EX-99.1 2 exhibit991q32013.htm PRESS RELEASE Exhibit 99.1 Q3 2013
Exhibit 99.1


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

EMC Reports Third-Quarter 2013 Financial Results

 
 
Highlights:

l
Consolidated revenue up 5% year over year
l
Year-over-year revenue growth across EMC's three federated businesses - EMC Information Infrastructure, VMware and Pivotal
l
Year-over-year revenue growth across all four major global geographies, with strong revenue growth from BRIC+13 markets
l
Strong year-over-year increase in operating and free cash flow

HOPKINTON, Mass. - October 22, 2013 - EMC Corporation (NYSE:EMC) today reported quarterly financial results that were highlighted by year-over-year revenue growth for EMC’s Information Infrastructure business, and accelerated year-over-year revenue growth for VMware and Pivotal.

Third-quarter consolidated revenue was $5.5 billion, an increase of 5% compared with the year-ago quarter.  Third-quarter GAAP net income attributable to EMC was $586 million and GAAP earnings per weighted average diluted share were $0.27. Non-GAAP1 net income attributable to EMC was $860 million and non-GAAP1 earnings per weighted average diluted share were $0.40. 

During the quarter, operating cash flow grew 25% year over year, generating $4.7 billion year to date. Free cash flow2 grew 26% year over year in the third quarter, generating $3.7 billion year to date. The company ended the third quarter with $17.5 billion in cash and investments.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “The EMC federation across EMC Information Infrastructure, VMware and Pivotal continues to be well positioned in our target markets and very well received by customers and partners. We leveraged the unique power of our business model in the quarter to expand our technology portfolio, strengthen our partner ecosystem and extend our leadership in cloud computing, Big Data and trusted IT. Despite our disappointment with our quarterly results, our confidence in the success of our strategy over the long term has never been stronger.”

David Goulden, EMC President and Chief Operating Officer, said, “While our financial results for the third quarter were impacted by a decline in US federal spending and a backend-loaded quarter, we achieved almost all of our strategic and operational goals.  We were pleased to see storage demand accelerate in the third quarter excluding US federal, and we think this is an encouraging sign for the storage market overall. Going forward, we remain confident EMC will continue to grow and gain market share.” 

Third-Quarter Highlights

In the third quarter, EMC’s Information Infrastructure business once again grew revenue year over year. Within this, EMC’s Emerging Storage business3 increased revenue 66% year over year. Highlights within


Emerging Storage included: continued strong year-over-year growth and a record number of new customers for the EMC Isilon scale-out NAS portfolio, solid demand for EMC Atmos object-based storage, and greater than 50% year-over-year revenue growth for EMC VPLEX virtual storage. Other achievements in the storage business in the quarter included the refresh of the mid-tier Data Domain product line in July and the successful launches of the next-generation VNX and ViPR in September. EMC’s RSA Information Security business increased revenue 11% year over year, the result of year-on-year revenue growth for both the Identity and Data Protection and Security Management and Compliance businesses.

VCE had an excellent third quarter as demand for Vblock systems showed accelerated year-over-year growth, outpacing the fast-growing market for converged infrastructure. EMC VSPEX reference architecture solutions saw continued strong growth with rapid adoption and growing popularity with customers and among partners. Additionally, third-quarter revenue from EMC’s Cloud Service Provider Partner program, the company’s fastest-growing vertical market segment, increased well over 50% year over year.

In the third quarter, VMware (NYSE: VMW) achieved accelerated double-digit year-over-year revenue growth. The company continues to excel because it is uniquely positioned to help customers move from the client-server era to the mobile-cloud era of computing. As VMware helps customers bridge to this new world, it is enabling them to capture new levels of efficiency, control and agility.

