EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

Contact:  Lesley Ogrodnick

                508-293-6961

                lesley.ogrodnick@emc.com

 

EMC REPORTS RECORD FIRST-QUARTER RESULTS

 

 

First-Quarter Highlights

 

  •  

Record first-quarter consolidated revenue up 18% year over year

 

  •  

All-time record consolidated quarterly revenue for Asia Pacific and Japan region

 

  •  

Record first-quarter GAAP net income up 28% year over year

 

  •  

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

 

 

HOPKINTON, Mass. – April 20, 2011 – EMC Corporation (NYSE:EMC) today reported record financial results for the first quarter of 2011. Continued healthy customer demand for EMC’s information infrastructure and virtual infrastructure products and services, and strong performance within the company’s Europe/Middle East/Africa and Asia Pacific/Japan regions, contributed to EMC achieving record first-quarter consolidated revenue, record first-quarter net income, and strong year-over-year percentage increase in operating and gross margins.

First-quarter consolidated revenue was $4.6 billion, an increase of 18% compared with the year-ago quarter. First-quarter GAAP net income attributable to EMC increased 28% year over year to $477.1 million. First-quarter GAAP diluted earnings per share were $0.21, up 24% year over year. Non-GAAP1 net income attributable to EMC for the first quarter was $700.4 million, an increase of 27% compared with the year-ago quarter. First-quarter non-GAAP1 earnings per diluted share were $0.31, an increase of 19% year over year.

During the first quarter, EMC expanded gross and operating margins substantially on a year-over-year basis. The company achieved operating cash flow of $1.1 billion and free cash flow2 of $857.3 million, and ended the first quarter with $9.5 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “EMC is off to a strong start in 2011 with significant opportunity and long-term growth potential ahead. With market-leading virtualization and information infrastructure products and services, and a strong partner ecosystem, we are positioned squarely at the intersection of two of the most sweeping trends in IT – cloud computing and Big Data. These assets, along with a robust innovation pipeline, uniquely align EMC to help customers accelerate their journey to cloud computing and unlock the full value of their information.”

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, “For the fifth consecutive quarter EMC achieved our financial ‘triple play’ – gaining market share, investing aggressively to take advantage of the rapidly emerging opportunities offered by cloud computing and Big Data, and improving profitability. Financial strength and flexibility, combined with an intense focus on customers, enable us to continually identify and successfully execute on opportunities that increase our value proposition to customers and reward shareholders. Given the strong growth we saw in the quarter and the opportunity we see throughout 2011, we are now even more confident that we can meet and potentially exceed our 2011 consolidated revenue, non-GAAP EPS and free cash flow goals while continuing to achieve our ‘triple play’ over the long term.”

First-Quarter Highlights

First-quarter highlights included strong customer demand for the company’s market-leading high-end EMC Symmetrix storage product portfolio, which increased revenue 25% compared with the year-ago quarter, and EMC’s portfolio of mid-tier storage products3, which grew revenue 20% year over year. Revenue from VMware (NYSE: VMW), which is majority-owned by EMC, increased 33% and revenue from EMC’s RSA information security business grew 8% year over year. Additional first-quarter highlights included consistently strong revenue growth for EMC’s backup and recovery solutions, led by EMC Data Domain products. The new Isilon Storage Division exceeded revenue expectations in its first quarter within EMC, while the Data Computing Division continued to perform well with highly differentiated Greenplum offerings in the Big Data warehousing and analytics space.

Also during the quarter, VCE – the Virtual Computing Environment Company formed by Cisco and EMC with investments from VMware and Intel – experienced increasing customer traction and an expanding pipeline for its Vblock converged architecture.

EMC’s consolidated first-quarter revenue from the United States reached $2.4 billion, an increase of 12% year over year, representing 51% of consolidated first-quarter revenue. Revenue from EMC’s business operations outside of the United States reached $2.2 billion, an increase of 26% year over year, representing 49% of consolidated first-quarter revenue. Within this, consolidated revenue in EMC’s Europe/Middle East/Africa region increased 21% and consolidated revenue in EMC’s Asia Pacific/Japan region reached an all-time record amount, growing 43% year over year.

