EMC Reports Record Revenue and 58% Profit Growth Third-Quarter Highlights

- All-time record consolidated revenue up 20% year over year

- Balanced, double-digit year-over-year revenue growth across U.S. and International geographies

- GAAP net income up 58% year over year

- Record third-quarter non-GAAP net income up 35% year over year

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

HOPKINTON, Mass., Oct. 19 /PRNewswire-FirstCall/ -- EMC Corporation (NYSE: EMC) today reported record financial results for the company’s third fiscal quarter of 2010.  Strong execution and continued healthy customer demand for the company’s storage, data protection, virtualization, and security products and services contributed to EMC achieving all-time record consolidated revenue and record third-quarter non-GAAP net income.  

For the third quarter, consolidated revenue was $4.21 billion, an increase of 20% compared with the year-ago quarter; GAAP net income attributable to EMC increased 58% year over year to $472.5 million; and GAAP diluted earnings per share were $0.22, up 57% year over year.  Non-GAAP(1) net income attributable to EMC for the third quarter was $649.4 million, an increase of 35% compared with the year-ago quarter, and non-GAAP(1) earnings per diluted share were $0.30, an increase of 30% year over year.  

During the quarter, EMC expanded gross and operating margins substantially on a year-over-year basis.  The company achieved all-time record year-to-date operating cash flow and free cash flow of $3.0 billion and $2.2 billion, which grew 31% and 22%, respectively, compared with the year-ago period.  The company completed the quarter with $10.5 billion in cash and investments.   

Joe Tucci, EMC’s Chairman and Chief Executive Officer, said, “Customers are embracing EMC in increasing numbers as a trusted partner for their cloud computing build-outs.  To lead this transformational IT wave, EMC remains focused on – and is taking share in – markets that are growing considerably faster than IT as a whole.  With our compelling technology and services portfolio, partner ecosystem, and strong product roadmap, we remain confident that we’ll continue to produce double-digit growth rates over the long term.”

David Goulden, EMC’s Executive Vice President and Chief Financial Officer, said, “For the third consecutive quarter EMC achieved our ‘triple play’ – we gained market share, invested aggressively to capitalize on the shift to cloud computing, and increased profitability.  Cloud computing is driving a fundamental change in the way IT is designed and managed, represents a massive opportunity, and is happening now in various phases across the globe.  Our strategy and business model remain strong, and our investments continue to pay off.  Moving forward, EMC has never been better positioned to deliver our ‘triple play’ results over the long term.”

Third-Quarter Highlights

Third-quarter highlights included strong customer demand and double-digit revenue growth for the company’s market-leading high-end EMC Symmetrix storage product portfolio, which increased 23% compared with the year-ago quarter, and EMC’s mid-tier storage product portfolio(2), which grew revenue 22% year over year.  Revenue from EMC’s RSA information security business grew 22% year over year, and VMware (NYSE: VMW), which is majority-owned by EMC, increased revenue 46% compared with the year-ago quarter.  Additional third-quarter highlights included strong customer demand for EMC’s backup and recovery solutions as part of the company’s fast-growing Backup and Recovery Systems Division, and a number of significant new customer wins with EMC’s Information Intelligence solutions.  Also in the third quarter, EMC completed its acquisition of data warehousing and business analytics pioneer Greenplum, forming the foundation of the company’s new Data Computing Products Division.  The new division is focused on helping customers rapidly deploy and generate disruptive competitive advantage from “big data” clouds and self-service analytics.

EMC consolidated third-quarter revenue from the United States reached $2.3 billion, an increase of 21% year over year, representing 54% of consolidated third-quarter revenue.  Revenue from EMC’s business operations outside of the United States reached $1.9 billion, an increase of 19% year over year, representing 46% of consolidated third-quarter revenue. Within this, revenue increased 14%, 28% and 23% year over year, respectively, in EMC’s Europe, Middle East and Africa; Asia Pacific and Japan; 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.

