EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

      Contact:  

Dave Farmer

508-293-7206

farmer_dave@emc.com

EMC REPORTS RECORD FIRST-QUARTER

FINANCIAL RESULTS

First-Quarter Highlights

 

  •  

Record first-quarter consolidated revenue up 23% year over year

 

  •  

GAAP net income up 92% year over year

 

  •  

Record first-quarter non-GAAP net income up 70% year over year

 

  •  

Record quarterly operating cash flow and free cash flow

 

  •  

Strong year-over-year increase in gross and operating margins

HOPKINTON, Mass. – April 21, 2010 – EMC Corporation (NYSE:EMC) today reported record financial results for the first quarter of 2010. Ongoing investments aligned to key customer priorities combined with an industry-leading product and service portfolio helped EMC achieve its second consecutive quarter of record revenue, high double-digit profit growth and all-time record quarterly free cash flow.

First-quarter consolidated revenue was $3.9 billion, an increase of 23% compared with the year-ago quarter. First-quarter GAAP net income attributable to EMC increased 92% year over year to $373 million. First-quarter GAAP diluted earnings per share were $0.17, up 70% year over year. Non-GAAP1 net income attributable to EMC for the first quarter was $550 million, an increase of 70% compared with the year-ago quarter. First-quarter non-GAAP1 earnings per diluted share were $0.26, an increase of 63% year over year.

During the first quarter, EMC expanded gross and operating margins substantially on a year-over-year basis, achieved record quarterly operating cash flow of $1.3 billion and record quarterly free cash flow of $1.1 billion. The company completed the first quarter with $10.2 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “EMC is off to a strong start in 2010, turning in the best first quarter in company history with record first-quarter revenue, high double-digit profit growth and all-time record free cash flow. Our private cloud strategy and focus on four multi-billion dollar markets – each expected to experience rapid growth for many years to come – are resonating very well with customers. We are confident in our ability to lead the next major wave of IT, maintain a long-term double-digit revenue growth rate and continue to take share.”

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “During the first quarter, we saw customers move forward with increased confidence, focusing not only on cost cutting initiatives, but beginning new innovative projects in their traditional and virtual data center infrastructures. This helped us clearly achieve the ‘triple play’ we projected last quarter by gaining market share while investing for the future and increasing profitability. Looking ahead, we remain confident that we’ll continue to execute on all three of these areas.”

First-Quarter Highlights

EMC’s Information Infrastructure business for the first quarter – comprising product and service revenue from the company’s Information Storage, RSA Security, and Content Management and Archiving business segments – reached $3.3 billion, increasing 22% year over year. First-quarter highlights included strong customer demand and double-digit revenue growth for EMC’s market-leading high-end Symmetrix storage product portfolio, which increased first-quarter revenue by 28% compared with the year-ago quarter, and EMC’s mid-tier platform product portfolio2, which grew revenue 32% year over year. Within EMC’s Backup and Recovery Systems Division (BRS), EMC Data Domain and Avamar next-generation backup and recovery products each grew over 100% on a year-over-year basis3. Additional highlights included strong customer demand for EMC’s RSA information security solutions and the company’s broad portfolio of consulting and professional services.

VMware (NYSE: VMW), which is majority-owned by EMC, contributed first-quarter revenue of $632 million, increasing 34% compared with the year-ago quarter.

EMC consolidated first-quarter revenue from the United States reached $2.1 billion, an increase of 29% year over year, representing 54% of consolidated first-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $1.8 billion, an increase of 17% year over year, representing 46% of consolidated first-quarter revenue. Within this, revenue increased 16%, 11% and 28% year over year respectively in EMC’s Europe, Middle East and Africa (EMEA), Asia Pacific and Japan (APJ) and Latin America regions.

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.

The following statements regarding 2010 financial results have been revised from the statements disclosed by EMC on January 26, 2010:

 

  •  

Consolidated EMC revenues are expected to be $16.5 billion for 2010.

 

  •  

Consolidated GAAP diluted earnings per share are expected to be $0.84 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 $1.18 for 2010.

 

  •  

GAAP operating income is expected to be 14% to 15% of revenues for 2010, and non-GAAP operating income is expected to be 20% to 21% 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%, 4% and 2% of revenues, respectively.