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 2011 financial results.

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

 

  •  

Consolidated revenues are expected to be $19.6 billion for 2011.

 

  •  

Consolidated GAAP operating income is expected to be 16.5% to 17.5% of revenues for 2011 and consolidated non-GAAP operating income is expected to be 23% to 24% of revenues for 2011. Excluded from consolidated 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 consolidated GAAP non-operating expense, which includes investment income, interest expense and other expense, is expected to be $120 million in 2011 and total consolidated non-GAAP non-operating expense is expected to be $175 million in 2011. Excluded from non-GAAP non-operating expense is a non-recurring gain on strategic investments of $55 million.

 

  •  

Consolidated GAAP net income is expected to be $2.5 billion in 2011 and consolidated non-GAAP net income is expected to be $3.3 billion in 2011. Excluded from consolidated non-GAAP net income are restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments, which account for $70 million, $590 million, $200 million and a gain of $30 million, respectively.

 

  •  

Consolidated GAAP diluted earnings per share are expected to be $1.09 for 2011 and consolidated non-GAAP diluted earnings per share are expected to be $1.46 for 2011. Excluded from consolidated non-GAAP diluted earnings per share are restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments which are expected to be $0.03, $0.26, $0.09 and ($0.01) per diluted share, respectively, for 2011.

 

  •  

The consolidated GAAP income tax rate is expected to be 20% for 2011. Excluding the impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments, which collectively impact the tax rate by 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2011.

 

  •  

GAAP net income attributable to the non-controlling interest in VMware is expected to be $117 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $175 million for 2011. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are acquisition-related charges, stock-based compensation expense, intangible asset amortization and a non-recurring gain on strategic investments which are expected to be $1 million, $57 million, $8 million and ($8 million), respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2011.

 

  •  

The weighted-average outstanding diluted shares are expected to be 2.26 billion for 2011.

 

  •  

Consolidated net cash provided by operating activities is expected to be $5.3 billion for 2011, and free cash flow is expected to be $4.0 billion in 2011. Excluded from free cash flow are $900 million of additions to property, plant and equipment and $440 million of capitalized software development costs.

 

  •  

EMC expects to repurchase $1.5 billion of the company’s stock in 2011.

Supporting Resources

 

  •  

EMC will host its first-quarter 2011 earnings conference call today at 8:30 a.m. ET, which will be available via webcast on EMC’s Investor Relations website at http://www.emc.com/ir

 

  •  

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 for the first quarters of 2011 and 2010 are amounts relating to restructuring and acquisition-related charges, stock-based compensation expense and intangible asset amortization. See attached schedules for reconciliation of GAAP to non-GAAP.

² Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. See attached schedules for a reconciliation of net cash provided by operating activities to free cash flow for the first quarters of 2011 and 2010.

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

EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, Greenplum, Isilon, RSA, Symmetrix, VNX and Vblock 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) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) component and product quality and availability; (vi) fluctuations in VMware, Inc.’s operating results and risks associated with trading of VMware stock; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) 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; (ix) the ability to attract and retain highly qualified employees; (x) insufficient, excess or obsolete inventory; (xi) fluctuating currency exchange rates; (xii) threats and other disruptions to our secure data centers or networks; (xiii) our ability to protect our proprietary technology; (xiv) war or acts of terrorism; 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 asset 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,     March 31,  
     2011     2010  

Revenues:

     

Product sales

    $ 2,931,259      $ 2,478,717   

Services

      1,676,359        1,411,975   
                
     4,607,618        3,890,692   

Cost and expenses:

     

Cost of product sales

      1,320,488        1,161,922   

Cost of services

      588,079        510,251   

Research and development

      502,108        434,933   

Selling, general and administrative

      1,495,931        1,261,284   

Restructuring and acquisition-related charges

      26,893        18,502   
                

Operating income

      674,119        503,800   

Non-operating income (expense):

