EX-99.1 2 exhibit991.htm PRESS RELEASE Exhibit 99.1
Exhibit 99.1


Contact:
Lesley Ogrodnick
508-293-6961
lesley.ogrodnick@emc.com


EMC Reports Third-Quarter 2012 Financial Results

 
 
Third-Quarter Highlights:

l
Consolidated revenue up 6% year over year
l
GAAP net income up 3% year over year; GAAP EPS up 4%
l
Non-GAAP net income up 7% year over year; Non-GAAP EPS up 8%
l
Operating cash flow up 12% year over year; Free cash flow up 16%
 
 

HOPKINTON, Mass. - October 24, 2012 - EMC Corporation (NYSE:EMC) today reported financial results for the third quarter of 2012, highlighted by record third-quarter consolidated revenue, net income and EPS.

Third-quarter consolidated revenue was $5.28 billion, an increase of 6% compared with the year-ago quarter. Third-quarter GAAP net income attributable to EMC increased 3% year over year to $626 million. Third-quarter GAAP earnings per weighted average diluted share increased 4% year over year to $0.28. Non-GAAP1 net income attributable to EMC for the third quarter was $881 million, an increase of 7% compared with the year-ago quarter. Third-quarter non-GAAP1 earnings per weighted average diluted share were $0.40, an increase of 8% year over year.

During the third quarter, EMC generated operating cash flow of $1.44 billion and free cash flow2 of $1.14 billion, a year-over-year increase of 12% and 16%, respectively. Additionally, the company ended the quarter with $10.6 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “EMC's third-quarter revenue and profit growth reflect the resiliency of our business in a more uncertain global economic environment. We remain very well positioned to capitalize on - and drive - the transformative trends of cloud computing, Big Data and trusted IT.  These major waves of change in IT become increasingly more important to customers and partners as they navigate through a cyclical slowdown, look to gain maximum value from their investments, and focus on their longer-term IT and business transformations.” 

David Goulden, EMC President and Chief Operating Officer, said, “For the third quarter, EMC's business continued to grow faster than overall IT spending growth and we gained market share in what turned out to be a more cautionary environment than we expected heading into the quarter. We remain extremely confident in our strategy, best-of-breed product portfolio and solid operational and financial model. Going forward, we fully believe that EMC will continue to grow faster than our addressable markets and take share, reinvest for the future, and deliver earnings leverage for shareholders.”





Third-Quarter Highlights

In the third quarter, revenue from EMC's networked storage platforms portfolio3, which includes EMC's high-end and mid-tier storage platform products, grew 2% year over year. Revenue from EMC's high-end Symmetrix storage product portfolio, which includes the company's VMAX systems family, increased 5% compared with the year-ago quarter. Revenue from the company's portfolio of mid-tier storage products4 was flat year over year.
 
Other third-quarter highlights included continued customer demand for EMC's Isilon scale-out NAS products and the company's Backup Recovery Systems (BRS) portfolio. Adoption of EMC's VSPEX reference architecture solutions also gained momentum and popularity among customers and with partners who have sold more than 300 VSPEX solutions since their launch in April 2012. Customers also continued to increasingly turn to EMC's Greenplum product portfolio to gain insight and value from Big Data. Revenue from EMC's RSA Information Security business increased 6% year over year, driven by continued customer requirements for trusted IT solutions. VMware (NYSE: VMW), the global leader in virtualization and cloud infrastructure, grew revenue 20% year over year. Additionally, EMC continued to experience solid demand for its broad portfolio of services to help customers accelerate their transition to cloud architectures and transform IT. Finally, VCE, formed by Cisco and EMC with investments from VMware and Intel, continued to gain traction in enterprise data centers and cloud service providers globally as demand for Vblock systems showed strong growth in the third quarter.

EMC's consolidated third-quarter revenue from the United States increased 8% year over year to $2.9 billion, representing 55% of consolidated third-quarter revenue. Revenue from EMC's business operations outside of the United States increased 4% year over year to $2.4 billion and represented 45% of consolidated third-quarter revenue.

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 made by EMC regarding 2012 financial results.

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

•
Consolidated revenues are expected to be between $21.60 billion and $21.75 billion for 2012.