  • For 2010, EMC expects consolidated revenues of $16.9 billion, $0.91 in consolidated GAAP diluted earnings per share, and $1.25 in consolidated non-GAAP diluted earnings per share, which excludes the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization.
  • For 2010, consolidated restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization are expected to be $0.02, $0.23 and $0.09 per diluted share, respectively.
  • GAAP operating income is expected to be 15% to 16% of revenues for 2010, and non-GAAP operating income is expected to be 21% to 22% 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 less than 2% of revenues, respectively.  
  • The consolidated GAAP income tax rate is expected to be 20% 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 2%, the consolidated non-GAAP income tax rate is expected to be 22% for 2010.  The expected annual GAAP and non-GAAP income tax rates assume that the U.S. research and development tax credit will be re-enacted in 2010 which is expected to favorably impact both the GAAP and non-GAAP income tax expense by $45 million to $50 million.  The R&D credit is expected to favorably impact the GAAP tax rate by 2% and the non-GAAP tax rate by 1%.
  • Total non-operating expense, which includes investment income, interest expense, and other expense, is expected to be $80 million in 2010.
  • The total weighted average diluted outstanding shares for 2010 are expected to be 2.14 billion.
  • EMC expects to repurchase up to $1.0 billion of the company’s common stock in 2010.

Supporting Resources


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 asset amortization for the third quarters of 2010 and 2009.  In addition, for the third quarter of 2009, gains on Data Domain and SpringSource common stock were also excluded. 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.

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; and (xiv) 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, intangible asset amortization and amounts relating to gains on Data Domain and SpringSource common stock) 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


Nine Months Ended



September 30,

September 30,


September 30,

September 30,



2010

2009


2010

2009

Revenues:







Product sales

$    2,675,925

$    2,200,581


$    7,707,958

$    6,174,971


Services

1,536,346

1,317,049


4,418,502

3,750,773



4,212,271

3,517,630


12,126,460

9,925,744








Cost and expenses:







Cost of product sales

1,194,297

1,107,400


3,513,961

3,177,935


Cost of services

531,000

470,013


1,547,807

1,380,559


Research and development

483,264

422,092


1,395,922

1,203,266


Selling, general and administrative

1,343,325

1,177,775


3,888,260

3,253,752


Restructuring and acquisition-related charges

12,561

34,781


40,902

83,587








Operating income

647,824

305,569


1,739,608

826,645








Non-operating (expense) income:







Investment income

40,563

38,106


104,198

109,293


Interest expense

(44,827)

(46,227)


(132,539)

(135,928)


Other (expense) income, net

(5,823)

28,022


(12,714)

17,281

Total non-operating (expense) income

(10,087)

19,901


(41,055)

(9,354)








Income before provision for income taxes

637,737

325,470


1,698,553

817,291

Income tax provision

148,663

20,602


381,292

96,462








Net income

489,074

304,868


1,317,261

720,829


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

(16,558)

(6,688)


(45,825)

(23,348)















Net income attributable to EMC Corporation

$       472,516

$       298,180


$    1,271,436

$       697,481








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







common shareholders

$             0.23

$             0.15


$             0.62

$             0.35








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







common shareholders

$             0.22

$             0.14


$             0.59

$             0.34
















Weighted average shares, basic

2,055,876

2,027,347


2,053,026

2,015,920









Weighted average shares, diluted

2,146,753

2,065,951


2,132,948

2,038,984



Reconciliation of GAAP to Non-GAAP

For the Three Months Ended September 30, 2010

(in thousands, except per share amounts)

Unaudited


































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



Revenue



































































EMC Consolidated GAAP


$ 4,212,271


$       1,725,297


$                            483,264


$                                     1,343,325


$                                                               12,561


$                 647,824


$                              (10,087)


$                  637,737


$                  148,663


$ 489,074


$                                         (16,558)


$                                 472,516


$                                                                  0.230


$                                                                    0.219






























Restructuring and acquisition-related charges


-


-


-


-


(12,561)


12,561


-


12,561


2,222


10,339


(202)


10,137


$                                                                  0.005


$                                                                    0.005



























































EMC Consolidated Adjusted (1)


4,212,271


1,725,297


483,264


1,343,325


-


660,385


(10,087)


650,298


150,885


499,413


(16,760)


482,653


$                                                                  0.235


$                                                                    0.224






























Stock-based compensation expense


-


(27,871)


(66,387)


(77,513)


-


171,771


406


172,177


41,525


130,652


(12,913)


117,739


$                                                                  0.057


$                                                                    0.055






























Intangible asset amortization


-


(32,342)


(6,456)


(34,631)


-


73,429


-


73,429


22,606


50,823


(1,802)