 

  •  

The weighted average outstanding diluted shares are expected to be 2.15 billion for 2010.

The following statements regarding 2010 financial results remain unchanged from the statements disclosed by EMC on January 26, 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.

 

  •  

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

 

  •  

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

Supporting Resources

 

  •  

EMC will host its first-quarter 2010 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 first-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.

# # #

¹ Items excluded from the non-GAAP results are restructuring and acquisition-related charges, stock-based compensation expense and intangible amortization for the first quarter of 2010, and restructuring charges, stock-based compensation expense and intangible amortization for the first quarter of 2009. See attached schedules for reconciliation of GAAP to non-GAAP.

2 Mid-tier platform products include hardware and software products from EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Avamar and EMC Atmos.

3 EMC purchased Data Domain in July 2009. The year-over-year comparison assumes Data Domain had been acquired on January 1, 2009 and incorporates revenue reported by Data Domain during the period from January 1, 2009 through the date of acquisition.

EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, RSA and Symmetrix are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries. VMware is a registered trademark or trademark of VMware, Inc. in the United States and/or other countries. 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 restructuring and acquisition-related charges, stock-based compensation expense and intangible amortization) 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.

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  
     March 31,
2010		     March 31,
2009		  

Revenues:

     

Product sales

    $ 2,478,717      $ 1,969,120   

Services

      1,411,975        1,181,642   
                
     3,890,692        3,150,762   

Cost and expenses:

     

Cost of product sales

      1,161,922        1,013,330   

Cost of services

      510,251        454,177   

Research and development

      434,933        383,293   

Selling, general and administrative

      1,261,284        1,024,773   

Restructuring and acquisition-related charges

      18,502        15,572   
                

Operating income

      503,800        259,617   

Investment income

      31,532        39,844   

Interest expense

      (42,968 )      (45,543 ) 

Other expense, net

      (9,021 )      (10,758 ) 
                

Income before tax

      483,343        243,160   

Income tax provision

      95,653        37,815   
                

Net income

      387,690        205,345   

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

      (14,986 )      (11,276 ) 
                

Net income attributable to EMC Corporation

    $ 372,704      $ 194,069   
                

Net income per weighted average share, basic attributable to EMC Corporation common shareholders:

    $ 0.18      $ 0.10   
                

Net income per weighted average share, diluted attributable to EMC Corporation common shareholders:

    $ 0.17      $ 0.10   
                

Weighted average shares, basic

      2,051,030        2,008,915   

Weighted average shares, diluted

      2,119,192        2,021,062   

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended March 31, 2010

(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)
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

    $ 3,890,692      $ 1,672,173      $ 434,933      $ 1,261,284      $ 18,502      $ 503,800    $ (20,457 )    $ 483,343    $ 95,653    $ 387,690    $ (14,986 )    $ 372,704      $ 0.182      $ 0.175   

Restructuring and acquisition-related charges

      —          —          —          —          (18,502 )      18,502      —          18,502      3,408      15,094      (237 )      14,857      $ 0.007      $ 0.007   
                                                                                                            

EMC Consolidated Adjusted (1)

      3,890,692        1,672,173        434,933        1,261,284        —          522,302      (20,457 )      501,845      99,061      402,784      (15,223 )      387,561      $ 0.189      $ 0.182   

Stock-based compensation expense

      —          (26,798 )      (59,855 )      (79,813 )      —          166,466      201        166,667      40,049      126,618      (10,432 )      116,186      $ 0.057      $ 0.055   

Intangible amortization

      —          (32,181 )      (4,562 )      (32,741 )      —          69,484      —          69,484      23,112      46,372      (529 )      45,843      $ 0.022      $ 0.022   
                                                                                                            

EMC Consolidated Non-GAAP (2)

    $ 3,890,692      $ 1,613,194      $ 370,516      $ 1,148,730      $ —        $ 758,252    $ (20,256 )    $ 737,996    $ 162,222    $ 575,774    $ (26,184 )    $ 549,590      $ 0.268      $ 0.258   
                                                                                                            

EMC Information Infrastructure GAAP

    $ 3,258,727      $ 1,564,373      $ 297,824      $ 979,259      $ 17,263      $ 400,008    $ (15,186 )    $ 384,822    $ 76,254    $ 308,568    $ —        $ 308,568      $ 0.150      $ 0.146   

