carry on any business, operation or activity through a wholly or partly owned subsidiary. (c) The corporation may be a partner in any business enterprise which it would have power to conduct by itself. (d) The directors may make, amend or repeal the bylaws in whole or in part, except with respect to any provision thereof which by law or the bylaws requires action by the stockholders. (e) Meetings of the stockholders may be held anywhere in the United States. (f) No stockholder shall have any right to examine any property or any books, accounts or other writings of the corporation if there is reasonable ground for belief that such examination will for any reason be adverse to the interests of the corporation, and a vote of the directors refusing permission to make such examination and setting forth that in the opinion of the directors such examination would be adverse to the interests of the corporation shall be prima facie evidence that such examination would be adverse to the interests of the corporation. Every such examination shall be subject to such reasonable regulations as the directors may establish in regard thereto. (g) The directors may specify the manner in which the accounts of the corporation shall be kept and may determine what constitutes net earnings, profits and surplus, what amounts, if any, shall be reserved for any corporate purpose, and what amounts, if any, shall be declared as dividends. Unless the board of directors otherwise specifies, the excess of the consideration for any share of its capital stock with par value issued by it over such par value shall be paid-in surplus. The board of directors may allocate to capital stock less than all of the consideration for any share of its capital stock without par value issued by it, in which case the balance of such consideration shall be paid-in surplus. All surplus shall be available for any corporate purpose, including the payment of dividends. (h) The purchase or other acquisition or retention by the corporation of shares of its own capital stock shall not be deemed a reduction of its capital stock. Upon any reduction of capital or capital stock, no stockholder shall have any right to demand any distribution from the corporation, except as and to the extent that the stockholders shall have provided at the time of authorizing such reduction. (i) The directors shall have the power to fix from time to time their compensation. No person shall be disqualified from holding any office by reason of any interest. In the absence of fraud, any director, officer or stockholder of this corporation, individually, or any individual having any interest in any concern which is a stockholder of this corporation, or any concern in which any of such directors, officers, stockholders or individuals has any interest, may be a party to, or may be pecuniarily or otherwise interested in, any contract, transaction or other act of this corporation, and (1) such contract, transaction or act shall not be in any way invalidated or otherwise affected by that fact; (2) no such director, officer, stockholder or individual shall be liable to account to this corporation for any profit or benefit realized through any such contract, transaction or act; and (3) any such director of this corporation may be counted in determining the existence of a quorum at any meeting of the directors or of any committee thereof which shall authorize any such contract, transaction or act, and may vote to authorize the same; provided, however, that any contract, transaction or act in which any director or officer of this corporation is so interested individually or as a director, officer, trustee or member of any concern which is not a subsidiary or affiliate of this corporation, or in which any directors or officers are so interested as holders, collectively, of a majority of shares of capital stock or other beneficial interest at the time outstanding in any concern which is not a subsidiary or affiliate of this corporation, shall be duly authorized or ratified by a majority of the directors who are not so interested, to whom the nature of such interest has been disclosed and who have made any findings required by law; the term "interest" including personal interest and interest as a director, officer, stockholder, shareholder, trustee, member or beneficiary of any concern; the term "concern" meaning any corporation, association, trust, partnership, firm, person or other entity other than this corporation; and the phrase "subsidiary or affiliate" meaning a concern in which a majority of the directors, trustees, partners or controlling persons is elected or appointed by the directors of this corporation, or is constituted of the directors or officers of this corporation. To the extent permitted by law, the authorizing or ratifying vote of the holders of a majority of the shares of each class of the capital stock of this corporation outstanding and entitled to vote for directors at any annual meeting or a special meeting duly called for the purpose (whether such vote is passed before or after judgment rendered in a suit with respect to such contract, transaction or act) shall validate any contract, transaction or act of this corporation, or of the board of directors or any committee thereof, with regard to all stockholders of this corporation, whether or not of record at the time of such vote, and with regard to all creditors and other claimants under this corporation; provided, however, that A. with respect to the authorization or ratification of contracts, transactions or acts in which any of the directors, officers or stockholders of this corporation have an interest, the nature of such contracts, transactions or acts and the interest of any director, officer or stockholder therein shall be summarized in the notice of any such annual or special meeting, or in a statement or letter accompanying such notice, and shall be fully disclosed at any such meeting; B. the stockholders so voting shall have made any findings required by law; C. stockholders so interested may vote at any such meeting except to the extent otherwise provided by law; and D. any failure of the stockholders to authorize or ratify such contract, transaction or act shall not be deemed in any way to invalidate the same or to deprive this corporation, its directors, officers or employees of its or their right to proceed with such contract, transaction or act. No contract, transaction or act shall be avoided by reason of any provision of this paragraph (i) which would be valid but for such provision or provisions. (j) The corporation shall have all powers granted to corporations by the laws of The Commonwealth of Massachusetts, provided that no such power shall include any activity inconsistent with the Business Corporation Law or the general laws of said Commonwealth. (k) No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director to the extent provided by applicable law notwithstanding any provision of law imposing such liability; provided, however, that to the extent, and only to the extent, required by Section 13(b) (1 1/2) or any successor provision of the Massachusetts Business Corporation Law, this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under sections 61 or 62 of the Massachusetts Business Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. This provision shall not be construed in any way so as to impose or create liability. The foregoing provisions of this Article 6(k) shall not eliminate the liability of a director for any act or omission occurring prior to the date on which this Article 6(k) becomes effective. No amendment to or repeal of this Article 6(k) shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. ARTICLE VII The effective date of the restated Articles of Organization of the corporation shall be the date approved and filed by the Secretary of the Commonwealth. If a LATER effective date is desired, specify such date which shall not be more than THIRTY DAYS after the date of filing. ARTICLE VIII THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE ARTICLES OF ORGANIZATION. a. The street address (post office boxes are not acceptable) of the principal office of the corporation IN MASSACHUSETTS is: 171 South Street, Hopkinton, Massachusetts 01748 b. The name, residential address and post office address of each director and officer of the corporation is as follows:

c. The fiscal year (i.e., tax year) of the corporation shall end on the last day of the month of: December d. The name and business address of the resident agent, if any, of the corporation is: CT Corporation, 2 Oliver Street, Boston, Massachusetts 02109 ** We further certify that the foregoing Restated Articles of Organization affect no amendments to the Articles of Organization of the corporation as heretofore amended, except amendments to the following articles. Briefly describe amendments below: None. SIGNED UNDER THE PENALTIES OF PERJURY, this 1st day of February, 2000. /s/ Joseph M. Tucci Joseph M. Tucci President /s/ Paul T. Dacier Paul T. Dacier Assistant Clerk THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) ================================================================================ I hereby approve the within Restated Articles of Organization and, the filing fee in the amount of $___________ having been paid, said articles are deemed to have been filed with me this _____ day of ____________, 1999. EFFECTIVE DATE: _____________________________ WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH TO BE FILLED IN BY CORPORATION PHOTOCOPY OF DOCUMENT TO BE SENT TO: Paul T. Dacier Vice President and General Counsel EMC Corporation 171 South Street, Hopkinton, MA 01748 Telephone: (508) 435-1000 -----END PRIVACY-ENHANCED MESSAGE-----