EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

    Contact:  

Dave Farmer

508-293-7206

farmer_dave@emc.com

EMC ACHIEVES RECORD FOURTH-QUARTER REVENUE AHEAD OF COMPANY EXPECTATIONS; QUARTERLY EARNINGS PER SHARE UP 54% YEAR OVER YEAR

Fourth-Quarter Highlights

 

  •  

Record fourth-quarter consolidated revenue of $4.1 billion – up 17% sequentially; ahead of company outlook of $4 billion

 

  •  

Fourth-quarter GAAP diluted EPS of $0.20 – up 43% sequentially and 54% year over year

 

  •  

Fourth-quarter non-GAAP diluted EPS of $0.33 – up 43% sequentially; ahead of company outlook of $0.30

 

  •  

Fourth-quarter operating cash flow of $1.0 billion; Record fourth-quarter free cash flow of $793 million

HOPKINTON, Mass. – January 26, 2010 – EMC Corporation (NYSE:EMC), the world leader in information infrastructure solutions, today reported financial results for the fourth quarter of 2009. Ongoing strategic investments aligned to key customer priorities helped EMC achieve record fourth-quarter revenue. A continued focus on efficiencies and expense controls helped deliver expanded gross and operating margins, record quarterly free cash flow and fourth-quarter profit that exceeded prior company outlook.

Consolidated revenue for the fourth quarter of 2009 reached a record $4.1 billion, an increase of 17% sequentially, 2% year over year and $100 million more than the outlook provided by EMC for the fourth quarter of 2009. Fourth-quarter GAAP net income attributable to EMC reached $426.5 million, an increase of 43% sequentially and 58% year over year. Fourth-quarter GAAP diluted earnings per share were $0.20, up 43% sequentially and 54% compared with the year-ago quarter. Non-GAAP1 net income attributable to EMC for the fourth quarter was $695.5 million, an increase of 45% sequentially and 11% compared with the fourth quarter of 2008. Non-GAAP1 earnings per diluted share were $0.33 for the fourth quarter, $0.03 ahead of the company outlook provided for the fourth quarter of 2009. Fourth-quarter non-GAAP1 earnings per diluted share increased 43% sequentially and were up 6% year over year.2

During the fourth quarter, EMC expanded gross and operating margins on a sequential basis, generated operating cash flow of $1.0 billion and achieved record quarterly free cash flow of $793 million. EMC completed the fourth quarter with $9.4 billion in cash and investments.

For the full year 2009, EMC achieved total consolidated revenue of $14.0 billion. GAAP net income attributable to EMC for 2009 was $1.1 billion or $0.55 per diluted share. Non-GAAP3 net income attributable to EMC for the full year was $1.9 billion or $0.90 per diluted share. For comparison, GAAP net income attributable to EMC for 2008 was $1.3 billion or $0.61 per diluted share and non-GAAP3 net income attributable to EMC for 20082 was $2.1 billion or $1.00 per diluted share. For 2009, EMC’s operating cash flow was $3.3 billion and free cash flow was $2.6 billion, an increase of 2% year over year.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “Aggressive investment in core technology and strategic partnerships during the downturn, combined with heightened operational discipline, leaves EMC stronger than ever financially and intensely focused on our customers. We are well positioned to lead the industry’s newest and potentially largest wave of IT, which we and others refer to as cloud computing. As we execute on our vision for where the industry is heading, EMC’s primary focus is on helping customers safely build out their next-generation, fully virtualized data centers and lead them along the journey to private cloud computing, which offers the promise of a dramatically more efficient and effective model for delivering IT as a service.”

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “Emerging from the worst global recession in company history, EMC is in the best financial and operational shape ever. We refined our financial model to a new level of efficiency and cost discipline, while continuing to invest in strategic technologies and high-growth markets. We rolled out new and more-advanced solutions and services with the best quality in our history and gained market share. With this positive momentum, EMC stands well positioned to continue to gain share in key markets and drive even greater profitability in 2010.”

Fourth-Quarter Highlights

EMC’s Information Infrastructure business for the fourth quarter – comprising product and service revenue from the company’s Information Storage, RSA Security, and Content Management and Archiving business segments – reached $3.5 billion, an increase of 15% sequentially. Within the Information Infrastructure business, the company’s Information Storage and Content Management and Archiving business segments achieved double-digit sequential revenue growth and EMC’s RSA Security business achieved record quarterly revenue. Fourth-quarter highlights included solid customer demand and strong sequential revenue growth for EMC’s Data Domain and Avamar next-generation backup and recovery solutions, EMC’s market-leading Symmetrix and CLARiiON networked storage systems and EMC Celerra unified storage systems; and continued strong demand for EMC’s RSA information security solutions, consumer and small business-focused Iomega products and EMC’s broad portfolio of consulting and professional services.

VMware (NYSE: VMW), which is majority-owned by EMC, contributed fourth-quarter revenue of $607 million.

EMC consolidated fourth-quarter revenue from the United States reached $2.2 billion, an increase of 14% sequentially and 1% year over year, representing 53% of consolidated fourth-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $1.9 billion, an increase of 20% sequentially and 4% year over year, representing 47% of consolidated fourth-quarter revenue.

2009 Highlights

Full-year 2009 consolidated revenue was $14.0 billion. Revenue from EMC’s Information Infrastructure business reached $12.0 billion and VMware contributed revenue of $2.0 billion. Throughout the year, EMC executed on numerous strategic initiatives that collectively helped strengthen the company’s market leadership and advance its competitive lead, including:

 

  •  

Sustained aggressive investment in research and development, totaling 12% of annual consolidated 2009 revenue, resulted in innovation across all business units. For example, EMC introduced an entirely new approach to high-end data storage with the EMC Virtual Matrix Architecture and EMC Symmetrix V-Max storage systems, unprecedented automation capabilities across all primary EMC storage platforms with the new EMC fully automated storage tiering (FAST) technology, and more than 30 new EMC services and solutions to drive the acceleration of private cloud computing.

 

  •  

Use of financial strength to make strategic acquisitions, including deduplication storage solutions leader Data Domain, and increase investment levels in higher-growth markets and geographies.

 

  •  

Tighter alignment with strategic partners, demonstrated by the Virtual Computing Environment coalition formed by EMC and Cisco with VMware, the extension of EMC’s strategic alliance with Microsoft, as well as enhanced technology integration and expanded solutions and services support with major industry players such as Cisco, VMware, Microsoft, Dell and others.

 

  •  

Further movement and penetration down market, including a wave of new consumer storage technologies and services from Iomega and Mozy.

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced or closed after the date hereof. These statements supersede all prior statements regarding 2010 financial results set forth in prior EMC news releases.

All dollar amounts and percentages set forth below should be considered to be approximations.

  •  

Consolidated EMC revenues are expected to be $16.0 billion for 2010.

 

  •  

2010 GAAP research and development (“R&D”) expense and non-GAAP R&D expense are each expected to increase 20% over 2009. Excluded from the increase in non-GAAP R&D expense is stock-based compensation expense of $42 million and intangible asset amortization of $8 million.

 

  •  

Transition costs to a more efficient cost structure are expected to be $50 million in 2010.

 

  •  

GAAP operating income is expected to be 13% of revenues for 2010 and non-GAAP operating income is expected to be 20% of revenues for 2010. Excluded from non-GAAP operating income are restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which account for less than 1%, 5% and 2% of revenues, respectively.

 

  •  

Total non-operating expense, which includes investment income, interest expense and other expense, is expected to be $90 million in 2010.

 

  •  

Consolidated GAAP diluted earnings per share are expected to be $0.78 for 2010.

 

  •  

Consolidated non-GAAP diluted earnings per share, excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization are expected to be $1.12 for 2010.

 

  •  

Consolidated restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization are expected to be $0.02, $0.24 and $0.08 per diluted share, respectively for 2010.