•
Consolidated GAAP operating income is expected to be 17.8% of revenues for 2012 and consolidated non-GAAP operating income is expected to be 24.5% of revenues for 2012. Excluded from consolidated non-GAAP operating income are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods and a release of excess RSA special charge reserve, which account for 4.3%, 1.7%, 0.5%, 0.3% and (0.1%) of revenues, respectively.



•
Total consolidated GAAP non-operating expense, which includes investment income, interest expense and other income and expense, is expected to be $211 million in 2012 and total consolidated non-GAAP non-operating expense is expected to be $200 million in 2012. Excluded from non-GAAP non-operating expense is stock-based compensation expense of $3 million, a gain on strategic investment of ($32 million) and a loss on interest rate swaps of $40 million.

•
Consolidated GAAP net income attributable to EMC is expected to be between $2.72 billion and $2.77 billion in 2012 and consolidated non-GAAP net income attributable to EMC is expected to be between $3.70 billion and $3.75 billion in 2012. Excluded from consolidated non-GAAP net income attributable to EMC are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods, a release of excess RSA special charge reserve, a gain on strategic investment and a loss on interest rate swaps which account for $646 million, $240 million, $90 million, $30 million, ($18 million), ($32 million) and $24 million, respectively.

•
Consolidated GAAP earnings per weighted average diluted share are expected to be between $1.24 and $1.26 for 2012 and consolidated non-GAAP earnings per weighted average diluted share are expected to be between $1.68 and $1.70 for 2012. Excluded from consolidated non-GAAP earnings per weighted average diluted share are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods, a release of excess RSA special charge reserve, a gain on strategic investment and a loss on interest rate swaps, which account for $0.29, $0.11, $0.04, $0.01, ($0.01), ($0.01) and $0.01 per weighted average diluted share, respectively.

•
The consolidated GAAP income tax rate is expected to be 21% for 2012. Excluding the tax impact of stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware's capitalized software from prior periods, a release of excess RSA special charge reserve, a gain on strategic investment and a loss on interest rate swaps, which collectively impact the tax rate by 1.5%, the consolidated non-GAAP income tax rate is expected to be 22.5% for 2012. This assumes that the U.S. research and development tax credit for 2012 is extended in the fourth quarter of 2012.

•
GAAP net income attributable to the non-controlling interest in VMware is expected to be $150 million and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $250 million for 2012. Excluded from non-GAAP net income attributable to the non-controlling interest in VMware are stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware's capitalized software from prior periods, which account for $75 million, $15 million, $1 million and $9 million, respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $15 million for 2012.

•
Consolidated net cash provided by operating activities is expected to be $6.1 billion for 2012 and free cash flow is expected to be $4.9 billion for 2012. Excluded from free cash flow are $800 million of additions to property, plant and equipment and $400 million of capitalized software development costs.



•
The weighted average outstanding diluted shares are expected to be 2.2 billion for 2012.

•
EMC expects to repurchase $700 million of the company's common stock in 2012.


Supporting Resources

•
EMC will host its 2012 third-quarter earnings conference call today at 8:30 a.m. ET, which will be available via EMC's web site at http://www.emc.com/about/investor-relations/index.htm

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

•
Visit http://ir.vmware.com for more information about VMware's third-quarter financial results.

•
Connect with EMC via Twitter, Facebook, YouTube, LinkedIn and ECN


About EMC
EMC Corporation is a global leader in enabling businesses and service providers to transform their operations and deliver IT as a service. Fundamental to this transformation is cloud computing. Through innovative products and services, EMC accelerates the journey to cloud computing, helping IT departments to store, manage, protect and analyze their most valuable asset - information - in a more agile, trusted and cost-efficient way. Additional information about EMC can be found at www.EMC.com.
 
# # #

1 Items excluded from the non-GAAP results for the third quarters of 2012 and 2011 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware's capitalized software from prior periods. See attached schedules for GAAP to non-GAAP reconciliations.

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 three and nine months ended September 30, 2012 and 2011.

3 EMC's networked storage platforms include EMC Symmetrix, EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products.

4 EMC's mid-tier storage products include EMC VNX, EMC CLARiiON, EMC Celerra, EMC Centera, EMC Data Domain, EMC Isilon, EMC Avamar and EMC Atmos hardware and software products.