Restructuring and acquisition-related charges

      —          —          —          —          (17,263 )      17,263      —          17,263      3,408      13,855      —          13,855      $ 0.007      $ 0.007   
                                                                                                            

EMC Information Infrastructure Adjusted (3)

      3,258,727        1,564,373        297,824        979,259        —          417,271      (15,186 )      402,085      79,662      322,423      —          322,423      $ 0.157      $ 0.152   

Stock-based compensation expense

      —          (17,870 )      (25,194 )      (55,381 )      —          98,445      143        98,588      26,560      72,028      —          72,028      $ 0.035      $ 0.034   

Intangible amortization

      —          (28,813 )      (4,089 )      (32,263 )      —          65,165      —          65,165      21,560      43,605      —          43,605      $ 0.021      $ 0.021   
                                                                                                            

EMC Information Infrastructure Non-GAAP (4)

    $ 3,258,727      $ 1,517,690      $ 268,541      $ 891,615      $ —        $ 580,881    $ (15,043 )    $ 565,838    $ 127,782    $ 438,056    $ —        $ 438,056      $ 0.214      $ 0.207   
                                                                                                            

VMware standalone GAAP

    $ 633,533      $ 108,650      $ 138,112      $ 284,585      $ —        $ 102,186    $ (4,547 )    $ 97,639    $ 19,218    $ 78,421    $ —        $ 78,421      $ 0.038      $ 0.037   

GAAP adjustments and eliminations

      (1,568 )      (850 )      (1,003 )      (2,560 )      1,239        1,606      (724 )      882      181      701      (14,986 )      (14,285 )    $ (0.007 )    $ (0.008 ) 
                                                                                                            

VMware within EMC GAAP (5)

      631,965        107,800        137,109        282,025        1,239        103,792      (5,271 )      98,521      19,399      79,122      (14,986 )      64,136      $ 0.031      $ 0.029   

Acquisition-related charges

      —          —          —          —          (1,239 )      1,239      —          1,239      —        1,239      (237 )      1,002      $ —        $ —     
                                                                                                            

VMware within EMC Adjusted (6)

      631,965        107,800        137,109        282,025        —          105,031      (5,271 )      99,760      19,399      80,361      (15,223 )      65,138      $ 0.032      $ 0.030   

Stock-based compensation expense

      —          (8,928 )      (34,661 )      (24,432 )      —          68,021      58        68,079      13,489      54,590      (10,432 )      44,158      $ 0.022      $ 0.021   

Intangible amortization

      —          (3,368 )      (473 )      (478 )      —          4,319      —          4,319      1,552      2,767      (529 )      2,238      $ 0.001      $ 0.001   
                                                                                                            

VMware within EMC Non-GAAP (7)

    $ 631,965      $ 95,504      $ 101,975      $ 257,115      $ —        $ 177,371    $ (5,213 )    $ 172,158    $ 34,440    $ 137,718    $ (26,184 )    $ 111,534      $ 0.054      $ 0.052   
                                                                                                            
                             Wtd. Average Share O/S        2,051,030        2,119,192   
                                            

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended March 31, 2010

(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)
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)

    $ —      $ —      $ —      $ —      $ —      $ —        $ (25,921 )    $ (25,921 )    $ (8,839 )    $ (17,082 )    $ —      $ (17,082 )    $ (0.008 )    $ (0.008 ) 

Transition costs (9)

      —        588      1,665      12,458      —        (14,711 )      —          (14,711 )      (4,179 )      (10,532 )      —      $ (10,532 )    $ (0.005 )    $ (0.005 ) 
                                                                                                          
   $ —      $ 588    $ 1,665    $ 12,458    $ —      $ (14,711 )    $ (25,921 )    $ (40,632 )    $ (13,018 )    $ (27,614 )    $ —      $ (27,614 )    $ (0.013 )    $ (0.013 ) 
                                                                                                          

 

(1) Represents EMC Consolidated GAAP excluding restructuring and acquisition-related charges.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible amortization.
(3) Represents EMC Information Infrastructure GAAP excluding restructuring and acquisition-related charges.
(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 March 31, 2009

(in thousands, except per share amounts)

Unaudited

 