 

  •  

The consolidated GAAP income tax rate is expected to be 17% for 2010. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization, which collectively impact the tax rate by 3%, the consolidated non-GAAP income tax rate is expected to be 20% for 2010. Both GAAP and non-GAAP income tax rates assume that the U.S. research and development tax credit will be re-enacted in 2010.

 

  •  

The weighted average outstanding diluted shares are expected to be 2.12 billion for 2010.

 

  •  

EMC expects to repurchase up to $1.0 billion of the company’s common stock.

Supporting Resources

 

  •  

EMC will host its 2009 fourth-quarter earnings conference call today at 8:30 a.m. ET, which will be available on EMC’s web site at http://www.emc.com/about/investor-relations/index.htm

  •  

Additional information regarding EMC’s financials, as well as a webcast of the conference call, will be available at 8:30 a.m. ET at http://www.emc.com/about/investor-relations/index.htm

 

  •  

Visit http://ir.vmware.com for more information about VMware’s fourth-quarter financial results.

About EMC

EMC Corporation (NYSE: EMC) is the world’s leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC’s products and services can be found at www.EMC.com.

# # #

¹Items excluded from the non-GAAP results are restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a special income tax charge for the fourth quarter of 2009 and restructuring charge, IPR&D charge, stock-based compensation expense and intangible asset amortization for the fourth quarter of 2008. See attached schedules for reconciliation of GAAP to non-GAAP.

2The results for 2008 have been adjusted to give effect to the adoption of authoritative guidance relating to non-controlling interests and the accounting for convertible debt instruments.

3 Items excluded from the non-GAAP results are gains on Data Domain and SpringSource common stock, restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a special income tax charge for 2009 and restructuring charge, IPR&D charge, special income tax benefit, stock-based compensation expense and intangible asset amortization for 2008. See attached schedules for reconciliation of GAAP to non-GAAP.

EMC, Avamar, Celerra, CLARiiON, Symmetrix, Symmetrix V-Max and Virtual Matrix Architecture are registered trademarks of EMC Corporation. RSA is a registered trademark of RSA Security Inc. VMware is a registered trademark of VMware, Inc. Iomega is a registered trademark of Iomega Corporation. Data Domain is a registered trademark of Data Domain, Inc. Mozy is a registered trademark of Decho Corporation. SpringSource is a registered trademark of SpringSource, Inc. All other trademarks used are the property of their respective owners.

Forward-Looking Statements

This release contains “forward-looking statements” as defined under the Federal Securities Laws. 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: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) our ability to protect our proprietary technology; (iv) risks associated with managing the growth of our business, including risks associated with acquisitions and investments and the challenges and costs of integration, restructuring and achieving anticipated synergies; (v) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vi) competitive factors, including but not limited to pricing pressures and new product introductions; (vii) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (viii) component and product quality and availability; (ix) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (x) insufficient, excess or obsolete inventory; (xi) war or acts of terrorism; (xii) the ability to attract and retain highly qualified employees; (xiii) fluctuating currency exchange rates; (xiv) litigation that we may be involved in; and (xv) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.

Use of Non-GAAP Financial Measures

This release, the accompanying schedules and the additional content that is available on EMC’s website contain non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC’s performance or liquidity, should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures in this release.

Where specified in the accompanying schedules for various periods entitled “Reconciliation of GAAP to Non-GAAP,” certain items noted on each such specific schedule (including, where noted, amounts relating to gains on Data Domain and SpringSource common stock, restructuring and acquisition-related charges, special income tax charge, stock-based compensation expense, intangible asset amortization, IPR&D charge, special income tax benefit and restructuring charge) are excluded from the non-GAAP financial measures.

EMC’s management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above-listed items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company’s current financial results with the Company’s past financial results.

This release also includes disclosures regarding free cash flow which is a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statement of cash flows.

Certain items in the accompanying schedules refer to growth rates at constant currency or adjusting for currency so that business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of EMC’s business performance. To present this information, current period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year quarter. Constant currency includes the impacts from EMC’s hedging program.

All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.

EMC CORPORATION

Consolidated Income Statements

(in thousands, except per share amounts)

Unaudited

 

     Three Months Ended     Twelve Months Ended  
     December 31,
2009		     December 31,
2008		     December 31,
2009		     December 31,
2008		  
           (As Adjusted)           (As Adjusted)  

Revenues:

         

Product sales

    $ 2,653,174      $ 2,776,794      $ 8,828,145      $ 10,071,816   

Services

      1,446,992        1,239,844        5,197,765        4,804,347   
                                
     4,100,166        4,016,638        14,025,910        14,876,163   

Cost and expenses:

         

Cost of product sales

      1,228,252        1,313,468        4,406,187        4,663,667   

Cost of services

      494,265        477,486        1,874,824        1,990,127   

Research and development

      424,243        434,521        1,627,509        1,721,330   

Selling, general and administrative

      1,284,373        1,211,120        4,538,125        4,601,588   

In-process research and development

      —          6,576        —          85,780   

Restructuring and acquisition-related charges

      23,903        240,694        107,490        244,735   
                                

Operating income

      645,130        332,773        1,471,775        1,568,936   

Non-operating income (expense):

         

Investment income

      31,137        54,462        140,430        247,049   

Interest expense

      (46,571 )      (44,741 )      (182,499 )      (176,355 ) 

Other income (expense), net

      (14,911 )      (18,518 )      2,370        (39,405 ) 
                                

Total non-operating income (expense)

      (30,345 )      (8,797 )      (39,699 )      31,289   

Income before tax

      614,785        323,976        1,432,076        1,600,225   

Income tax provision

      177,919        36,336        274,381        280,396   
                                

Net income

      436,866        287,640        1,157,695        1,319,829   

Less: Net income attributable to the non-controlling interests in VMware, Inc.

      (10,376 )      (17,718 )      (33,724 )      (44,725 ) 
                                

Net income attributable to EMC Corporation

    $ 426,490      $ 269,922      $ 1,123,971      $ 1,275,104   
                                

Net income per weighted average share, basic:

         

common shareholders:

    $ 0.21      $ 0.13      $ 0.56      $ 0.62   
                                

Net income per weighted average share, diluted:

         

common shareholders:

    $ 0.20      $ 0.13      $ 0.55      $ 0.61   
                                

Weighted average shares, basic

      2,041,601        2,012,389        2,022,371        2,048,506   

Weighted average shares, diluted

      2,103,569        2,028,635        2,055,146        2,079,853   

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended December 31, 2009

(in thousands, except per share amounts)

Unaudited

 

     Revenue     Cost of
Revenue		     Research and
Development		     Selling,
General and
Administrative		     Restructuring
and
Acquisition-
Related
Charges		     Operating
Income		    Other
Expense,
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		     Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

EMC Consolidated GAAP

    $ 4,100,166      $ 1,722,517      $ 424,243      $ 1,284,373      $ 23,903      $ 645,130    $ (30,345 )    $ 614,785      $ 177,919      $ 436,866      $ (10,376 )    $ 426,490      $ 0.209      $ 0.202   

Restructuring and acquisition-related charges

      —          —          —          —          (23,903 )      23,903      —          23,903        9,130        14,773        (152 )      14,621      $ 0.007      $ 0.007   

Special income tax charge

      —          —          —          —          —          —        —          —          (77,168 )      77,168        —          77,168      $ 0.038      $ 0.037   
                                                                                                               

EMC Consolidated Adjusted (1)

      4,100,166        1,722,517        424,243        1,284,373        —          669,033      (30,345 )      638,688        109,881        528,807        (10,528 )      518,279      $ 0.254      $ 0.246   

Stock-based compensation expense

      —          (30,136 )      (67,040 )      (84,421 )      —          181,597      —          181,597        36,849        144,748        (11,554 )      133,194      $ 0.065      $ 0.063   