49,021


$                                                                  0.024


$                                                                    0.023






























EMC Consolidated Non-GAAP (2)


$ 4,212,271


$       1,665,084


$                            410,421


$                                     1,231,181


$                                                                      -


$                 905,585


$                                (9,681)


$                  895,904


$                  215,016


$ 680,888


$                                         (31,475)


$                                 649,413


$                                                                  0.316


$                                                                    0.301


















































































































































EMC Information Infrastructure GAAP


$ 3,500,812


$       1,598,897


$                            309,800


$                                     1,027,760


$                                                               11,527


$                 552,828


$                              (12,100)


$                  540,728


$                  136,450


$ 404,278


$                                                  -


$                                 404,278


$                                                                  0.197


$                                                                    0.188






























Restructuring and acquisition-related charges


-


-


-


-


(11,527)


11,527


-


11,527


2,222


9,305


-


9,305


$                                                                  0.005


$                                                                    0.004



























































EMC Information Infrastructure Adjusted (3)


3,500,812


1,598,897


309,800


1,027,760


-


564,355


(12,100)


552,255


138,672


413,583


-


413,583


$                                                                  0.201


$                                                                    0.193






























Stock-based compensation expense


-


(18,285)


(23,474)


(51,763)


-


93,522


406


93,928


29,259


64,669


-


64,669


$                                                                  0.031


$                                                                    0.030






























Intangible asset amortization


-


(24,182)


(5,829)


(33,498)


-


63,509


-


63,509


21,893


41,616


-


41,616


$                                                                  0.020


$                                                                    0.019






























EMC Information Infrastructure Non-GAAP (4)


$ 3,500,812


$       1,556,430


$                            280,497


$                                        942,499


$                                                                      -


$                 721,386


$                              (11,694)


$                  709,692


$                  189,824


$ 519,868


$                                                  -


$                                 519,868


$                                                                  0.253


$                                                                    0.242


















































































































































VMware standalone GAAP


$    714,245


$          126,562


$                            175,429


$                                        318,242


$                                                                      -


$                   94,012


$                                  2,733


$                    96,745


$                    12,145


$   84,600


$                                                  -


$                                   84,600


$                                                                  0.041


$                                                                    0.039






























GAAP adjustments and eliminations


(2,786)


(162)


(1,965)


(2,677)


1,034


984


(720)


264


68


196


(16,558)


(16,362)


$                                                                (0.008)


$                                                                  (0.009)






























VMware within EMC GAAP (5)


711,459


126,400


173,464


315,565


1,034


94,996


2,013


97,009


12,213


84,796


(16,558)


68,238


$                                                                  0.033


$                                                                    0.031






























Acquisition-related charges


-


-


-


-


(1,034)


1,034


-


1,034


-


1,034


(202)


832


$                                                                  0.000


$                                                                    0.000






























VMware within EMC Adjusted (6)


711,459


126,400


173,464


315,565


-


96,030


2,013


98,043


12,213


85,830


(16,760)


69,070


$                                                                  0.034


$                                                                    0.031






























Stock-based compensation expense


-


(9,586)


(42,913)


(25,750)


-


78,249


-


78,249


12,266


65,983


(12,913)


53,070


$                                                                  0.026


$                                                                    0.025






























Intangible asset amortization


-


(8,160)


(627)


(1,133)


-


9,920


-


9,920


713


9,207


(1,802)


7,405


$                                                                  0.004


$                                                                    0.003






























VMware within EMC Non-GAAP (7)


$    711,459


$          108,654


$                            129,924


$                                        288,682


$                                                                      -


$                 184,199


$                                  2,013


$                  186,212


$                    25,192


$ 161,020


$                                         (31,475)


$                                 129,545


$                                                                  0.063


$                                                                    0.059

















































































Wtd. Average Share O/S




2,055,876


2,146,753
































Reconciliation of GAAP to Non-GAAP

For the Three Months Ended September 30, 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)


$-


$                    -


$                                      -


$                                                  -


$-


$                          -


$                              (26,559)


$                  (26,559)


$                    (9,581)


$ (16,978)


$-


$                                  (16,978)


$                                                                (0.008)


$                                                                  (0.008)

Transition costs (9)


-


536


1,093


6,183


-


(7,812)


-


(7,812)


(2,238)


(5,574)


-


(5,574)


$                                                                (0.003)


$                                                                  (0.003)