     Revenue    Cost of
Revenue		     Research
and
Development		     Selling,
General and
Administrative		     Restructuring
Charge		     Operating
Income		    Other
(Expense)
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

    $ 3,150,762    $ 1,467,507      $ 383,293      $ 1,024,773      $ 15,572      $ 259,617    $ (16,457 )    $ 243,160    $ 37,815    $ 205,345    $ (11,276 )    $ 194,069      $ 0.097      $ 0.096   

Restructuring charge

      —        —          —          —          (15,572 )      15,572      —          15,572      6,115      9,457      —          9,457      $ 0.005      $ 0.005   
                                                                                                           

EMC Consolidated Adjusted (1)

      3,150,762      1,467,507        383,293        1,024,773        —          275,189      (16,457 )      258,732      43,930      214,802      (11,276 )      203,526      $ 0.101      $ 0.101   

Stock-based compensation expense

      —        (19,894 )      (41,242 )      (51,511 )      —          112,647      —          112,647      24,340      88,307      (6,672 )      81,635      $ 0.041      $ 0.040   

Intangible amortization

      —        (30,610 )      (3,210 )      (25,368 )      —          59,188      —          59,188      20,321      38,867      (345 )      38,522      $ 0.019      $ 0.019   
                                                                                                           

EMC Consolidated Non-GAAP (2)

    $ 3,150,762    $ 1,417,003      $ 338,841      $ 947,894      $ —        $ 447,024    $ (16,457 )    $ 430,567    $ 88,591    $ 341,976    $ (18,293 )    $ 323,683      $ 0.161      $ 0.160   
                                                                                                           

EMC Information Infrastructure GAAP

    $ 2,680,361    $ 1,392,825      $ 278,499      $ 823,249      $ 15,572      $ 170,216    $ (13,508 )    $ 156,708    $ 22,081    $ 134,627    $ —        $ 134,627      $ 0.067      $ 0.067   

Restructuring charge

      —        —          —          —          (15,572 )      15,572      —          15,572      6,115      9,457      —          9,457      $ 0.005      $ 0.005   
                                                                                                           

EMC Information Infrastructure Adjusted (3)

      2,680,361      1,392,825        278,499        823,249        —          185,788      (13,508 )      172,280      28,196      144,084      —          144,084      $ 0.072      $ 0.071   

Stock-based compensation expense

      —        (14,233 )      (17,312 )      (29,404 )      —          60,949      —          60,949      14,030      46,919      —          46,919      $ 0.023      $ 0.023   

Intangible amortization

      —        (27,853 )      (3,210 )      (24,816 )      —          55,879      —          55,879      19,153      36,726      —          36,726      $ 0.018      $ 0.018   
                                                                                                           

EMC Information Infrastructure Non-GAAP (4)

    $ 2,680,361    $ 1,350,739      $ 257,977      $ 769,029      $ —        $ 302,616    $ (13,508 )    $ 289,108    $ 61,379    $ 227,729    $ —        $ 227,729      $ 0.113      $ 0.113   
                                                                                                           

VMware standalone GAAP

    $ 470,310    $ 75,003      $ 105,401      $ 203,003      $ —        $ 86,903    $ (1,436 )    $ 85,467    $ 15,532    $ 69,935    $ —        $ 69,935      $ 0.035      $ 0.035   

GAAP adjustments and eliminations

      91      (321 )      (607 )      (1,479 )      —          2,498      (1,513 )      985      202      783      (11,276 )      (10,493 )    $ (0.005 )    $ (0.005 ) 
                                                                                                           

VMware within EMC GAAP (5)

      470,401      74,682        104,794        201,524        —          89,401      (2,949 )      86,452      15,734      70,718      (11,276 )      59,442      $ 0.030      $ 0.029   

Stock-based compensation expense

      —        (5,661 )      (23,930 )      (22,107 )      —          51,698      —          51,698      10,310      41,388      (6,672 )      34,716      $ 0.017      $ 0.017   

Intangible amortization

      —        (2,757 )      —          (552 )      —          3,309      —          3,309      1,168      2,141      (345 )      1,796      $ 0.001      $ 0.001   
                                                                                                           

VMware within EMC Non-GAAP (6)

    $ 470,401    $ 66,264      $ 80,864      $ 178,865      $ —        $ 144,408    $ (2,949 )    $ 141,459    $ 27,212    $ 114,247    $ (18,293 )    $ 95,954      $ 0.048      $ 0.047   
                                                                                                           