Intangible amortization

      —          (36,488 )      (3,191 )      (26,224 )      —          65,903      —          65,903        21,443        44,460        (468 )      43,992      $ 0.022      $ 0.021   
                                                                                                               

EMC Consolidated Non-GAAP (2)

    $ 4,100,166      $ 1,655,893      $ 354,012      $ 1,173,728      $ —        $ 916,533    $ (30,345 )    $ 886,188      $ 168,173      $ 718,015      $ (22,550 )    $ 695,465      $ 0.341      $ 0.330   
                                                                                                               

EMC Information Infrastructure GAAP

    $ 3,493,623      $ 1,614,231      $ 290,130      $ 994,389      $ 23,075      $ 571,798    $ (24,067 )    $ 547,731      $ 167,141      $ 380,590      $ —        $ 380,590      $ 0.186      $ 0.181   

Restructuring and acquisition-related charges

      —          —          —          —          (23,075 )      23,075      —          23,075        9,130        13,945        —          13,945      $ 0.007      $ 0.007   

Special income tax charge

      —          —          —          —          —          —        —          —          (77,168 )      77,168        —          77,168      $ 0.038      $ 0.037   
                                                                                                               

EMC Information Infrastructure Adjusted (3)

      3,493,623        1,614,231        290,130        994,389        —          594,873      (24,067 )      570,806        99,103        471,703        —          471,703      $ 0.231      $ 0.224   

Stock-based compensation expense

      —          (20,633 )      (29,880 )      (58,024 )      —          108,537      —          108,537        26,614        81,923        —          81,923      $ 0.040      $ 0.039   

Intangible amortization

      —          (32,960 )      (3,124 )      (25,710 )      —          61,794      —          61,794        19,881        41,913        —          41,913      $ 0.021      $ 0.020   
                                                                                                               

EMC Information Infrastructure Non-GAAP (4)

    $ 3,493,623      $ 1,560,638      $ 257,126      $ 910,655      $ —        $ 765,204    $ (24,067 )    $ 741,137      $ 145,598      $ 595,539      $ —        $ 595,539      $ 0.292      $ 0.283   
                                                                                                               

VMware standalone GAAP

    $ 608,201      $ 107,506      $ 136,262      $ 293,276      $ —        $ 71,157    $ (3,920 )    $ 67,237      $ 10,828      $ 56,409      $ —        $ 56,409      $ 0.028      $ 0.027   

GAAP adjustments and eliminations

      (1,658 )      780        (2,149 )      (3,292 )      828        2,175      (2,358 )      (183 )      (50 )      (133 )      (10,376 )      (10,509 )    $ (0.005 )    $ (0.006 ) 
                                                                                                               

VMware within EMC GAAP (5)

      606,543        108,286        134,113        289,984        828        73,332      (6,278 )      67,054        10,778        56,276        (10,376 )      45,900      $ 0.022      $ 0.021   

Acquisition-related charges

      —          —          —          —          (828 )      828      —          828        —          828        (152 )      676      $ —        $ —     
                                                                                                               

VMware within EMC Adjusted (6)

      606,543        108,286        134,113        289,984        —          74,160      (6,278 )      67,882        10,778        57,104        (10,528 )      46,576      $ 0.023      $ 0.022   

Stock-based compensation expense

      —          (9,503 )      (37,160 )      (26,397 )      —          73,060      —          73,060        10,235        62,825        (11,554 )      51,271      $ 0.025      $ 0.024   

Intangible amortization

      —          (3,528 )      (67 )      (514 )      —          4,109      —          4,109        1,562        2,547        (468 )      2,079      $ 0.001      $ 0.001   
                                                                                                               

VMware within EMC Non-GAAP (7)

    $ 606,543      $ 95,255      $ 96,886      $ 263,073      $ —        $ 151,329    $ (6,278 )    $ 145,051      $ 22,575      $ 122,476      $ (22,550 )    $ 99,926      $ 0.049      $ 0.047   
                                                                                                               
                     

 

Wtd. Average Share O/S

  

     2,041,601        2,103,569   
                                         
                     

 

Incremental VMware dilution

  

     $ 1,150   
                     

 

Minority interest percentage

  

       0.1839   

 

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended December 31, 2009

(in thousands, except per share amounts)

Unaudited

(Continued)

The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results

 

     Revenue    Cost of
Revenue		    Research and
Development		    Selling,
General and
Administrative		    Restructuring
and
Acquisition-
Related
Charges		    Operating
Income		     Other
Expense,
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		    Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

Non-cash interest expense on convertible debt (8)

    $ —      $ —      $ —      $ —      $ —      $ —        $ (27,785 )    $ (27,785 )    $ (9,253 )    $ (18,532 )    $ —      $ (18,532 )    $ (0.009 )    $ (0.009 ) 

Transition costs (9)

      —        167      3,243      15,921      —        (19,331 )      —          (19,331 )      (5,053 )      (14,278 )      —      $ (14,278 )    $ (0.007 )    $ (0.007 ) 
                                                                                                          
   $ —      $ 167    $ 3,243    $ 15,921    $ —      $ (19,331 )    $ (27,785 )    $ (47,116 )    $ (14,306 )    $ (32,810 )    $ —      $ (32,810 )    $ (0.016 )    $ (0.016 ) 
                                                                                                          

 

(1) Represents EMC Consolidated GAAP excluding restructuring, acquisition-related charges and a special income tax charge.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible amortization.
(3) Represents EMC Information Infrastructure GAAP excluding restructuring, acquisition-related charges and a special income tax charge.
(4) Represents EMC Information Infrastructure Adjusted excluding stock-based compensation expense and intangible amortization.
(5) Represents VMware within EMC GAAP.
(6) Represents VMware within EMC GAAP excluding acquisition-related charges.
(7) Represents VMware within EMC Adjusted excluding stock-based compensation expense and intangible amortization.
(8) Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million.
(9) Represents incremental costs incurred to transform our current cost structure to a more streamlined cost structure.

Note: schedule may not add due to rounding

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended December 31, 2008

(in thousands, except per share amounts)

Unaudited

 

     Revenue     Cost of
Revenue		     Research and
Development		     Selling,
General and
Administrative		     IPR&D
Charge		     Restructuring
Charge		     Operating
Income		    Other
Income,
net		     Income
Before
Taxes		    Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		     Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

EMC Consolidated GAAP

    $ 4,016,638      $ 1,790,954      $ 434,521      $ 1,211,120      $ 6,576      $ 240,694      $ 332,773    $ (8,797 )    $ 323,976    $ 36,336      $ 287,640      $ (17,718 )    $ 269,922      $ 0.134      $ 0.133   

Restructuring charge

      —          —          —          —          —          (240,694 )      240,694      6,877        247,571      48,037        199,534        —          199,534      $ 0.099      $ 0.098   

IPR&D charge

      —          —          —          —          (6,576 )      —          6,576      —          6,576      2,229        4,347        (691 )      3,656      $ 0.002      $ 0.002   
                                                                                                                      

EMC Consolidated Adjusted (1)

      4,016,638        1,790,954        434,521        1,211,120        —          —          580,043      (1,920 )      578,123      86,602        491,521        (18,409 )      473,112      $ 0.235      $ 0.233   

Stock-based compensation expense

      —          (21,704 )      (47,385 )      (74,682 )      —          —          143,771      —          143,771      26,895        116,876        (6,837 )      110,039      $ 0.055      $ 0.054   

Intangible amortization

      —          (40,397 )      (4,305 )      (28,260 )      —          —          72,962      —          72,962      26,930        46,032        (480 )      45,552      $ 0.023      $ 0.022   
                                                                                                                      

EMC Consolidated Non-GAAP (2)