EMC, Atmos, Avamar, Celerra, Centera, CLARiiON, Data Domain, Greenplum, Isilon, RSA, Symmetrix, Vblock, VMAX, VNX and VSPEX 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 stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges and the amortization of VMware's capitalized software from prior periods) 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,
 
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
 
Product sales
$
3,084,441

 
$
3,074,367

 
$
9,332,035

 
$
9,049,610

 
Services
2,193,735

 
1,905,834

 
6,351,912

 
5,383,547

 
 
5,278,176

 
4,980,201

 
15,683,947

 
14,433,157

Cost and expenses:
 
 
 
 
 
 
 
 
Cost of product sales
1,292,756

 
1,269,323

 
3,848,634

 
3,917,028

 
Cost of services
697,881

 
644,613

 
2,087,164

 
1,870,526

 
Research and development
652,898

 
548,021

 
1,896,656

 
1,589,020

 
Selling, general and administrative
1,708,794

 
1,612,914

 
5,075,641

 
4,684,534

 
Restructuring and acquisition-related charges
27,064

 
20,302

 
80,560

 
68,411

Operating income
898,783

 
885,028

 
2,695,292

 
2,303,638

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
Investment income
29,850

 
32,293

 
85,280

 
106,506

 
Interest expense
(21,480
)
 
(44,322
)
 
(58,207
)
 
(135,777
)
 
Other income (expense), net
(63,055
)
 
(59,799
)
 
(157,704
)
 
(72,616
)
Total non-operating income (expense)
(54,685
)
 
(71,828
)
 
(130,631
)
 
(101,887
)
Income before provision for income taxes
844,098

 
813,200

 
2,564,661

 
2,201,751

Income tax provision
185,434

 
171,086

 
590,600

 
465,456

Net income
658,664

 
642,114

 
1,974,061

 
1,736,295

Less: Net income attributable to the non-controlling interest in VMware, Inc.
(32,326
)
 
(36,465
)
 
(111,367
)
 
(107,004
)
Net income attributable to EMC Corporation
$
626,338

 
$
605,649

 
$
1,862,694

 
$
1,629,291

 
 
 
 
 
 
 
 
Net income per weighted average share, basic attributable to EMC Corporation common shareholders
$
0.30

 
$
0.29

 
$
0.89

 
$
0.79

 
 
 
 
 
 
 
 
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders
$
0.28

 
$
0.27

 
$
0.84

 
$
0.72

 
 
 
 
 
 
 
 
Weighted average shares, basic
2,104,205

 
2,054,007

 
2,089,516

 
2,060,242

 
 
 
 
 
 
 
 
Weighted average shares, diluted
2,210,421

 
2,207,099

 
2,206,805

 
2,244,508




EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
 
September 30,
 
December 31,
 
 
2012
 
2011
                                                   ASSETS
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
4,160,817

 
$
4,531,036

 
Short-term investments
1,284,855

 
1,786,987

 
Accounts and notes receivable, less allowance
 
 
 
 
     for doubtful accounts of $63,117 and $61,804
3,164,005

 
2,937,499

 
Inventories
1,158,262

 
1,009,968

 
Deferred income taxes
802,215

 
733,308

 
Other current assets
541,263

 
583,885

Total current assets
11,111,417

 
11,582,683

Long-term investments
5,134,328

 
4,525,106

Property, plant and equipment, net
2,983,446

 
2,833,149

Intangible assets, net
2,053,360

 
1,766,115

Goodwill
13,728,256

 
12,154,970

Other assets, net
1,494,911

 
1,406,156

 
     Total assets
$
36,505,718

 
$
34,268,179

 
 
 
 
 
                LIABILITIES & SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
1,074,079

 
$
1,101,659

 
Accrued expenses
2,317,568

 
2,354,979

 
Notes converted and payable
—

 
1,699,832

 
Income taxes payable
286,696

 
155,909

 
Convertible debt
1,636,907

 
1,605,142

 
Deferred revenue
4,353,490

 
3,458,689

Total current liabilities
9,668,740

 
10,376,210

Income taxes payable
332,289

 
238,851

Deferred revenue
2,884,240

 
2,715,361

Deferred income taxes
384,444

 
250,817

Other liabilities
307,455

 
287,912

 
Total liabilities
13,577,168

 
13,869,151

 
 
 
 
 
Convertible debt
73,280

 
119,325

 
 
 
 
 
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 and outstanding 2,106,655 and 2,048,890 shares
21,067