$-


$                 536


$                                1,093


$                                            6,183


$-


$                   (7,812)


$                              (26,559)


$                  (34,371)


$                  (11,819)


$ (22,552)


$-


$                                  (22,552)


$                                                                (0.011)


$                                                                  (0.011)
































(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 September 30, 2009

(in thousands, except per share amounts)

Unaudited


































Cost of
Revenue


Research and
Development


Selling, General
and
Administrative


Restructuring
and
Acquisition-
Related
Charges


Operating
Income


Other
Income
(Expense),
net


Income
Before
Taxes


Income Tax
Provision


Net Income


Net Income
Attributable
to VMware


Net Income
Attributable
to EMC


Net Income
per Weighted
Average
Share, Basic


Net Income
per Weighted
Average
Share, Diluted



Revenue



































































EMC Consolidated GAAP


$   3,517,630


$       1,577,413


$               422,092


$              1,177,775


$                         34,781


$                  305,569


$                                   19,901


$                     325,470


$                        20,602


$   304,868


$                                                (6,688)


$                                        298,180


$                                                                       0.147


$                                                                          0.144






























Gain on Data Domain and SpringSource common stock


-


-


-


-


-


-


(25,822)


(25,822)


-


(25,822)


1,025


(24,797)


$                                                                      (0.012)


$                                                                        (0.012)






























Restructuring and acquisition-related charges


-


(12,485)


-


-


(34,781)


47,266


-


47,266


14,724


32,542


(135)


32,407


$                                                                       0.016


$                                                                          0.016



























































EMC Consolidated Adjusted (1)


3,517,630


1,564,928


422,092


1,177,775


-


352,835


(5,921)


346,914


35,326


311,588


(5,798)


305,790


$                                                                       0.151


$                                                                          0.148

Stock-based compensation expense


-


(27,106)


(62,557)


(99,915)


-


189,578


-


189,578


47,078


142,500


(9,181)


133,319


$                                                                       0.066


$                                                                          0.065






























Intangible asset amortization


-


(34,121)


(3,261)


(25,903)


-


63,285


-


63,285


21,651


41,634


(405)


41,229


$                                                                       0.020


$                                                                          0.020






























EMC Consolidated Non-GAAP (2)


$   3,517,630


$       1,503,701


$               356,274


$              1,051,957


$                                 -


$                  605,698


$                                    (5,921)


$                     599,777


$                      104,055


$   495,722


$                                              (15,384)


$                                        480,338


$                                                                       0.237


$                                                                          0.232


















































































































































EMC Information Infrastructure GAAP


$   3,028,725


$       1,481,485


$               289,715


$                 944,637


$                         34,008


$                  278,880


$                                   14,334


$                     293,214


$                        26,897


$   266,317


$                                                        -


$                                        266,317


$                                                                       0.131


$                                                                          0.129






























Gain on Data Domain common stock


-


-


-


-


-


-


(19,963)


(19,963)


-


(19,963)


-


(19,963)


$                                                                      (0.010)


$                                                                        (0.010)






























Restructuring and acquisition-related charges


-


(12,485)


-


-


(34,008)


46,493


-


46,493


14,724


31,769


-


31,769


$                                                                       0.016


$                                                                          0.015






























EMC Information Infrastructure Adjusted (3)


3,028,725


1,469,000


289,715


944,637


-


325,373


(5,629)


319,744


41,621


278,123


-


278,123


$                                                                       0.137


$                                                                          0.135






























Stock-based compensation expense


-


(17,608)


(28,307)


(76,146)


-


122,061


-


122,061


32,023


90,038


-


90,038


$                                                                       0.044


$                                                                          0.044






























Intangible asset amortization


-


(31,228)


(3,221)


(25,389)


-


59,838


-


59,838


20,518


39,320


-


39,320


$                                                                       0.019


$                                                                          0.019






























EMC Information Infrastructure Non-GAAP (4)


$   3,028,725


$       1,420,164


$               258,187


$                 843,102


$                                 -


$                  507,272


$                                    (5,629)


$                     501,643


$                        94,162


$   407,481


$                                                        -


$                                        407,481


$                                                                       0.201


$                                                                          0.197





















































































































VMware standalone GAAP


$      489,751


$            96,073


$               133,509


$                 236,933


$                                 -


$                    23,236


$                                     8,638


$                       31,874


$                        (6,345)