                              Wtd. Average Share O/S        2,008,915        2,021,062   
                                             

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended March 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
Charge		    Operating
Income		     Other
(Expense)
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 (7)

    $ —      $ —      $ —      $ —      $ —      $ —        $ (26,299 )    $ (26,299 )    $ (8,234 )    $ (18,065 )    $ —      $ (18,065 )    $ (0.009 )    $ (0.009 ) 

Transition costs (8)

      —        896      393      8,366      —        (9,655 )      —          (9,655 )      (3,346 )      (6,309 )      —      $ (6,309 )    $ (0.003 )    $ (0.003 ) 
                                                                                                          
   $ —      $ 896    $ 393    $ 8,366    $ —      $ (9,655 )    $ (26,299 )    $ (35,954 )    $ (11,580 )    $ (24,374 )    $ —      $ (24,374 )    $ (0.012 )    $ (0.012 ) 
                                                                                                          

 

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

Note: schedule may not add due to rounding

EMC CORPORATION

Consolidated Balance Sheets

(in thousands, except per share amounts)

Unaudited

 

     March 31,
2010		     December 31,
2009		  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 6,256,626      $ 6,302,499   

Short-term investments

      641,576        392,839   

Accounts and notes receivable, less allowance for doubtful accounts of $50,504 and $47,414

      1,735,043        2,108,575   

Inventories

      851,501        886,289   

Deferred income taxes

      580,845        564,174   

Other current assets

      309,534        283,926   
                

Total current assets

      10,375,125        10,538,302   

Long-term investments

      3,254,641        2,692,323   

Property, plant and equipment, net

      2,226,238        2,224,346   

Intangible assets, net

      1,194,104        1,185,632   

Goodwill

      9,402,851        9,210,376   

Other assets, net

      1,015,004        961,024   
                

Total assets

    $ 27,467,963      $ 26,812,003   
                

LIABILITIES & SHAREHOLDERS' EQUITY

     

Current liabilities:

     

Accounts payable

    $ 796,688      $ 899,298   

Accrued expenses

      1,896,188        1,944,210   

Income taxes payable

      49,595        41,691   

Deferred revenue

      2,502,646        2,262,968   
                

Total current liabilities

      5,245,117        5,148,167   

Income taxes payable

      240,004        235,976   

Deferred revenue

      1,495,602        1,373,798   

Deferred income taxes

      631,649        708,378   

Long-term convertible debt

      3,128,079        3,100,290   

Other liabilities

      183,445        184,920   
                

Total liabilities

      10,923,896        10,751,529   
                

Commitments and contingencies

     

Shareholders' equity:

     

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

      —          —     

Common stock, par value $.01; authorized 6,000,000 shares; issued 2,055,608 and 2,052,441 shares

      20,556        20,524   

Additional paid-in capital

      3,933,124        3,875,791   

Retained earnings

      12,131,993        11,759,289   

Accumulated other comprehensive loss, net

      (109,689 )      (105,722 ) 
                

Total EMC Corporation's shareholders' equity

      15,975,984        15,549,882   

Non-controlling interest in VMware, Inc.

      568,083        510,592   
                

Total shareholders' equity

      16,544,067        16,060,474   
                

Total liabilities and shareholders' equity

    $ 27,467,963      $ 26,812,003   
                

EMC CORPORATION

Consolidated Statements of Cash Flows

(in thousands)

Unaudited

 

     Three Months Ended  
     March 31,
2010		     March 31,
2009		  

Cash flows from operating activities:

     

Cash received from customers

    $ 4,615,013      $ 3,860,223   

Cash paid to suppliers and employees

      (3,213,917 )      (2,877,408 ) 

Dividends and interest received

      26,634        46,656   

Interest paid

      (4,670 )      (4,007 ) 

Income taxes paid

      (105,714 )      (161,773 ) 
                

Net cash provided by operating activities

      1,317,346        863,691   
                

Cash flows from investing activities:

     

Additions to property, plant and equipment

      (114,048 )      (95,320 ) 

Capitalized software development costs

      (93,161 )      (87,627 ) 

Purchases of short and long-term available-for-sale securities

      (1,475,229 )      (2,277,512 ) 