 
20,489

 
Additional paid-in capital
3,854,545

 
3,405,513

 
Retained earnings
17,983,315

 
16,120,621

 
Accumulated other comprehensive loss, net
(155,303
)
 
(235,009
)
 
Total EMC Corporation's shareholders' equity
21,703,624

 
19,311,614

 
Non-controlling interest in VMware, Inc.
1,151,646

 
968,089

 
Total shareholders' equity
22,855,270

 
20,279,703

 
     Total liabilities and shareholders' equity
$
36,505,718

 
$
34,268,179





EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
September 30,
 
September 30,
 
 
 
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
Cash received from customers
$
16,556,689

 
$
15,434,151

 
Cash paid to suppliers and employees
(11,950,620
)
 
(11,577,038
)
 
Dividends and interest received
64,780

 
77,706

 
Interest paid
(16,880
)
 
(54,683
)
 
Income taxes paid
(290,888
)
 
(395,539
)
 
 
 
Net cash provided by operating activities
4,363,081

 
3,484,597

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
(523,459
)
 
(601,177
)
 
Capitalized software development costs
(315,798
)
 
(342,091
)
 
Purchases of short- and long-term available-for-sale securities
(5,011,791
)
 
(5,589,382
)
 
Sales of short- and long-term available-for-sale securities
4,153,617

 
3,945,683

 
Maturities of short- and long-term available-for-sale securities
844,287

 
877,510

 
Business acquisitions, net of cash acquired
(1,878,051
)
 
(536,624
)
 
Decrease (increase) in strategic and other related investments, net
18,648

 
(268,087
)
 
Joint venture funding
(217,881
)
 
(191,624
)
 
Purchase of leasehold interest
—

 
(151,083
)
 
 
 
Net cash used in investing activities
(2,930,428
)
 
(2,856,875
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Issuance of EMC's common stock from the exercise of stock options
387,782

 
501,627

 
Issuance of VMware's common stock from the exercise of stock options
214,223

 
285,286

 
EMC repurchase of EMC's common stock
(379,997
)
 
(1,899,208
)
 
EMC purchase of VMware's common stock
(131,917
)
 
(342,201
)
 
VMware repurchase of VMware's common stock
(307,012
)
 
(490,916
)
 
Excess tax benefits from stock-based compensation
212,280

 
318,717

 
Payment of long-term and short-term obligations
(14,677
)
 
(1,263
)
 
Proceeds from long-term and short-term obligations
4,279

 
1,253

 
Payment of convertible debt
(1,699,816
)
 
—

 
Interest rate contract settlement
(69,905
)
 
—

 
 
 
Net cash used in financing activities
(1,784,760
)
 
(1,626,705
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(18,112
)
 
5,455

 
 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
(370,219
)
 
(993,528
)
Cash and cash equivalents at beginning of period
4,531,036

 
4,119,138

Cash and cash equivalents at end of period
$
4,160,817

 
$
3,125,610

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

 
 
 
 
Net income
$
1,974,061

 
$
1,736,295

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
1,127,881

 
1,048,151

 
Non-cash interest expense on convertible debt
33,871

 
76,398

 
Non-cash restructuring and other special charges
8,990

 
(2,325
)
 
Stock-based compensation expense
658,455

 
613,233

 
Provision for doubtful accounts
21,339

 
8,525

 
Deferred income taxes, net
(72,657
)
 
83,657

 
Excess tax benefits from stock-based compensation
(212,280
)
 
(318,717
)


 
Other, net
(19,555
)
 
(28,740
)
 
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts and notes receivable
(207,395
)
 
(56,076
)
 
 
Inventories
(336,748
)
 
(416,898
)
 
 
Other assets
62,820

 
(157,024
)
 
 
Accounts payable
118,950

 
(75,263
)
 
 
Accrued expenses
(225,725
)
 
51,747

 
 
Income taxes payable
372,369

 
(13,740
)
 
 
Deferred revenue
1,058,798

 
1,048,545

 
 
Other liabilities
(93
)
 
(113,171
)
 
 
 
Net cash provided by operating activities
$
4,363,081

 
$
3,484,597




Reconciliation of GAAP to Non-GAAP*
(in thousands, except per share amounts)
Unaudited
 