    $ 4,016,638      $ 1,728,853      $ 382,831      $ 1,108,178      $ —        $ —        $ 796,776    $ (1,920 )    $ 794,856    $ 140,427      $ 654,429      $ (25,726 )    $ 628,703      $ 0.312      $ 0.310   
                                                                                                                      

EMC Information Infrastructure GAAP

    $ 3,502,307      $ 1,719,162      $ 331,166      $ 982,832      $ —        $ 240,694      $ 228,453    $ (5,703 )    $ 222,750    $ 41,639      $ 181,111      $ —        $ 181,111      $ 0.090      $ 0.089   

Restructuring charge

      —          —          —          —          —          (240,694 )      240,694      6,877        247,571      48,037        199,534        —          199,534      $ 0.099      $ 0.098   
                                                                                                                      

EMC Information Infrastructure Adjusted (3)

      3,502,307        1,719,162        331,166        982,832        —          —          469,147      1,174        470,321      89,676        380,645        —          380,645      $ 0.189      $ 0.188   

Stock-based compensation expense

      —          (16,665 )      (25,274 )      (52,885 )      —          —          94,824      —          94,824      20,958        73,866        —          73,866      $ 0.037      $ 0.036   

Intangible amortization

      —          (37,253 )      (4,305 )      (26,705 )      —          —          68,263      —          68,263      25,248        43,015        —          43,015      $ 0.021      $ 0.021   
                                                                                                                      

EMC Information Infrastructure Non-GAAP (4)

    $ 3,502,307      $ 1,665,244      $ 301,587      $ 903,242      $ —        $ —        $ 632,234    $ 1,174      $ 633,408    $ 135,882      $ 497,526      $ —        $ 497,526      $ 0.247      $ 0.245   
                                                                                                                      

VMware standalone GAAP

    $ 514,603      $ 71,950      $ 110,506      $ 230,033      $ —        $ —        $ 102,114    $ (1,490 )    $ 100,624    $ (10,830 )    $ 111,454      $ —        $ 111,454      $ 0.055      $ 0.055   

GAAP adjustments and eliminations

      (272 )      (158 )      (7,151 )      (1,745 )      6,576        —          2,206      (1,604 )      602      5,527        (4,925 )      (17,718 )      (22,643 )    $ (0.011 )    $ (0.011 ) 
                                                                                                                      

VMware within EMC GAAP (5)

      514,331        71,792        103,355        228,288        6,576        —          104,320      (3,094 )      101,226      (5,303 )      106,529        (17,718 )      88,811      $ 0.044      $ 0.044   

IPR&D charge

      —          —          —          —          (6,576 )      —          6,576      —          6,576      2,229        4,347        (691 )      3,656      $ 0.002      $ 0.002   
                                                                                                                      

VMware within EMC Adjusted (6)

      514,331        71,792        103,355        228,288        —          —          110,896      (3,094 )      107,802      (3,074 )      110,876        (18,409 )      92,467      $ 0.046      $ 0.045   

Stock-based compensation expense

      —          (5,039 )      (22,111 )      (21,797 )      —          —          48,947      —          48,947      5,937        43,010        (6,837 )      36,173      $ 0.018      $ 0.018   

Intangible amortization

      —          (3,144 )      —          (1,555 )      —          —          4,699      —          4,699      1,682        3,017        (480 )      2,537      $ 0.001      $ 0.001   
                                                                                                                      

VMware within EMC Non-GAAP (7)

    $ 514,331      $ 63,609      $ 81,244      $ 204,936      $ —        $ —        $ 164,542    $ (3,094 )    $ 161,448    $ 4,545      $ 156,903      $ (25,726 )    $ 131,177      $ 0.065      $ 0.065   
                                                                                                                      
                          

 

Wtd. Average Share O/S

  

     2,012,389        2,028,635   
                                            
                          

 

Incremental VMware dilution

  

     $ 268   
                          

 

Minority interest percentage

  

       0.1590   

 

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended December 31, 2008

(in thousands, except per share amounts)

Unaudited

(Continued)

The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results

 

     Revenue    Cost of
Revenue		    Research and
Development		    Selling,
General and
Administrative		    IPR&D
Charge		    Restructuring
Charge		    Operating
Income		    Other
Income,
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		    Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

Non-cash interest expense on convertible debt (8)

    $ —      $ —      $ —      $ —      $ —      $ —      $ —      $ (26,295 )    $ (26,295 )    $ (8,233 )    $ (18,062 )    $ —      $ (18,062 )    $ (0.009 )    $ (0.009 ) 

 

(1) Represents EMC Consolidated GAAP excluding restructuring charge and IPR&D charge.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible amortization.
(3) Represents EMC Information Infrastructure GAAP excluding restructuring charge.
(4) Represents EMC Information Infrastructure Adjusted less stock-based compensation expense and intangible amortization.
(5) Represents VMware within EMC GAAP.
(6) Represents VMware within EMC GAAP excluding IPR&D charge.
(7) Represents VMware within EMC Adjusted excluding stock-based compensation expense and intangible amortization.
(8) Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million.

Note: schedule may not add due to rounding

Reconciliation of GAAP to Non-GAAP

For the Twelve Months Ended December 31, 2009

(in thousands, except per share amounts)

Unaudited

 

     Revenue     Cost of
Revenue		     Research and
Development		     Selling,
General and
Administrative		     Restructuring
and
Acquisition-
Related
Charges		     Operating
Income		    Other
Income
(Expense),
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		     Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

EMC Consolidated GAAP

    $ 14,025,910      $ 6,281,011      $ 1,627,509      $ 4,538,125      $ 107,490      $ 1,471,775    $ (39,699 )    $ 1,432,076      $ 274,381      $ 1,157,695      $ (33,724 )    $ 1,123,971      $ 0.556      $ 0.546   

Gain on Data Domain and SpringSource common stock

      —          —          —          —          —          —        (25,822 )      (25,822 )      —          (25,822 )      1,025        (24,797 )    $ (0.012 )    $ (0.012 ) 

Restructuring and acquisition-related charges

      —          (12,485 )      —          —          (107,490 )      119,975      —          119,975        35,884        84,091        (287 )      83,804      $ 0.041      $ 0.041   

Special income tax charge

      —          —          —          —          —          —        —          —          (77,168 )      77,168        —          77,168      $ 0.038      $ 0.038   
                                                                                                               

EMC Consolidated Adjusted (1)

      14,025,910        6,268,526        1,627,509        4,538,125        —          1,591,750      (65,521 )      1,526,229        233,097        1,293,132        (32,986 )      1,260,146      $ 0.623      $ 0.612   

Stock-based compensation expense

      —          (99,393 )      (214,554 )      (291,759 )      —          605,706      —          605,706        135,130        470,576        (34,731 )      435,845      $ 0.216      $ 0.212   

Intangible amortization

      —          (131,754 )      (12,883 )      (103,151 )      —          247,788      —          247,788        83,842        163,946        (1,568 )      162,378      $ 0.080      $ 0.079   
                                                                                                               

EMC Consolidated Non-GAAP (2)

    $ 14,025,910      $ 6,037,379      $ 1,400,072      $ 4,143,215      $ —        $ 2,445,244    $ (65,521 )    $ 2,379,723      $ 452,069      $ 1,927,654      $ (69,285 )    $ 1,858,369      $ 0.919      $ 0.904   
                                                                                                               

EMC Information Infrastructure GAAP

    $ 12,004,948      $ 5,921,103      $ 1,136,100      $ 3,600,416      $ 105,889      $ 1,241,440    $ (36,059 )    $ 1,205,381      $ 247,405      $ 957,976      $ —        $ 957,976      $ 0.474      $ 0.466   

Gain on Data Domain common stock

      —          —          —          —          —          —        (19,963 )      (19,963 )      —          (19,963 )      —          (19,963 )    $ (0.010 )    $ (0.010 ) 