     

Investment income

      38,227        31,532   

Interest expense

      (44,979 )      (42,968 ) 

Other expense, net

      (43,174 )      (9,021 ) 
                

Total non-operating expense

      (49,926 )      (20,457 ) 
                

Income before provision for income taxes

      624,193        483,343   

Income tax provision

      121,639        95,653   
                

Net income

      502,554        387,690   

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

      (25,406 )      (14,986 ) 
                

Net income attributable to EMC Corporation

    $ 477,148      $ 372,704   
                

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

    $ 0.23      $ 0.18   
                

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

    $ 0.21      $ 0.17   
                

Weighted average shares, basic

      2,066,136        2,051,030   

Weighted average shares, diluted

      2,258,278        2,119,192   

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended March 31, 2011

(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

   $ 4,607,618      $ 1,908,567      $ 502,108      $ 1,495,931      $ 26,893      $ 674,119      $ (49,926 )    $ 624,193      $ 121,639      $ 502,554      $ (25,406 )    $ 477,148      $ 0.231      $ 0.210   

Restructuring and acquisition-related charges

     —          —          —          —          (26,893 )      26,893        —          26,893        7,190        19,703        (35 )      19,668      $ 0.010      $ 0.009   
                                                                                                               

EMC Consolidated Adjusted (1)

     4,607,618        1,908,567        502,108        1,495,931        —          701,012        (49,926 )      651,086        128,829        522,257        (25,441 )      496,816      $ 0.241      $ 0.219   

Stock-based compensation expense

     —          (33,164 )      (76,181 )      (109,668 )      —          219,013        635        219,648        54,433        165,215        (14,154 )      151,061      $ 0.073      $ 0.067   

Intangible asset amortization

     —          (36,175 )      (3,714 )      (40,704 )      —          80,593        —          80,593        26,030        54,563        (2,084 )      52,479      $ 0.025      $ 0.023   
                                                                                                               

EMC Consolidated Non-GAAP (2)

   $ 4,607,618      $ 1,839,228      $ 422,213      $ 1,345,559      $ —        $ 1,000,618      $ (49,291 )    $ 951,327      $ 209,292      $ 742,035      $ (41,679 )    $ 700,356      $ 0.339      $ 0.309   
                                                                                                               

EMC Information Infrastructure GAAP

   $ 3,764,906      $ 1,759,784      $ 335,766      $ 1,126,853      $ 26,721      $ 515,782      $ (51,450 )    $ 464,332      $ 90,625      $ 373,707      $ —        $ 373,707      $ 0.181      $ 0.165   

Restructuring and acquisition-related charges

     —          —          —          —          (26,721 )      26,721        —          26,721        7,190        19,531        —          19,531      $ 0.009      $ 0.009   
                                                                                                               

EMC Information Infrastructure Adjusted (3)

     3,764,906        1,759,784        335,766        1,126,853        —          542,503        (51,450 )      491,053        97,815        393,238        —          393,238      $ 0.190      $ 0.174   

Stock-based compensation expense

     —          (21,953 )      (34,297 )      (77,304 )      —          133,554        635        134,189        39,076        95,113        —          95,113      $ 0.046      $ 0.042   

Intangible asset amortization

     —          (25,893 )      (2,917 )      (38,579 )      —          67,389        —          67,389        23,148        44,241        —          44,241      $ 0.021      $ 0.020   
                                                                                                               

EMC Information Infrastructure Non-GAAP (4)

   $ 3,764,906      $ 1,711,938      $ 298,552      $ 1,010,970      $ —        $ 743,446      $ (50,815 )    $ 692,631      $ 160,039      $ 532,592      $ —        $ 532,592      $ 0.258      $ 0.236   
                                                                                                               

VMware standalone GAAP

   $ 843,721      $ 149,897      $ 169,163      $ 371,159      $ —        $ 153,502      $ 2,612      $ 156,114      $ 30,302      $ 125,812      $ —        $ 125,812      $ 0.061      $ 0.056   