Sales of short and long-term available-for-sale securities

      628,504        2,077,730   

Maturities of short and long-term available-for-sale securities

      40,346        91,365   

Business acquisitions, net of cash acquired

      (288,246 )      —     

Increase in strategic and other related investments

      (5,240 )      (1,960 ) 

Other

      (16,648 )      1,054   
                

Net cash used in investing activities

      (1,323,722 )      (292,270 ) 
                

Cash flows from financing activities:

     

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

      130,338        8,637   

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

      109,775        4,503   

EMC repurchase of EMC's common stock

      (176,260 )      —     

EMC purchase of VMware's common stock

      (99,500 )      —     

VMware repurchase of VMware's common stock

      (31,348 )      —     

Payments on securities lending

      —          (65,179 ) 

Excess tax benefits from stock-based compensation

      35,248        776   

Payment of long-term and short-term obligations

      (2,327 )      (19,257 ) 

Proceeds from long-term and short-term obligations

      1,116        1,038   
                

Net cash used in financing activities

      (32,958 )      (69,482 ) 
                

Effect of exchange rate changes on cash

      (6,539 )      (22,172 ) 
                

Net (decrease) increase in cash and cash equivalents

      (45,873 )      479,767   

Cash and cash equivalents at beginning of period

      6,302,499        5,843,685   
                

Cash and cash equivalents at end of period

    $ 6,256,626      $ 6,323,452   
                

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

     

Net income

    $ 387,690      $ 205,345   

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

     

Depreciation and amortization

      281,580        255,798   

Non-cash interest expense on convertible debt

      25,921        26,299   

Non-cash restructuring and other special charges

      162        2,072   

Stock-based compensation expense

      158,805        112,647   

Provision for doubtful accounts

      7,226        5,388   

Deferred income taxes, net

      (28,766 )      (4,527 ) 

Excess tax benefits from stock-based compensation

      (35,248 )      (776 ) 

Other

      (820 )      795   

Changes in assets and liabilities, net of acquisitions:

     

Accounts and notes receivable

      380,790        550,917   

Inventories

      2,198        (2,226 ) 

Other assets

      (24,760 )      (22,271 ) 

Accounts payable

      (102,803 )      (80,021 ) 

Accrued expenses

      (83,164 )      (222,591 ) 

Income taxes payable

      18,705        (119,431 ) 

Deferred revenue

      336,305        153,156   

Other liabilities

      (6,475 )      3,117   
                

Net cash provided by operating activities

    $ 1,317,346      $ 863,691   
                

EMC Corporation

Reconciliation of Cash Flow from Operations to Free Cash Flow

(in thousands)

Unaudited

 

     Three Months Ended  
     March 31,
2010		     March 31,
2009		  

EMC Consolidated

     

Cash flow from Operations

    $ 1,317,346      $ 863,691   

Capital Expenditures

      (114,048 )      (95,320 ) 

Capitalized Software

      (93,161 )      (87,627 ) 
                

Free Cash Flow

    $ 1,110,137      $ 680,744   
                

VMware within EMC

     

Cash flow from Operations

    $ 341,979      $ 240,943   

Capital Expenditures

      (29,045 )      (24,326 ) 

Capitalized Software

      (21,861 )      (29,935 ) 
                

Free Cash Flow

    $ 291,073      $ 186,682   
                

EMC Information Infrastructure

     

Cash flow from Operations

    $ 975,367      $ 622,748   

Capital Expenditures

      (85,003 )      (70,994 ) 

Capitalized Software

      (71,300 )      (57,692 ) 
                

Free Cash Flow

    $ 819,064      $ 494,062   
                

EMC Corporation

Reconciliation of GAAP to Non-GAAP Tax Rate

(in thousands)

Unaudited

 

For the three months ended March 31, 2010

         
     Income
Before
Tax		    Tax
Provision		    Tax
Rate		  

EMC Consolidated GAAP

    $ 483,343    $ 95,653    20 % 

Stock-based compensation expense

      166,667      40,049    24 % 

Intangible asset amortization

      69,484      23,112    33 % 

Restructuring and acquisition-related charges

      18,502      3,408    18 % 
                

EMC Consolidated Non-GAAP

    $ 737,996    $ 162,222    22 % 
                

EMC Corporation

Reconciliation of Gross Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     EMC II
Q1 '10		    VMware
within EMC
Q1 '10