Three Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
September 30,
 
Earnings
 
September 30,
 
Earnings
 
2012
 
Per Share
 
2011
 
Per Share
Net Income Attributable to EMC GAAP
$
626,338

 
$
0.283

 
$
605,649

 
$
0.273

Stock-based compensation expense
163,977

 
0.074
 
141,280

 
0.064

Intangible asset amortization
60,088

 
0.027
 
57,474

 
0.026

Restructuring and acquisition-related charges
24,182

 
0.011
 
17,418

 
0.008

Amortization of VMware's capitalized software
from prior periods
6,677

 
0.003
 
—

 
—

Net Income Attributable to EMC Non-GAAP
$
881,262

 
$
0.398

 
$
821,821

 
$
0.371

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,210,421

 
 
 
2,207,099

Incremental VMware Dilution
 
 
$
1,766

 
 
 
$
3,233

* Net of tax and non-controlling interest in VMware, Inc., except Weighted average shares, diluted. See Income Tax Provision and Net Income Attributable to VMware lines in Supplemental Information schedules.

Note: Schedule may not add due to rounding.


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Cash Flow from Operations
$
1,437,867

 
$
1,286,390

 
$
4,363,081

 
$
3,484,597

Capital expenditures
(191,157
)
 
(195,019
)
 
(523,459
)
 
(601,177
)
Capitalized software
(109,236
)
 
(110,530
)
 
(315,798
)
 
(342,091
)
Free Cash Flow
$
1,137,474

 
$
980,841

 
$
3,523,824

 
$
2,541,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Reconciliation of GAAP to Non-GAAP
(in thousands)
Unaudited

 
Three Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
Gross Margin GAAP
$
3,287,539

 
$
3,066,265

Stock-based compensation expense
32,973

 
28,720

Intangible asset amortization
51,672

 
41,015

Restructuring and acquisition-related charges
—

 
—

Amortization of VMware's capitalized software from prior periods
12,693

 
—

Gross Margin Non-GAAP
$
3,384,877

 
$
3,136,000

 
 
 
 
Revenues
$
5,278,176

 
$
4,980,201

 
 
 
 
Gross Margin Percentages:
 
 
 
GAAP
62.3
%
 
61.6
%
Non-GAAP
64.1
%
 
63.0
%

 
Three Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
Operating Margin GAAP
$
898,783

 
$
885,028

Stock-based compensation expense
249,874

 
200,217

Intangible asset amortization
93,441

 
88,605

Restructuring and acquisition-related charges
27,064

 
20,302

Amortization of VMware's capitalized software from prior periods
12,693

 
—

Operating Margin Non-GAAP
$
1,281,855

 
$
1,194,152

 
 
 
 
Revenues
$
5,278,176

 
$
4,980,201

 
 
 
 
Operating Margin Percentages:
 
 
 
GAAP
17.0
%
 
17.8
%
Non-GAAP
24.3
%
 
24.0
%

 
Three Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
Non-operating income (expense) GAAP
$
(54,685
)
 
$
(71,828
)
Stock-based compensation expense
508

 
1,320

Intangible asset amortization
—

 
—

Restructuring and acquisition-related charges
—

 
—

Amortization of VMware's capitalized software from prior periods
—

 
—

Non-operating income (expense) Non-GAAP
$
(54,177
)
 
$
(70,508
)



Reconciliation of GAAP to Non-GAAP
(in thousands)
Unaudited
 
Three Months Ended September 30, 2012
 
Income Before
 
Tax
 
Tax
 
Tax
 
Provision
 
Rate
EMC Consolidated GAAP
$
844,098

 
$
185,434

 
22.0
%
Stock-based compensation expense
250,382

 
66,734

 
26.7
%
Intangible asset amortization
93,441

 
29,527

 
31.6
%
Restructuring and acquisition-related charges
27,064

 
2,527

 
9.3
%
Amortization of VMware's capitalized software from prior periods
12,693

 
4,282

 
33.7
%
EMC Consolidated Non-GAAP
$
1,227,678

 
$
288,504

 
23.5
%



Supplemental Information
For the Three Months Ended September 30, 2012
(in thousands)
Unaudited
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
EMC Consolidated
 
 
 
 
 
 
 
Cost of revenue
$
(32,973
)
 
$
(51,672
)
 
$
—

 
$
(12,693
)
Research and development
(85,499
)
 
(2,719
)
 