GAAP adjustments and eliminations

     (1,009 )      (1,114 )      (2,821 )      (2,081 )      172        4,835        (1,088 )      3,747        712        3,035        (25,406 )      (22,371 )    $ (0.011 )    $ (0.011 ) 
                                                                                                               

VMware within EMC GAAP (5)

     842,712        148,783        166,342        369,078        172        158,337        1,524        159,861        31,014        128,847        (25,406 )      103,441      $ 0.050      $ 0.045   

Acquisition-related charges

     —          —          —          —          (172 )      172        —          172        —          172        (35 )      137      $ —        $ —     
                                                                                                               

VMware within EMC Adjusted (6)

     842,712        148,783        166,342        369,078        —          158,509        1,524        160,033        31,014        129,019        (25,441 )      103,578      $ 0.050      $ 0.045   

Stock-based compensation expense

     —          (11,211 )      (41,884 )      (32,364 )      —          85,459        —          85,459        15,357        70,102        (14,154 )      55,948      $ 0.027      $ 0.025   

Intangible asset amortization

     —          (10,282 )      (797 )      (2,125 )      —          13,204        —          13,204        2,882        10,322        (2,084 )      8,238      $ 0.004      $ 0.004   
                                                                                                               

VMware within EMC Non-GAAP (7)

   $ 842,712      $ 127,290      $ 123,661      $ 334,589      $ —        $ 257,172      $ 1,524      $ 258,696      $ 49,253      $ 209,443      $ (41,679 )    $ 167,764      $ 0.081      $ 0.073   
                                                                                                               
                      Wtd. Average Share O/S        2,066,136        2,258,278   
                                       
                      Incremental VMware dilution        $ 2,764   

Reconciliation of GAAP to Non-GAAP

For the Three Months Ended March 31, 2011

(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)

   $ —        $ —        $ —        $ —        $ —        $ —        $ (26,822 )    $ (26,822 )    $ (10,081 )    $ (16,741 )    $ —        $ (16,741 )    $ (0.008 )    $ (0.007 ) 

Transition costs (9)

     —          63        419        5,706        —          (6,188 )      —          (6,188 )      (2,094 )      (4,094 )      —          (4,094 )    $ (0.002 )    $ (0.002 ) 
                                                                                                               
  $ —        $ 63      $ 419      $ 5,706      $ —        $ (6,188 )    $ (26,822 )    $ (33,010 )    $ (12,175 )    $ (20,835 )    $ —        $ (20,835 )    $ (0.010 )    $ (0.009 ) 
                                                                                                               

 

(1) Represents EMC Consolidated GAAP excluding restructuring and acquisition-related charges.
(2) Represents EMC Consolidated Adjusted excluding stock-based compensation expense and intangible asset 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 asset 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 asset 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, 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 asset 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 asset 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      $ 0.000      $ 0.000   
                                                                                                               

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 asset 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   
                                       
                      Incremental VMware dilution        $ 1,883   

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 asset 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 asset 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 asset 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

EMC CORPORATION

Consolidated Balance Sheets

(in thousands, except per share amounts)

Unaudited

 

     March 31,     December 31,  
     2011     2010  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 4,102,332      $ 4,119,138   

Short-term investments

      1,491,454        1,256,175   

Accounts and notes receivable, less allowance for doubtful accounts of $62,305 and $57,385

      2,379,175        2,569,523   

Inventories

      921,004        856,405   

Deferred income taxes

      631,809        609,832   

Other current assets

      646,684        372,249   
                

Total current assets

      10,172,458        9,783,322   

Long-term investments

      3,876,569        4,115,918   

Property, plant and equipment, net

      2,565,263        2,528,432   

Intangible assets, net

      1,556,718        1,624,267   

Goodwill

      11,790,048        11,772,650   

Other assets, net

      1,226,376        1,008,695   
                

Total assets

    $ 31,187,432      $ 30,833,284   
                

LIABILITIES & SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 913,773      $ 1,062,600   