Gross Margin GAAP

    $ 1,694,354    $ 524,165

Stock-based compensation expense

      17,870      8,928

Intangible asset amortization

      28,813      3,368
             

Gross Margin Non-GAAP

    $ 1,741,037    $ 536,461
             

Revenues

    $ 3,258,727    $ 631,965

% GAAP

      52.0%      82.9%

% Non-GAAP

      53.4%      84.9%

EMC Corporation

Reconciliation of Operating Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     EMC II
Q1 '10		    VMware
within EMC
Q1 '10		    EMC
Consolidated
Q1 '10

Operating Margin GAAP

    $ 400,008    $ 103,792    $ 503,800

Restructuring and acquisition-related charges

      17,263      1,239      18,502

Stock-based compensation expense

      98,445      68,021      166,466

Intangible asset amortization

      65,165      4,319      69,484
                    

Operating Margin Non-GAAP

    $ 580,881    $ 177,371    $ 758,252
                    

Revenues

    $ 3,258,727    $ 631,965    $ 3,890,692

% GAAP

      12.3%      16.4%      12.9%

% Non-GAAP

      17.8%      28.1%      19.5%

EMC Corporation

Supplemental

Revenue Analysis

(in thousands)

Unaudited

Supplemental Revenue Data

 

     Q1 2009     Q2 2009     Q3 2009     Q4 2009     YTD 2009     Q1 2010  

Storage:

             

Product Revenue

    $ 1,572,408      $ 1,632,309      $ 1,818,230      $ 2,175,104      $ 7,198,051      $ 2,017,314   

Services Revenue

      790,932        842,558        880,807        947,061        3,461,358        901,781   
                                                

Total Storage Revenue

    $ 2,363,340      $ 2,474,867      $ 2,699,037      $ 3,122,165      $ 10,659,409      $ 2,919,095   
                                                

Content Management and Archiving:

             

Product Revenue

    $ 58,710      $ 60,792      $ 58,209      $ 83,125      $ 260,836      $ 63,662   

Services Revenue

      115,605        119,445        118,979        124,724        478,753        114,502   
                                                

Total Content Management and Archiving Revenue

    $ 174,315      $ 180,237      $ 177,188      $ 207,849      $ 739,589      $ 178,164   
                                                

Security:

             

Product Revenue

    $ 80,671      $ 84,080      $ 84,080      $ 91,441      $ 340,272      $ 85,814   

Services Revenue

      62,035        63,055        68,420        72,168        265,678        75,654   
                                                

Total Security Revenue

    $ 142,706      $ 147,135      $ 152,500      $ 163,609      $ 605,950      $ 161,468   
                                                

EMC Information Infrastructure:

             

Product Revenue

    $ 1,711,789      $ 1,777,181      $ 1,960,519      $ 2,349,670      $ 7,799,159      $ 2,166,790   

Services Revenue

      968,572        1,025,058        1,068,206        1,143,953        4,205,789        1,091,937   
                                                

Total EMC Information Infrastructure Revenue

    $ 2,680,361      $ 2,802,239      $ 3,028,725      $ 3,493,623      $ 12,004,948      $ 3,258,727   
                                                

VMware:

             

Product Revenue

    $ 257,331      $ 228,089      $ 240,062      $ 303,504      $ 1,028,986      $ 311,927   

Services Revenue

      213,070        227,024        248,843        303,039        991,976        320,038   
                                                

Total VMware Revenue

    $ 470,401      $ 455,113      $ 488,905      $ 606,543      $ 2,020,962      $ 631,965   
                                                

Consolidated Revenues

             

Product Revenue

    $ 1,969,120      $ 2,005,270      $ 2,200,581      $ 2,653,174      $ 8,828,145      $ 2,478,717   

Services Revenue

      1,181,642        1,252,082        1,317,049        1,446,992        5,197,765        1,411,975   
                                                

Total Consolidated Revenues

    $ 3,150,762      $ 3,257,352      $ 3,517,630      $ 4,100,166      $ 14,025,910      $ 3,890,692   
                                                

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

      (3.5 )%      (3.7 )%      (1.3 )%      2.5 %      (1.4 )%      2.4 %