Restructuring and acquisition-related charges

      —          (12,485 )      —          —          (105,889 )      118,374      —          118,374        35,884        82,490        —          82,490      $ 0.041      $ 0.040   

Special income tax charge

      —          —          —          —          —          —        —          —          (77,168 )      77,168        —          77,168      $ 0.038      $ 0.038   
                                                                                                               

EMC Information Infrastructure Adjusted (3)

      12,004,948        5,908,618        1,136,100        3,600,416        —          1,359,814      (56,022 )      1,303,792        206,121        1,097,671        —          1,097,671      $ 0.543      $ 0.534   

Stock-based compensation expense

      —          (67,698 )      (92,766 )      (198,239 )      —          358,703      —          358,703        89,055        269,648        —          269,648      $ 0.133      $ 0.131   

Intangible amortization

      —          (119,819 )      (12,776 )      (101,059 )      —          233,654      —          233,654        78,824        154,830        —          154,830      $ 0.077      $ 0.075   
                                                                                                               

EMC Information Infrastructure Non-GAAP (4)

    $ 12,004,948      $ 5,721,101      $ 1,030,558      $ 3,301,118      $ —        $ 1,952,171    $ (56,022 )    $ 1,896,149      $ 374,000      $ 1,522,149      $ —        $ 1,522,149      $ 0.753      $ 0.741   
                                                                                                               

VMware standalone GAAP

    $ 2,023,937      $ 359,728      $ 496,552      $ 948,362      $ —        $ 219,295    $ 4,154      $ 223,449      $ 26,351      $ 197,098      $ —        $ 197,098      $ 0.097      $ 0.096   

GAAP adjustments and eliminations

      (2,975 )      180        (5,143 )      (10,653 )      1,601        11,040      (7,794 )      3,246        625        2,621        (33,724 )      (31,103 )    $ (0.015 )    $ (0.016 ) 
                                                                                                               

VMware within EMC GAAP (5)

      2,020,962        359,908        491,409        937,709        1,601        230,335      (3,640 )      226,695        26,976        199,719        (33,724 )      165,995      $ 0.082      $ 0.080   

Gain on SpringSource common stock

      —          —          —          —          —          —        (5,859 )      (5,859 )      —          (5,859 )      1,025        (4,834 )    $ (0.002 )    $ (0.002 ) 

Acquisition-related charges

      —          —          —          —          (1,601 )      1,601      —          1,601        —          1,601        (287 )      1,314      $ 0.001      $ 0.001   
                                                                                                               

VMware within EMC Adjusted (6)

      2,020,962        359,908        491,409        937,709        —          231,936      (9,499 )      222,437        26,976        195,461        (32,986 )      162,475      $ 0.080      $ 0.078   

Stock-based compensation expense

      —          (31,695 )      (121,788 )      (93,520 )      —          247,003      —          247,003        46,075        200,928        (34,731 )      166,197      $ 0.082      $ 0.081   

Intangible amortization

      —          (11,935 )      (107 )      (2,092 )      —          14,134      —          14,134        5,018        9,116        (1,568 )      7,548      $ 0.004      $ 0.004   
                                                                                                               

VMware within EMC Non-GAAP (7)

    $ 2,020,962      $ 316,278      $ 369,514      $ 842,097      $ —        $ 493,073    $ (9,499 )    $ 483,574      $ 78,069      $ 405,505      $ (69,285 )    $ 336,220      $ 0.166      $ 0.163   
                                                                                                               
                             
                     

 

Wtd. Average Share O/S

  

     2,022,371        2,055,146   
                                         
                     

 

Incremental VMware dilution

  

     $ 1,392   

 

Reconciliation of GAAP to Non-GAAP

For the Twelve Months Ended December 31, 2009

(in thousands, except per share amounts)

Unaudited

(Continued)

The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results

 

     Revenue    Cost of
Revenue		    Research and
Development		    Selling,
General and
Administrative		    Restructuring
and
Acquisition-
Related
Charges		    Operating
Income		     Other
Income
(Expense),
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		    Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

Non-cash interest expense on convertible debt (8)

    $ —      $ —      $ —      $ —      $ —      $ —        $ (108,347 )    $ (108,347 )    $ (35,025 )    $ (73,322 )    $ —      $ (73,322 )    $ (0.036 )    $ (0.036 ) 

Transition costs (9)

      —        3,194      8,411      43,063      —        (54,668 )      —          (54,668 )      (15,683 )      (38,985 )      —      $ (38,985 )    $ (0.019 )    $ (0.019 ) 
                                                                                                          
   $ —      $ 3,194    $ 8,411    $ 43,063    $ —      $ (54,668 )    $ (108,347 )    $ (163,015 )    $ (50,708 )    $ (112,307 )    $ —      $ (112,307 )    $ (0.056 )    $ (0.055 ) 
                                                                                                          

 

(1) Represents EMC Consolidated GAAP excluding gain on Data Domain and SpringSource common stock, restructuring and acquisition-related charges and a special income tax charge.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible amortization.
(3) Represents EMC Information Infrastructure GAAP excluding gain on Data Domain common stock, restructuring and acquisition-related charges and a special income tax charge.
(4) Represents EMC Information Infrastructure Adjusted excluding stock-based compensation expense and intangible amortization.
(5) Represents VMware within EMC GAAP.
(6) Represents VMware within EMC GAAP excluding gain on SpringSource common stock and acquisition-related charges.
(7) Represents VMware within EMC Adjusted excluding stock-based compensation expense and intangible amortization.
(8) Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million.
(9) Represents incremental costs incurred to transform our current cost structure to a more streamlined cost structure.

Note: schedule may not add due to rounding

Reconciliation of GAAP to Non-GAAP

For the Twelve Months Ended December 31, 2008

(in thousands, except per share amounts)

Unaudited

 

     Revenue     Cost of
Revenue		     Research and
Development		     Selling,
General and
Administrative		     IPR&D
Charge		     Restructuring
Charge		     Operating
Income		    Other
Income,
net		     Income
Before
Taxes		    Income
Tax
Provision		    Net
Income		     Net Income
Attributable
to VMware		     Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

EMC Consolidated GAAP

    $ 14,876,163      $ 6,653,794      $ 1,721,330      $ 4,601,588      $ 85,780      $ 244,735      $ 1,568,936    $ 31,289      $ 1,600,225    $ 280,396    $ 1,319,829      $ (44,725 )    $ 1,275,104      $ 0.622      $ 0.610   

Restructuring charge

      —          —          —          —          —          (245,092 )      245,092      6,877        251,969      51,027      200,942        —          200,942      $ 0.098      $ 0.097   

IPR&D charge

      —          —          —          —          (85,780 )      —          85,780      —          85,780      2,229      83,551        (691 )      82,860      $ 0.040      $ 0.040   

Special income tax benefit

      —          —          —          —          —          —          —        —          —        17,803      (17,803 )      —          (17,803 )    $ (0.009 )    $ (0.009 ) 
                                                                                                                     

EMC Consolidated Adjusted (1)

      14,876,163        6,653,794        1,721,330        4,601,588        —          (357 )      1,899,808      38,166        1,937,974      351,455      1,586,519        (45,416 )      1,541,103      $ 0.752      $ 0.737   

Stock-based compensation expense

      —          (80,126 )      (162,377 )      (258,936 )      —          —          501,439      —          501,439      108,811      392,628        (21,412 )      371,216      $ 0.181      $ 0.178   

Intangible amortization

      —          (158,600 )      (12,986 )      (108,222 )      —          —          279,808      —          279,808      97,233      182,575        (1,704 )      180,871      $ 0.088      $ 0.087   
                                                                                                                     

EMC Consolidated Non-GAAP (2)