Accrued expenses

      2,044,953        2,090,035   

Income taxes payable

      —          199,735   

Convertible debt

      3,244,134        3,214,771   

Deferred revenue

      3,155,651        2,810,873   
                

Total current liabilities

      9,358,511        9,378,014   

Income taxes payable

      266,880        265,549   

Deferred revenue

      2,065,026        1,853,263   

Deferred income taxes

      710,474        717,004   

Other liabilities

      248,081        217,449   
                

Total liabilities

      12,648,972        12,431,279   
                

Convertible debt

      205,866        235,229   

Commitments and contingencies

     

Shareholders’ equity:

     

Preferred stock, par value $0.01; authorized 25,000 shares; none outstanding

      —          —     

Common stock, par value $0.01; authorized 6,000,000 shares; issued 2,057,568 and 2,069,246 shares

      20,576        20,692   

Additional paid-in capital

      3,426,722        3,816,681   

Retained earnings

      14,136,432        13,659,284   

Accumulated other comprehensive loss, net

      (56,903 )      (92,617 ) 
                

Total EMC Corporation’s shareholders’ equity

      17,526,827        17,404,040   

Non-controlling interest in VMware, Inc.

      805,767        762,736   
                

Total shareholders’ equity

      18,332,594        18,166,776   
                

Total liabilities and shareholders’ equity

    $ 31,187,432      $ 30,833,284   
                

EMC CORPORATION

Consolidated Statements of Cash Flows

(in thousands)

Unaudited

 

     Three Months Ended  
     March 31,
2011		     March 31,
2010		  

Cash flows from operating activities:

     

Cash received from customers

    $ 5,392,175      $ 4,615,013   

Cash paid to suppliers and employees

      (4,009,553 )      (3,213,917 ) 

Dividends and interest received

      33,927        26,634   

Interest paid

      (4,749 )      (4,670 ) 

Income taxes paid

      (277,023 )      (105,714 ) 
                

Net cash provided by operating activities

      1,134,777        1,317,346   
                

Cash flows from investing activities:

     

Additions to property, plant and equipment

      (165,525 )      (114,048 ) 

Capitalized software development costs

      (111,993 )      (93,161 ) 

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

      (1,601,241 )      (1,475,229 ) 

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

      1,341,335        628,504   

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

      261,228        40,346   

Business acquisitions, net of cash acquired

      (14,950 )      (288,246 ) 

Increase in strategic and other related investments

      (198,049 )      (5,240 ) 

Other

      (45,000 )      (16,648 ) 
                

Net cash used in investing activities

      (534,195 )      (1,323,722 ) 
                

Cash flows from financing activities:

     

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

      224,347        130,338   

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

      90,171        109,775   

EMC repurchase of EMC’s common stock

      (868,065 )      (176,260 ) 

EMC purchase of VMware’s common stock

      (38,000 )      (99,500 ) 

VMware repurchase of VMware’s common stock

      (147,729 )      (31,348 ) 

Excess tax benefits from stock-based compensation

      109,008        35,248   

Payment of long-term and short-term obligations

      (11 )      (2,327 ) 

Proceeds from long-term and short-term obligations

      294        1,116   
                

Net cash used in financing activities

      (629,985 )      (32,958 ) 
                

Effect of exchange rate changes on cash and cash equivalents

      12,597        (6,539 ) 
                

Net decrease in cash and cash equivalents

      (16,806 )      (45,873 ) 

Cash and cash equivalents at beginning of period

      4,119,138        6,302,499   
                

Cash and cash equivalents at end of period

    $ 4,102,332      $ 6,256,626   
                

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

     

Net income

    $ 502,554      $ 387,690   

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

     

Depreciation and amortization

      339,272        281,580   

Non-cash interest expense on convertible debt

      26,291        25,921   

Non-cash restructuring and other special charges

      382        162   

Stock-based compensation expense

      212,265        158,805   

Provision for doubtful accounts

      6,415        7,226   

Deferred income taxes, net

      (10,834 )      (28,766 ) 