—

 
—

Selling, general and administrative
(131,402
)
 
(39,050
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(27,064
)
 
—

Non-operating (income) expense
508

 
—

 
—

 
—

Income tax provision
66,734

 
29,527

 
2,527

 
4,282

Net income attributable to VMware
(19,671
)
 
(3,826
)
 
(355
)
 
(1,734
)
 
 
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
 
 
Cost of revenue
$
(22,429
)
 
$
(31,953
)
 
$
—

 
$
—

Research and development
(25,305
)
 
(1,757
)
 
—

 
—

Selling, general and administrative
(67,826
)
 
(35,763
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(25,341
)
 
—

Non-operating (income) expense
508

 
—

 
—

 
—

Income tax provision
27,817

 
24,115

 
2,527

 
—

Net income attributable to VMware
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
Cost of revenue
$
(10,544
)
 
$
(19,719
)
 
$
—

 
$
(12,693
)
Research and development
(60,194
)
 
(962
)
 
—

 
—

Selling, general and administrative
(63,576
)
 
(3,287
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(1,723
)
 
—

Non-operating (income) expense
—

 
—

 
—

 
—

Income tax provision
38,917

 
5,412

 
—

 
4,282

Net income attributable to VMware
(19,671
)
 
(3,826
)
 
(355
)
 
(1,734
)


Supplemental Information
For the Three Months Ended September 30, 2011
(in thousands)
Unaudited
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
EMC Consolidated
 
 
 
 
 
Cost of revenue
$
(28,720
)
 
$
(41,015
)
 
$
—

Research and development
(76,059
)
 
(4,450
)
 
—

Selling, general and administrative
(95,438
)
 
(43,140
)
 
—

Restructuring and acquisition-related charges
—

 
—

 
(20,302
)
Non-operating (income) expense
1,320

 
—

 
—

Income tax provision
44,997

 
28,407

 
2,711

Net income attributable to VMware
(15,260
)
 
(2,724
)
 
(173
)
 
 
 
 
 
 
EMC Information Infrastructure
 
 
 
 
 
Cost of revenue
$
(20,102
)
 
$
(27,717
)
 
$
—

Research and development
(29,396
)
 
(3,653
)
 
—

Selling, general and administrative
(60,157
)
 
(40,271
)
 
—

Restructuring and acquisition-related charges
—

 
—

 
(19,458
)
Non-operating (income) expense
1,320

 
—

 
—

Income tax provision
28,732

 
24,704

 
2,711

Net income attributable to VMware
—

 
—

 
—

 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
Cost of revenue
$
(8,618
)
 
$
(13,298
)
 
$
—

Research and development
(46,663
)
 
(797
)
 
—

Selling, general and administrative
(35,281
)
 
(2,869
)
 
—

Restructuring and acquisition-related charges
—

 
—

 
(844
)
Non-operating (income) expense
—

 
—

 
—

Income tax provision
16,265

 
3,703

 
—

Net income attributable to VMware
(15,260
)
 
(2,724
)
 
(173
)




Supplemental Information
For the Three Months Ended September 30, 2012
(in thousands)
Unaudited
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
1,133,684

 
$
(3,219
)
 
$
1,130,465

Cost of revenue
179,362

 
(818
)
 
178,544

Gross margin
954,322

 
(2,401
)
 
951,921

Research and development
259,907

 
(1,863
)
 
258,044

Selling, general and administrative
504,072

 
(1,755
)
 
502,317

Restructuring and acquisition-related charges
—

 
1,723

 
1,723

Operating income
190,343

 
(506
)
 
189,837

Non-operating income
4,804

 
3,694

 
8,498

Income before taxes
195,147

 
3,188

 
198,335

Income tax provision
38,379

 
(4,070
)
 
34,309

Net income
$
156,768

 
7,258

 
164,026

Net income attributable to VMware
 
 
(32,326
)
 
(32,326
)
Net income attributable to EMC
 
 
$
(25,068
)
 
$
131,700


Supplemental Information
For the Three Months Ended September 30, 2011
(in thousands)
Unaudited
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
941,863

 
$
(1,078
)
 
$
940,785

Cost of revenue
152,741

 
(142
)
 
152,599

Gross margin
789,122

 
(936
)
 
788,186

Research and development
199,655

 
(3,619
)
 
196,036

Selling, general and administrative
408,746

 
(2,409
)
 