$     38,219


$                                                        -


$                                          38,219


$                                                                       0.019


$                                                                          0.018






























GAAP adjustments and eliminations


(846)


(145)


(1,132)


(3,795)


773


3,453


(3,071)


382


50


332


(6,688)


(6,356)


$                                                                      (0.003)


$                                                                        (0.003)






























VMware within EMC GAAP (5)


488,905


95,928


132,377


233,138


773


26,689


5,567


32,256


(6,295)


38,551


(6,688)


31,863


$                                                                       0.016


$                                                                          0.015






























Gain on SpringSource common stock


-


-


-


-


-


-


(5,859)


(5,859)


-


(5,859)


1,025


(4,834)


$                                                                      (0.002)


$                                                                        (0.002)






























Acquisition-related charges


-


-


-


-


(773)


773


-


773


-


773


(135)


638


$                                                                             -


$                                                                                -






























VMware within EMC Adjusted (6)


488,905


95,928


132,377


233,138


-


27,462


(292)


27,170


(6,295)


33,465


(5,798)


27,667


$                                                                       0.014


$                                                                          0.013

Stock-based compensation expense


-


(9,498)


(34,250)


(23,769)


-


67,517


-


67,517


15,055


52,462


(9,181)


43,281


$                                                                       0.021


$                                                                          0.021






























Intangible asset amortization


-


(2,893)


(40)


(514)


-


3,447


-


3,447


1,133


2,314


(405)


1,909


$                                                                       0.001


$                                                                          0.001






























VMware within EMC Non-GAAP (7)


$      488,905


$            83,537


$                 98,087


$                 208,855


$                                 -


$                    98,426


$                                       (292)


$                       98,134


$                          9,893


$     88,241


$                                              (15,384)


$                                          72,857


$                                                                       0.036


$                                                                          0.035

















































































Wtd. Average Share O/S




2,027,347


2,065,951
































Reconciliation of GAAP to Non-GAAP

For the Three Months Ended September 30, 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


































Cost of
Revenue


Research and
Development


Selling, General
and
Administrative


Restructuring
and
Acquisition-
Related
Charges


Operating
Income


Other Income
(Expense),
net


Income
Before
Taxes


Income Tax
Provision


Net Income


Net Income
Attributable
to VMware


Net Income
Attributable
to EMC


Net Income
per Weighted
Average
Share, Basic


Net Income
per Weighted
Average
Share, Diluted



Revenue






































Non-cash interest expense on convertible debt (8)


$-


$                    -


$                        -


$                           -


$-


$                            -


$                                  (27,483)


$                      (27,483)


$                        (9,153)


$   (18,330)


$-


$                                        (18,330)


$                                                                      (0.009)


$                                                                        (0.009)

Transition costs (9)


-


789


3,159


12,825


-


(16,773)


-


(16,773)


(4,943)


(11,830)


-


(11,830)


$                                                                      (0.006)


$                                                                        (0.006)



$-


$                 789


$                   3,159


$                   12,825


$-


$                  (16,773)


$                                  (27,483)


$                      (44,256)


$                      (14,096)


$   (30,160)


$-


$                                        (30,160)


$                                                                      (0.015)


$                                                                        (0.015)
































(1) Represents EMC Consolidated GAAP excluding gain on Data Domain and SpringSource common stock and 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 gain on Data Domain common stock and 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 gain on SpringSource common stock and 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





September 30,


December 31,



2010


2009



(unaudited)



ASSETS




Current assets:





Cash and cash equivalents

$    4,940,592


$   6,302,499


Short-term investments

1,712,410


392,839


Accounts and notes receivable, less allowance





    for doubtful accounts of $56,763 and $47,414

2,120,679


2,108,575


Inventories

838,622


886,289


Deferred income taxes

596,568


564,174


Other current assets

387,362


283,926

Total current assets

10,596,233


10,538,302

Long-term investments

3,860,062


2,692,323

Property, plant and equipment, net

2,430,679


2,224,346

Intangible assets, net

1,213,680


1,185,632

Goodwill

9,787,321


9,210,376

Other assets, net

1,038,933


961,024


     Total assets

$  28,926,908


$ 26,812,003











LIABILITIES  &  SHAREHOLDERS' EQUITY




Current liabilities:





Accounts payable

$       827,181


$      899,298


Accrued expenses

2,033,790


1,944,210


Income taxes payable

46,055


41,691


Deferred revenue

2,641,559


2,262,968

Total current liabilities

5,548,585


5,148,167

Income taxes payable

253,075


235,976

Deferred revenue

1,628,473


1,373,798

Deferred income taxes

605,400


708,378

Long-term convertible debt

3,185,417


3,100,290

Other liabilities

186,122


184,920

Total liabilities

11,407,072


10,751,529
















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 2,060,396 and 2,052,441 shares

20,604


20,524


Additional paid-in capital

3,886,415


3,875,791


Retained earnings

13,030,725


11,759,289


Accumulated other comprehensive loss, net

(120,268)


(105,722)


     Total EMC Corporation's shareholders' equity

16,817,476


15,549,882


Non-controlling interest in VMware, Inc.

702,360


510,592


Total shareholders' equity

17,519,836


16,060,474


     Total liabilities and shareholders' equity

$  28,926,908


$ 26,812,003



EMC CORPORATION

Consolidated Statements of Cash Flows

(in thousands)

Unaudited





Nine Months Ended





September 30,
2010


September 30,
2009

Cash flows from operating activities:





Cash received from customers

$  12,733,156


$  10,600,727


Cash paid to suppliers and employees

(9,567,360)


(8,098,216)


Dividends and interest received

92,834


95,024


Interest paid

(41,621)


(39,550)


Income taxes paid

(180,403)


(232,257)



Net cash provided by operating activities

3,036,606


2,325,728








Cash flows from investing activities:





Additions to property, plant and equipment

(541,866)


(277,589)


Capitalized software development costs

(272,492)


(222,432)


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

(5,091,454)


(4,224,872)


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

2,624,509


4,880,173


Business acquisitions, net of cash acquired

(851,380)


(2,664,141)


Increase in strategic and other related investments

(5,642)


(152,667)




Net cash used in investing activities

(4,138,325)


(2,661,528)















Cash flows from financing activities:





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

552,846


226,276


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

355,846


166,523


EMC repurchase of EMC's common stock

(800,267)


-


EMC purchase of VMware's common stock

(289,587)


-


VMware repurchase of VMware's common stock

(285,940)


-


Payments on securities lending

-


(412,321)


Excess tax benefits from stock-based compensation

210,711


25,355


Payment of long-term and short-term obligations

(3,755)


(19,836)


Proceeds from long-term and short-term obligations

1,116


1,615




Net cash used in financing activities

(259,030)


(12,388)








Effect of exchange rate changes on cash and cash equivalents

(1,158)


22,862








Net decrease in cash and cash equivalents

(1,361,907)


(325,326)

Cash and cash equivalents at beginning of period

6,302,499


5,843,685

Cash and cash equivalents at end of period

$    4,940,592


$    5,518,359








Reconciliation of net income to net cash provided





by operating activities:











Net income

$    1,317,261


$       720,829

Adjustments to reconcile net income to net cash





provided by operating activities:





Depreciation and amortization

862,964


791,043


Non-cash interest expense on convertible debt

78,731


80,562


Non-cash restructuring and other special charges

3,114


22,138


Stock-based compensation expense

484,141


420,947


Provision for doubtful accounts

18,599


15,160


Deferred income taxes, net

(41,355)


8,101


Excess tax benefits from stock-based compensation

(210,711)


(25,355)


Gain on Data Domain and SpringSource common stock

-


(25,822)


Other  

(9,192)


(13,567)


Changes in assets and liabilities, net of acquisitions:






Accounts and notes receivable

(14,380)


455,116



Inventories

(55,862)


(61,265)



Other assets

(127,401)


(35,483)



Accounts payable

(71,839)


66,868



Accrued expenses

(38,343)


(175,982)



Income taxes payable

242,244


(143,896)



Deferred revenue

602,477


204,707



Other liabilities

(3,842)


21,627




Net cash provided by operating activities

$    3,036,606


$    2,325,728



   EMC Corporation
   Reconciliation of Cash Flow from Operations to Free Cash Flow
   (in thousands)
   Unaudited






Nine Months Ended



Three Months Ended



September 30,


September 30,



September 30,


September 30,



2010


2009



2010


2009











EMC Consolidated




















Cash flow from Operations


$                       3,036,606


$                   2,325,728



$                          962,400


$                      887,649











Capital Expenditures


(541,866)