    $ 14,876,163      $ 6,415,068      $ 1,545,967      $ 4,234,430      $ —        $ (357 )    $ 2,681,055    $ 38,166      $ 2,719,221    $ 557,499    $ 2,161,722      $ (68,532 )    $ 2,093,190      $ 1.022      $ 1.003   
                                                                                                                     

EMC Information Infrastructure GAAP

    $ 12,999,227      $ 6,350,213      $ 1,300,715      $ 3,773,900      $ 79,204      $ 244,735      $ 1,250,460    $ 26,937      $ 1,277,397    $ 245,048    $ 1,032,349      $ —        $ 1,032,349      $ 0.504      $ 0.496   

Restructuring charge

      —          —          —          —          —          (245,092 )      245,092      6,877        251,969      51,027      200,942        —          200,942      $ 0.098      $ 0.097   

IPR&D charge

      —          —          —          —          (79,204 )      —          79,204      —          79,204      —        79,204        —          79,204      $ 0.039      $ 0.038   

Special income tax benefit

      —          —          —          —          —          —          —        —          —        17,803      (17,803 )      —          (17,803 )    $ (0.009 )    $ (0.009 ) 
                                                                                                                     

EMC Information Infrastructure Adjusted (3)

      12,999,227        6,350,213        1,300,715        3,773,900        —          (357 )      1,574,756      33,814        1,608,570      313,878      1,294,692        —          1,294,692      $ 0.632      $ 0.622   

Stock-based compensation expense

      —          (56,538 )      (84,001 )      (185,018 )      —          —          325,557      —          325,557      73,932      251,625        —          251,625      $ 0.123      $ 0.121   

Intangible amortization

      —          (147,323 )      (12,986 )      (102,035 )      —          —          262,344      —          262,344      90,945      171,399        —          171,399      $ 0.084      $ 0.082   
                                                                                                                     

EMC Information Infrastructure Non-GAAP (4)

    $ 12,999,227      $ 6,146,352      $ 1,203,728      $ 3,486,847      $ —        $ (357 )    $ 2,162,657    $ 33,814      $ 2,196,471    $ 478,755    $ 1,717,716      $ —        $ 1,717,716      $ 0.839      $ 0.826   
                                                                                                                     

VMware standalone GAAP

    $ 1,881,027      $ 304,105      $ 429,204      $ 835,193      $ —        $ —        $ 312,525    $ 6,760      $ 319,285    $ 29,152    $ 290,133      $ —        $ 290,133      $ 0.142      $ 0.139   

GAAP adjustments and eliminations

      (4,091 )      (524 )      (8,589 )      (7,505 )      6,576        —          5,951      (2,408 )      3,543      6,196      (2,653 )      (44,725 )      (47,378 )    $ (0.023 )    $ (0.026 ) 
                                                                                                                     

VMware within EMC GAAP (5)

      1,876,936        303,581        420,615        827,688        6,576        —          318,476      4,352        322,828      35,348      287,480        (44,725 )      242,755      $ 0.119      $ 0.113   

IPR&D charge

      —          —          —          —          (6,576 )      —          6,576      —          6,576      2,229      4,347        (691 )      3,656      $ 0.002      $ 0.002   
                                                                                                                     

VMware within EMC Adjusted (6)

      1,876,936        303,581        420,615        827,688        —          —          325,052      4,352        329,404      37,577      291,827        (45,416 )      246,411      $ 0.120      $ 0.115   

Stock-based compensation expense

      —          (23,588 )      (78,376 )      (73,918 )      —          —          175,882      —          175,882      34,879      141,003        (21,412 )      119,591      $ 0.058      $ 0.057   

Intangible amortization

      —          (11,277 )      —          (6,187 )      —          —          17,464      —          17,464      6,288      11,176        (1,704 )      9,472      $ 0.005      $ 0.005   
                                                                                                                     

VMware within EMC Non-GAAP (7)

    $ 1,876,936      $ 268,716      $ 342,239      $ 747,583      $ —        $ —        $ 518,398    $ 4,352      $ 522,750    $ 78,744    $ 444,006      $ (68,532 )    $ 375,474      $ 0.183      $ 0.177   
                                                                                                                     
                         

 

Wtd. Average Share O/S

  

     2,048,506        2,079,853   
                                             
                         

 

Incremental VMware dilution

  

     $ 7,428   

 

Reconciliation of GAAP to Non-GAAP

For the Twelve Months Ended December 31, 2008

(in thousands, except per share amounts)

Unaudited

(Continued)

The following costs are included in EMC Consolidated Non-GAAP and EMC Information Infrastructure Non-GAAP results

     Revenue    Cost of
Revenue		    Research and
Development		    Selling,
General and
Administrative		    IPR&D
Charge		    Restructuring
Charge		    Operating
Income		    Other
Income,
net		     Income
Before
Taxes		     Income
Tax
Provision		     Net
Income		     Net Income
Attributable
to VMware		    Net Income
Attributable
to EMC		     Net
Income
per
Weighted
Average
Share,
Basic		     Net
Income
per
Weighted
Average
Share,
Diluted		  

Non-cash interest expense on convertible debt (8)

    $ —      $ —      $ —      $ —      $ —      $ —      $ —      $ (102,581 )    $ (102,581 )    $ (32,118 )    $ (70,463 )    $ —      $ (70,463 )    $ (0.034 )    $ (0.034 ) 

 

(1) Represents EMC Consolidated GAAP excluding restructuring charge, IPR&D charge and special income tax benefit.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible amortization.
(3) Represents EMC Information Infrastructure GAAP excluding restructuring charge, IPR&D charge and special income tax benefit.
(4) Represents EMC Information Infrastructure Adjusted less stock-based compensation expense and intangible amortization.
(5) Represents VMware within EMC GAAP.
(6) Represents VMware within EMC GAAP excluding IPR&D charge.
(7) Represents VMware within EMC Adjusted excluding stock-based compensation expense and intangible amortization.
(8) Represents the non-cash interest charge associated with our convertible senior notes due 2011 and 2013 totaling $3,450 million.

Note: schedule may not add due to rounding

EMC CORPORATION

Consolidated Balance Sheets

(in thousands, except per share amounts)

Unaudited

 

     December 31,
2009		     December 31,
2008		  
           (As Adjusted)  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 6,302,499      $ 5,843,685   

Short-term investments

      392,839        963,292   

Accounts and notes receivable, less allowance for doubtful accounts of $47,414 and $48,080

      2,108,575        2,252,640   

Inventories

      886,289        842,803   

Deferred income taxes

      559,018        477,101   

Other current assets

      283,926        285,508   
                

Total current assets

      10,533,146        10,665,029   

Long-term investments

      2,692,323        2,370,493   

Property, plant and equipment, net

      2,224,346        2,223,007   

Intangible assets, net

      1,185,632        795,616   

Goodwill, net

      9,210,376        7,046,799   

Other assets, net

      961,024        773,631   
                

Total assets

    $ 26,806,847      $ 23,874,575   
                

LIABILITIES & SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 899,298      $ 757,405   

Accrued expenses

      1,886,710        1,901,884   

Securities lending payable

      —          412,321   

Income taxes payable

      58,141        136,802   

Deferred revenue

      2,262,968        2,010,024   
                

Total current liabilities

      5,107,117        5,218,436   

Income taxes payable

      235,976        255,182   

Deferred revenue

      1,373,798        1,182,360   

Deferred income taxes

      708,378        389,787   

Long-term convertible debt

      3,100,290        2,991,943   

Other liabilities

      184,920        180,917   
                

Total liabilities

      10,710,479        10,218,625   
                

Commitments and contingencies

     

EMC Corporation’s Shareholders’ equity:

     

Preferred stock, par value $.01; authorized 25,000 shares, none outstanding

      —          —     

Common stock, par value $.01; authorized 6,000,000 shares; issued 2,052,441 and 2,012,938 shares

      20,524        20,129   

Additional paid-in capital

      3,874,952        2,817,054   

Retained earnings

      11,795,183        10,671,212   

Accumulated other comprehensive loss

      (104,883 )      (179,952 ) 
                

Total EMC Corporation’s shareholders’ equity

      15,585,776        13,328,443   

Non-controlling interest in VMware, Inc.