406,337

Restructuring and acquisition-related charges
—

 
844

 
844

Operating income
180,721

 
4,248

 
184,969

Non-operating income
2,438

 
(2,241
)
 
197

Income before taxes
183,159

 
2,007

 
185,166

Income tax provision
5,621

 
(2,640
)
 
2,981

Net income
$
177,538

 
4,647

 
182,185

Net income attributable to VMware
 
 
(36,465
)
 
(36,465
)
Net income attributable to EMC
 
 
$
(31,818
)
 
$
145,720






Supplemental Information
(in thousands)
Unaudited

 
 Q1 2011
 
 Q2 2011
 
 Q3 2011
 
 Q4 2011
 
 FY 2011
 
 Q1 2012
 
 Q2 2012
 
Q3 2012
Information Storage:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
2,384,011

 
$
2,432,702

 
$
2,465,339

 
$
2,818,421

 
$
10,100,473

 
$
2,454,735

 
$
2,512,914

 
$
2,438,665

Services Revenue
1,055,466

 
1,135,792

 
1,197,581

 
1,265,867

 
4,654,706

 
1,234,172

 
1,304,311

 
1,324,110

Total Information Storage Revenue
$
3,439,477

 
$
3,568,494

 
$
3,662,920

 
$
4,084,288

 
$
14,755,179

 
$
3,688,907

 
$
3,817,225

 
$
3,762,775

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Information Intelligence Group:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
41,132

 
$
44,226

 
$
50,439

 
$
73,540

 
$
209,337

 
$
36,062

 
$
45,497

 
$
49,881

Services Revenue
110,043

 
115,646

 
111,157

 
115,169

 
452,015

 
109,491

 
107,276

 
108,117

Total Information Intelligence Group Revenue
$
151,175

 
$
159,872

 
$
161,596

 
$
188,709

 
$
661,352

 
$
145,553

 
$
152,773

 
$
157,998

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSA Information Security:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
87,180

 
$
102,273

 
$
115,685

 
$
135,652

 
$
440,790

 
$
96,489

 
$
103,458

 
$
106,020

Services Revenue
87,074

 
93,861

 
99,215

 
107,263

 
387,413

 
110,028

 
117,312

 
120,918

Total RSA Information Security Revenue
$
174,254

 
$
196,134

 
$
214,900

 
$
242,915

 
$
828,203

 
$
206,517

 
$
220,770

 
$
226,938

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
2,512,323

 
$
2,579,201

 
$
2,631,463

 
$
3,027,613

 
$
10,750,600

 
$
2,587,286

 
$
2,661,869

 
$
2,594,566

Services Revenue
1,252,583

 
1,345,299

 
1,407,953

 
1,488,299

 
5,494,134

 
1,453,691

 
1,528,899

 
1,553,145

Total EMC Information Infrastructure Revenue
$
3,764,906

 
$
3,924,500

 
$
4,039,416

 
$
4,515,912

 
$
16,244,734

 
$
4,040,977

 
$
4,190,768

 
$
4,147,711

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VMware:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
418,936

 
$
464,783

 
$
442,904

 
$
513,519

 
$
1,840,142

 
$
481,571

 
$
516,868

 
$
489,875

Services Revenue
423,776

 
456,055

 
497,881

 
545,000

 
1,922,712

 
571,830

 
603,757

 
640,590

Total VMware Revenue
$
842,712

 
$
920,838

 
$
940,785

 
$
1,058,519

 
$
3,762,854

 
$
1,053,401

 
$
1,120,625

 
$
1,130,465

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
2,931,259

 
$
3,043,984

 
$
3,074,367

 
$
3,541,132

 
$
12,590,742

 
$
3,068,857

 
$
3,178,737

 
$
3,084,441

Services Revenue
1,676,359

 
1,801,354

 
1,905,834

 
2,033,299

 
7,416,846

 
2,025,521

 
2,132,656

 
2,193,735

Total Consolidated Revenues
$
4,607,618

 
$
4,845,338

 
$
4,980,201

 
$
5,574,431

 
$
20,007,588

 
$
5,094,378

 
$
5,311,393

 
$
5,278,176

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year
1.1%
 
3.4%
 
1.7%
 
0.1%
 
1.5%
 
(0.5)%
 
(2.1)%
 
(1.5)%