Excess tax benefits from stock-based compensation

      (109,008 )      (35,248 ) 

Other

      (8,316 )      (820 ) 

Changes in assets and liabilities, net of acquisitions:

     

Accounts and notes receivable

      223,464        380,790   

Inventories

      (102,729 )      2,198   

Other assets

      (127,747 )      (24,760 ) 

Accounts payable

      (136,802 )      (102,803 ) 

Accrued expenses

      (121,190 )      (83,164 ) 

Income taxes payable

      (144,550 )      18,705   

Deferred revenue

      554,678        336,305   

Other liabilities

      30,632        (6,475 ) 
                

Net cash provided by operating activities

    $ 1,134,777      $ 1,317,346   
                

EMC Corporation

Reconciliation of Cash Flow from Operations to Free Cash Flow

(in thousands)

Unaudited

 

     Three Months Ended  
     March 31,
2011		     March 31,
2010		  

Cash flow from Operations

    $ 1,134,777      $ 1,317,346   

Capital Expenditures

      (165,525 )      (114,048 ) 

Capitalized Software

      (111,993 )      (93,161 ) 
                

Free Cash Flow

    $ 857,259      $ 1,110,137   
                

EMC Corporation

For the three months ended March 31, 2011

Reconciliation of Consolidated GAAP to Consolidated Non-GAAP Tax Rate

(in thousands)

Unaudited

 

     Income Before
Tax		      Tax
Provision		      Tax
Rate		  

EMC GAAP

    $ 624,193       $ 121,639         19.5 % 

Stock-based compensation expense

      219,648         54,433         24.8 % 

Intangible asset amortization

      80,593         26,030         32.3 % 

Restructuring and acquisition-related charges

      26,893         7,190         26.7 % 
                    

EMC Non-GAAP

    $ 951,327       $ 209,292         22.0 % 
                    

EMC Corporation

Supplemental

Revenue Analysis

(in thousands)

Unaudited

Supplemental Revenue Data

 

    Q1 2009     Q2 2009     Q3 2009     Q4 2009     FY 2009     Q1 2010     Q2 2010     Q3 2010     Q4 2010     FY 2010     Q1 2011  

Storage:

                      

Product Revenue

   $ 1,572,408      $ 1,632,309      $ 1,818,230      $ 2,175,104      $ 7,198,051      $ 2,017,314      $ 2,076,855      $ 2,172,875      $ 2,557,243      $ 8,824,287      $ 2,381,891   

Services Revenue

     790,932        842,558        880,807        947,061        3,461,358        901,781        922,067        966,414        1,084,564        3,874,826        1,048,406   
                                                                                       

Total Storage Revenue

   $ 2,363,340      $ 2,474,867      $ 2,699,037      $ 3,122,165      $ 10,659,409      $ 2,919,095      $ 2,998,922      $ 3,139,289      $ 3,641,807      $ 12,699,113      $ 3,430,297   
                                                                                       

Information Intelligence Group:

                      

Product Revenue

   $ 58,710      $ 60,792      $ 58,209      $ 83,125      $ 260,836      $ 63,662      $ 62,329      $ 59,078      $ 84,069      $ 269,138      $ 43,252   

Services Revenue

     115,605        119,445        118,979        124,724        478,753        114,502        116,105        116,713        119,439        466,759        117,103   
                                                                                       

Total Information Intelligence Group Revenue

   $ 174,315      $ 180,237      $ 177,188      $ 207,849      $ 739,589      $ 178,164      $ 178,434      $ 175,791      $ 203,508      $ 735,897      $ 160,355   
                                                                                       

Security:

                      

Product Revenue

   $ 80,671      $ 84,080      $ 84,080      $ 91,441      $ 340,272      $ 85,814      $ 90,876      $ 102,442      $ 121,019      $ 400,151      $ 87,180   