      510,592        327,507   
                

Total shareholders’ equity

      16,096,368        13,655,950   
                

Total liabilities and shareholders’ equity

    $ 26,806,847      $ 23,874,575   
                

EMC CORPORATION

Consolidated Statements of Cash Flows

(in thousands)

Unaudited

 

     Twelve Months Ended  
     December 31,
2009		     December 31,
2008		  
           (As Adjusted)  

Cash flows from operating activities:

     

Cash received from customers

    $ 14,647,691      $ 15,378,081   

Cash paid to suppliers and employees

      (11,032,859 )      (11,747,031 ) 

Dividends and interest received

      109,525        240,031   

Interest paid

      (73,430 )      (73,695 ) 

Income taxes paid

      (316,542 )      (232,298 ) 
                

Net cash provided by operating activities

      3,334,385        3,565,088   
                

Cash flows from investing activities:

     

Additions to property, plant and equipment

      (411,579 )      (695,899 ) 

Capitalized software development costs

      (304,520 )      (294,973 ) 

Purchases of short and long-term available for sale securities

      (5,409,540 )      (3,318,545 ) 

Sales of short and long-term available for sale securities

      5,171,449        3,189,547   

Maturities of short and long-term available for sale securities

      704,653        204,091   

Acquisitions, net of cash acquired

      (2,664,141 )      (725,521 ) 

Increase in strategic and other related investments

      (182,994 )      (5,510 ) 

Other

      1,184        31,878   
                

Net cash used in investing activities

      (3,095,488 )      (1,614,932 ) 
                

Cash flows from financing activities:

     

Issuance of EMC’s common stock from the exercise of stock options

      366,361        241,060   

Issuance of VMware’s common stock from the exercise of stock options

      227,666        190,107   

Purchase of VMware’s common stock

      —          (13,259 ) 

(Repayments on) proceeds from securities lending

      (412,321 )      412,321   

Repurchase of EMC’s common stock

      —          (1,489,501 ) 

Excess tax benefits from stock-based compensation

      46,082        97,705   

Payment of short and long-term obligations

      (20,835 )      (6,151 ) 

Proceeds from short and long-term obligations

      4,969        33,707   
                

Net cash provided by (used in) financing activities

      211,922        (534,011 ) 
                

Effect of exchange rate changes on cash

      7,995        (54,671 ) 
                

Net increase in cash and cash equivalents

      458,814        1,361,474   

Cash and cash equivalents at beginning of period

      5,843,685        4,482,211   
                

Cash and cash equivalents at end of period

    $ 6,302,499      $ 5,843,685   
                

Reconciliation of net income to net cash provided by operating activities:

     

Net income

    $ 1,157,695      $ 1,319,829   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

      1,073,135        1,057,511   

Non-cash interest expense on convertible debt

      108,347        102,581   

Non-cash restructuring and in-process research and development

      25,050        139,193   

Stock-based compensation expense

      600,537        501,439   

Increase in provision for doubtful accounts

      14,351        34,667   

Deferred income taxes, net

      32,354        4,629   

Excess tax benefits from stock-based compensation

      (46,082 )      (97,705 ) 

Gain on Data Domain and SpringSource common stock

      (25,822 )      —     

Other

      (13,906 )      (13,471 ) 

Changes in assets and liabilities, net of acquisitions:

     

Accounts and notes receivable

      241,069        73,184   

Inventories

      (158,482 )      165,813   

Other assets

      3,600        (16,178 ) 

Accounts payable

      140,376        (148,821 ) 

Accrued expenses

      (138,142 )      8,688   

Income taxes payable

      (74,692 )      44,821   

Deferred revenue

      366,361        394,067   

Other liabilities

      28,636        (5,159 ) 
                

Net cash provided by operating activities

    $ 3,334,385      $ 3,565,088   
                

EMC Corporation

Reconciliation of Cash Flow from Operations to Free Cash Flow

(in thousands)

Unaudited

 

     Three Months Ended     Twelve Months Ended  
     December 31,
2009		     December 31,
2008		     December 31,
2009		     December 31,
2008		  

EMC Consolidated

         

Cash flow from Operations

    $ 1,008,657      $ 1,066,746      $ 3,334,385      $ 3,565,088   

Capital Expenditures

      (133,990 )      (205,833 )      (411,579 )      (695,899 ) 

Capitalized Software

      (82,088 )      (85,532 )      (304,520 )      (294,973 ) 
                                

Free Cash Flow

    $ 792,579      $ 775,381      $ 2,618,286      $ 2,574,216   
                                

VMware within EMC

         

Cash flow from Operations

    $ 278,316      $ 264,331      $ 941,126      $ 735,632   

Capital Expenditures

      (24,248 )      (58,011 )      (90,352 )      (176,396 ) 

Capitalized Software

      (15,087 )      (37,005 )      (68,611 )      (90,900 ) 
                                

Free Cash Flow

    $ 238,981      $ 169,315      $ 782,163      $ 468,336   
                                

EMC Information Infrastructure

         

Cash flow from Operations

    $ 730,341      $ 802,415      $ 2,393,259      $ 2,829,456   

Capital Expenditures

      (109,742 )      (147,822 )      (321,227 )      (519,503 ) 

Capitalized Software

      (67,001 )      (48,527 )      (235,909 )      (204,073 ) 
                                

Free Cash Flow

    $ 553,598      $ 606,066      $ 1,836,123      $ 2,105,880   
                                

Free cash flow for the twelve months ended December 31, 2009 includes intercompany tax payments of $93.4 million from EMC Information Infrastructure to VMware within EMC.

EMC Corporation

Reconciliation of GAAP to Non-GAAP Tax Rate

(in thousands)

Unaudited

 

For the three months ended December 31, 2009

       
     Income Before
Tax		     Tax
Provision		     Tax
Rate		  

EMC Consolidated GAAP

    $ 614,785      $ 177,919      29 % 

Stock-based compensation expense

      181,597        36,849      20 % 

Intangible asset amortization

      65,903        21,444      33 % 

Restructuring and acquisition-related charges

      23,903        9,130      38 % 

Special income tax charge

      —          (77,168 )    NA   
                  

EMC Consolidated Non-GAAP

    $ 886,188      $ 168,174      19 % 
                  

For the year ended December 31, 2009

       
     Income Before
Tax		     Tax
Provision		     Tax
Rate		  

EMC Consolidated GAAP

    $ 1,432,076      $ 274,381      19 % 

Stock-based compensation expense

      605,706        135,130      22 % 

Intangible asset amortization

      247,788        83,842      34 % 

Gain on Data Domain and SpringSource common stock

      (25,822 )      —        0 % 

Restructuring and acquisition-related charges

      119,975        35,884      30 % 

Special income tax charge

      —          (77,168 )    NA   
                  

EMC Consolidated Non-GAAP

    $ 2,379,723      $ 452,069      19 % 
                  

EMC Corporation

Reconciliation of EMC Information Infrastructure Gross Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     Q1 ’08     Q2 ’08     Q3 ’08     Q4 ’08     Q1 ’09     Q2 ’09     Q3 ’09     Q4 ’09  

EMC Information Infrastructure Gross Margin GAAP

    $ 1,548,285      $ 1,656,440      $ 1,661,144      $ 1,783,145      $ 1,287,536      $ 1,369,676      $ 1,547,240      $ 1,879,392   

Less: Stock-based compensation expense

      12,136        12,486        15,251        16,665        14,233        15,224        17,608        20,633   