(277,589)



(240,674)


(72,077)











Capitalized Software


(272,492)


(222,432)



(86,858)


(70,658)











Free Cash Flow


$                       2,222,248


$                   1,825,707



$                          634,868


$                      744,914



EMC Corporation

Reconciliation of GAAP to Non-GAAP Tax Rate

(in thousands)

Unaudited








For the three months ended September 30, 2010
















Income Before


Tax


Tax



Tax


Provision


Rate








EMC Consolidated GAAP


$          637,737


$ 148,663


23%

Stock-based compensation expense


172,177


41,525


24%

Intangible asset amortization


73,429


22,606


31%

Restructuring and acquisition-related charges


12,561


2,222


18%

EMC Consolidated Non-GAAP


$          895,904


$ 215,016


24%



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

YTD 2010

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

$   6,267,044


Services Revenue


790,932

842,558

880,807

947,061

3,461,358


901,781

922,067

966,414

2,790,262














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

$   9,057,306



























Information Intelligence Group:













Product Revenue


$      58,710

$      60,792

$      58,209

$      83,125

$      260,836


$      63,662

$      62,329

$      59,078

$      185,069


Services Revenue


115,605

119,445

118,979

124,724

478,753


114,502

116,105

116,713

347,320














Total Information Intelligence Group Revenue


$    174,315

$    180,237

$    177,188

$    207,849

$      739,589


$    178,164

$    178,434

$    175,791

$      532,389



























Security:













Product Revenue


$      80,671

$      84,080

$      84,080

$      91,441

$      340,272


$      85,814

$      90,876

$    102,442

$      279,132


Services Revenue


62,035

63,055

68,420

72,168

265,678


75,654

82,460

83,290

241,404














Total Security Revenue


$    142,706

$    147,135

$    152,500

$    163,609

$      605,950


$    161,468

$    173,336

$    185,732

$      520,536



























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

$   6,731,245


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

3,378,986














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

$ 10,110,231



























VMware:













Product Revenue


$    257,331

$    228,089

$    240,062

$    303,504

$   1,028,986


$    311,927

$    323,256

$    341,530

$      976,713


Services Revenue


213,070

227,024

248,843

303,039

991,976


320,038

349,549

369,929

1,039,516














Total VMware Revenue


$    470,401

$    455,113

$    488,905

$    606,543

$   2,020,962


$    631,965

$    672,805

$    711,459

$   2,016,229





















































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

$   7,707,958


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

4,418,502














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

$ 12,126,460




























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%



EMC Corporation
Reconciliation of Gross Margin GAAP to Non-GAAP
(in thousands)
Unaudited








Q3 2010


Q3 2009











Gross Margin GAAP


$         2,486,974


$         1,940,217

           Restructuring and acquisition-related charges


-


12,485

           Stock-based compensation expense


27,871


27,106

           Intangible asset amortization


32,342


34,121






Gross Margin Non-GAAP


$         2,547,187


$         2,013,929
















Revenues


$         4,212,271


$         3,517,630

% GAAP


59.0%


55.2%

% Non-GAAP


60.5%


57.3%



EMC Corporation
Reconciliation of Operating Margin GAAP to Non-GAAP
(in thousands)
Unaudited








Q3 2010


Q3 2009











Operating Margin GAAP


$            647,824


$            305,569

        Restructuring and acquisition-related charges


12,561


47,266

        Stock-based compensation expense


171,771


189,578

        Intangible asset amortization


73,429


63,285






Operating Margin Non-GAAP


$            905,585


$            605,698











Revenues


$         4,212,271


$         3,517,630

% GAAP


15.4%


8.7%

% Non-GAAP


21.5%


17.2%



EMC Corporation 

Reconciliation of EMC's Compounded Annual Growth Rate

(in thousands)

Unaudited












Actual


Guidance


Guidance




2004


2010


CAGR


















GAAP diluted earnings per share


$               0.36


$             0.91


17%










Restructuring and acquisition-related charges


0.01


0.02


9%


Stock-based compensation expense


0.02


0.23


55%


Intangible asset amortization


0.03


0.09


21%


Non-GAAP diluted earnings per share


$               0.41


$             1.25


20%


























Schedule may not add due to rounding









SOURCE EMC Corporation



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