Services Revenue

     62,035        63,055        68,420        72,168        265,678        75,654        82,460        83,290        87,828        329,232        87,074   
                                                                                       

Total Security Revenue

   $ 142,706      $ 147,135      $ 152,500      $ 163,609      $ 605,950      $ 161,468      $ 173,336      $ 185,732      $ 208,847      $ 729,383      $ 174,254   
                                                                                       

EMC Information Infrastructure:

                      

Product Revenue

   $ 1,711,789      $ 1,777,181      $ 1,960,519      $ 2,349,670      $ 7,799,159      $ 2,166,790      $ 2,230,060      $ 2,334,395      $ 2,762,331      $ 9,493,576      $ 2,512,323   

Services Revenue

     968,572        1,025,058        1,068,206        1,143,953        4,205,789        1,091,937        1,120,632        1,166,417        1,291,831        4,670,817        1,252,583   
                                                                                       

Total EMC Information Infrastructure Revenue

   $ 2,680,361      $ 2,802,239      $ 3,028,725      $ 3,493,623      $ 12,004,948      $ 3,258,727      $ 3,350,692      $ 3,500,812      $ 4,054,162      $ 14,164,393      $ 3,764,906   
                                                                                       

VMware:

                      

Product Revenue

   $ 257,331      $ 228,089      $ 240,062      $ 303,504      $ 1,028,986      $ 311,927      $ 323,256      $ 341,530      $ 422,568      $ 1,399,281      $ 418,936   

Services Revenue

     213,070        227,024        248,843        303,039        991,976        320,038        349,549        369,929        411,936        1,451,452        423,776   
                                                                                       

Total VMware Revenue

   $ 470,401      $ 455,113      $ 488,905      $ 606,543      $ 2,020,962      $ 631,965      $ 672,805      $ 711,459      $ 834,504      $ 2,850,733      $ 842,712   
                                                                                       

Consolidated Revenues:

                      

Product Revenue

   $ 1,969,120      $ 2,005,270      $ 2,200,581      $ 2,653,174      $ 8,828,145      $ 2,478,717      $ 2,553,316      $ 2,675,925      $ 3,184,899      $ 10,892,857      $ 2,931,259   

Services Revenue

     1,181,642        1,252,082        1,317,049        1,446,992        5,197,765        1,411,975        1,470,181        1,536,346        1,703,767        6,122,269        1,676,359   
                                                                                       

Total Consolidated Revenues

   $ 3,150,762      $ 3,257,352      $ 3,517,630      $ 4,100,166      $ 14,025,910      $ 3,890,692      $ 4,023,497      $ 4,212,271      $ 4,888,666      $ 17,015,126      $ 4,607,618   
                                                                                       

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 %      0.0 %      (0.6 )%      (0.6 )%      0.2 %      1.1 % 

EMC Corporation

Reconciliation of Gross Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     Q1 2011     Q1 2010  

Gross Margin GAAP

    $ 2,699,051      $ 2,218,519   

Stock-based compensation expense

      33,164        26,798   

Intangible asset amortization

      36,175        32,181   

Restructuring and acquisition-related charges

      —          —     
                

Gross Margin Non-GAAP

    $ 2,768,390      $ 2,277,498   
                

Revenues

    $ 4,607,618      $ 3,890,692   

% GAAP

      58.6 %      57.0 % 

% Non-GAAP

      60.1 %      58.5 % 

EMC Corporation

Reconciliation of Operating Margin GAAP to Non-GAAP

(in thousands)

Unaudited

 

     Q1 2011     Q1 2010  

Operating Margin GAAP

    $ 674,119      $ 503,800   

Restructuring and acquisition-related charges

      26,893        18,502   

Stock-based compensation expense

      219,013        166,466   

Intangible asset amortization

      80,593        69,484   
                

Operating Margin Non-GAAP

    $ 1,000,618      $ 758,252   
                

Revenues

    $ 4,607,618      $ 3,890,692   

% GAAP

      14.6 %      12.9 % 

% Non-GAAP

      21.7 %      19.5 %