   Intangible asset amortization

      35,888        36,974        37,208        37,253        27,853        27,778        31,228        32,960   

   Restructuring-related charges

      —          —          —          —          —          —          12,485        —     
                                                                

EMC Information Infrastructure Gross Margin Non-GAAP

    $ 1,596,309      $ 1,705,900      $ 1,713,603      $ 1,837,063      $ 1,329,622      $ 1,412,678      $ 1,608,561      $ 1,932,985   
                                                                

Revenues

    $ 3,031,889      $ 3,221,299      $ 3,243,732      $ 3,502,307      $ 2,680,361      $ 2,802,239      $ 3,028,725      $ 3,493,623   

% GAAP

      51.1 %      51.4 %      51.2 %      50.9 %      48.0 %      48.9 %      51.1 %      53.8 % 

% Non-GAAP

      52.7 %      53.0 %      52.8 %      52.5 %      49.6 %      50.4 %      53.1 %      55.3 % 

EMC Corporation

Reconciliation of EMC Information Infrastructure Operating Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     Q1 ’08     Q2 ’08     Q3 ’08     Q4 ’08     Q1 ’09     Q2 ’09     Q3 ’09     Q4 ’09  

EMC Information Infrastructure Operating Margin GAAP

    $ 263,370      $ 391,523      $ 367,114      $ 228,453      $ 170,216      $ 220,545      $ 278,880      $ 571,798   

Less: Restructuring and acquisition-related charges

      79,204        —          4,398        240,694        15,572        33,234        46,493        23,075   

   Stock-based compensation expense

      74,460        75,424        80,849        94,824        60,949        67,156        122,061        108,537   

   Intangible asset amortization

      62,149        65,038        66,894        68,263        55,879        56,143        59,838        61,794   
                                                                

EMC Information Infrastructure Operating Margin Non-GAAP

    $ 479,183      $ 531,985      $ 519,255      $ 632,234      $ 302,616      $ 377,078      $ 507,272      $ 765,204   
                                                                

Revenues

    $ 3,031,889      $ 3,221,299      $ 3,243,732      $ 3,502,307      $ 2,680,361      $ 2,802,239      $ 3,028,725      $ 3,493,623   

% GAAP

      8.7 %      12.2 %      11.3 %      6.5 %      6.4 %      7.9 %      9.2 %      16.4 % 

% Non-GAAP

      15.8 %      16.5 %      16.0 %      18.1 %      11.3 %      13.5 %      16.7 %      21.9 % 

 

14

EMC Corporation

Supplemental

Revenue Analysis

(in thousands)

Unaudited

Supplemental Revenue Data

 

     Q1 2008     Q2 2008     Q3 2008     Q4 2008     YTD 2008     Q1 2009     Q2 2009     Q3 2009     Q4 2009     YTD 2009  

Storage:

                     

Product Revenue

    $ 1,903,639      $ 2,018,026      $ 2,056,498      $ 2,285,366      $ 8,263,529      $ 1,572,408      $ 1,632,309      $ 1,818,230      $ 2,175,104      $ 7,198,051   

Services Revenue

      808,190        855,221        851,825        853,539        3,368,775        790,932        842,558        880,807        947,061        3,461,358   
                                                                                

Total Storage Revenue

    $ 2,711,829      $ 2,873,247      $ 2,908,323      $ 3,138,905      $ 11,632,304      $ 2,363,340      $ 2,474,867      $ 2,699,037      $ 3,122,165      $ 10,659,409   
                                                                                

Content Management and Archiving:

                     

Product Revenue

    $ 61,128      $ 73,415      $ 62,576      $ 81,054      $ 278,173      $ 58,710      $ 60,792      $ 58,209      $ 83,125      $ 260,836   

Services Revenue

      124,075        130,591        125,493        127,316        507,475        115,605        119,445        118,979        124,724        478,753   
                                                                                

Total Content Management and Archiving Revenue

    $ 185,203      $ 204,006      $ 188,069      $ 208,370      $ 785,648      $ 174,315      $ 180,237      $ 177,188      $ 207,849      $ 739,589   
                                                                                

Security:

                     

Product Revenue

    $ 81,683      $ 89,067      $ 88,779      $ 95,534      $ 355,063      $ 80,671      $ 84,080      $ 84,080      $ 91,441      $ 340,272   

Services Revenue

      53,174        54,979        58,561        59,498        226,212        62,035        63,055        68,420        72,168        265,678   
                                                                                

Total Security Revenue

    $ 134,857      $ 144,046      $ 147,340      $ 155,032      $ 581,275      $ 142,706      $ 147,135      $ 152,500      $ 163,609      $ 605,950   
                                                                                

EMC Information Infrastructure:

                     

Product Revenue

    $ 2,046,450      $ 2,180,508      $ 2,207,853      $ 2,461,954      $ 8,896,765      $ 1,711,789      $ 1,777,181      $ 1,960,519      $ 2,349,670      $ 7,799,159   

Services Revenue

      985,439        1,040,791        1,035,879        1,040,353        4,102,462        968,572        1,025,058        1,068,206        1,143,953        4,205,789   
                                                                                

Total EMC Information Infrastructure Revenue

    $ 3,031,889      $ 3,221,299      $ 3,243,732      $ 3,502,307      $ 12,999,227      $ 2,680,361      $ 2,802,239      $ 3,028,725      $ 3,493,623      $ 12,004,948   
                                                                                

VMware:

                     

Product Revenue

    $ 293,980      $ 281,143      $ 285,088      $ 314,840      $ 1,175,051      $ 257,331      $ 228,089      $ 240,062      $ 303,504      $ 1,028,986   

Services Revenue

      144,190        171,432        186,772        199,491        701,885        213,070        227,024        248,843        303,039        991,976   
                                                                                

Total VMware Revenue

    $ 438,170      $ 452,575      $ 471,860      $ 514,331      $ 1,876,936      $ 470,401      $ 455,113      $ 488,905      $ 606,543      $ 2,020,962   
                                                                                

Consolidated Revenues

                     

Product Revenue

    $ 2,340,430      $ 2,461,651      $ 2,492,941      $ 2,776,794      $ 10,071,816      $ 1,969,120      $ 2,005,270      $ 2,200,581      $ 2,653,174      $ 8,828,145   

Services Revenue

      1,129,629        1,212,223        1,222,651        1,239,844        4,804,347        1,181,642        1,252,082        1,317,049        1,446,992        5,197,765   
                                                                                

Total Consolidated Revenues

    $ 3,470,059      $ 3,673,874      $ 3,715,592      $ 4,016,638      $ 14,876,163      $ 3,150,762      $ 3,257,352      $ 3,517,630      $ 4,100,166      $ 14,025,910   
                                                                                

Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year

      2.3 %      2.7 %      1.2 %      (2.3 )%      0.8 %      (3.5 )%      (3.7 )%      (1.3 )%      2.5 %      (1.4 )% 

 

15

EMC Corporation

Constant Currency Revenue Analysis

(in thousands)

Unaudited

 

Consolidated Revenue

    Q4-09 vs. Q4-08  

Revenue growth—GAAP

    2.1 % 

Impact of constant currency

    -2.5 % 
      

Revenue growth on a constant currency basis

    -0.4 % 
      

BRIC + 13 Revenue

    Q4-09 vs. Q4-08  

Revenue growth—GAAP

    5.5 % 

Impact of constant currency

    -4.3 % 
      

Revenue growth on a constant currency basis

    1.2 % 
      

This presentation refers to growth rates at constant currency or adjusting for currency so that business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of EMC’s business performance. To present this information, current period results for entities reporting in currencies other than US dollars are converted into US dollars at the exchange rate applied in each month of the prior year quarter. Constant currency includes the impacts from EMC’s hedging program.

 

16