Pivotal - the new company that unites strategic technology, people and programs from EMC and VMware - continued to execute well in the third quarter as it builds a next generation platform comprising new data fabrics, application fabrics and a cloud-independent platform-as-a-service.  Pivotal’s recent acquisition of Xtreme Labs adds an important dimension to this effort, as Xtreme Labs’ advances in mobile application development are highly complementary to the expertise of Pivotal Labs, the agile development services unit within Pivotal.

EMC’s consolidated third-quarter revenue from the United States increased 2% year over year to $3.0 billion, representing 53% of consolidated third-quarter revenue.  Revenue from EMC’s business operations outside of the United States increased 8% year over year to $2.6 billion and represented 47% of consolidated third-quarter revenue. Within this, on a year-over-year basis, revenue from EMC’s Europe, Middle East and Africa region grew 8%, revenue from EMC’s Asia Pacific and Japan region increased 8%, and revenue from EMC’s Latin American region grew 13%.  Revenue from EMC’s BRIC+13 markets increased 19% 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 made by EMC regarding 2013 financial results.

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

•
Consolidated revenues are expected to be $23.25 billion for 2013.

•
Consolidated GAAP operating income is expected to be 18.0% of revenues for 2013 and consolidated non-GAAP operating income is expected to be 25.0% of revenues for 2013. Excluded from consolidated non-GAAP operating income 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 4.2%, 1.7%, 1.0% 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 $319 million and consolidated non-GAAP non-operating expense is expected to be $350 million in 2013. Excluded from consolidated non-GAAP non-operating expense is a net gain on disposition of certain lines of business and other for ($31 million).

•
Consolidated GAAP net income attributable to EMC is expected to be $2.9 billion in 2013 and consolidated non-GAAP net income attributable to EMC is expected to be $3.9 billion in 2013. 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, the benefit of the 2012 R&D tax credit, special tax charges and a net gain on disposition of certain lines of business and other, which account for $630 million, $260 million, $170 million, $15 million, ($60 million), $23 million and ($22 million), respectively.

•
Consolidated GAAP earnings per weighted average diluted share are expected to be $1.33 for 2013 and consolidated non-GAAP earnings per weighted average diluted share are expected to be $1.80 for 2013. 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, the benefit of the 2012 R&D tax credit, special tax charges and a net gain on disposition of certain lines of business and other, which account for $0.29, $0.12, $0.08, $0.01, ($0.03), $0.01 and ($0.01) per weighted average diluted share, respectively.

•
The consolidated GAAP income tax rate is expected to be 20.5% for 2013. 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, the benefit of the 2012 R&D tax credit, special tax charges and net gain on disposition of certain lines of business and other, which collectively impact the tax rate by 3%, the consolidated non-GAAP income tax rate is expected to be 23.5% for 2013.

•
GAAP net income attributable to the non-controlling interest in VMware is expected to be $195 million for 2013 and non-GAAP net income attributable to the non-controlling interest in VMware is expected to be $285 million for 2013. 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, the amortization of VMware's capitalized software from prior periods, the benefit of the 2012 R&D tax credit and a net gain on disposition of certain lines of business and other, which account for $70 million, $15 million, $13 million, $4 million, ($6 million) and ($6 million), respectively. The incremental dilution attributable to the shares of VMware held by EMC is expected to be $10 million for 2013.

•
Consolidated net cash provided by operating activities is expected to be $6.8 billion for 2013 and free cash flow is expected to be $5.5 billion for 2013. Excluded from free cash flow are $900 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 2.16 billion for 2013.

•
EMC expects to repurchase an aggregate of $3.5 billion of the company’s common stock in 2013 and the first half of 2014.

Supporting Resources

•
EMC will host its 2013 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/ir

•
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/ir

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

•
Visit EMC Pulse, EMC’s product and technology news blog, and EMC Reflections. Connect with EMC via Twitter, Facebook, YouTube, and LinkedIn

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 2013 and 2012 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring and acquisition-related charges, the amortization of VMware’s capitalized software from prior periods, special tax charges and a net gain on the disposition of certain lines of business and other. 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, 2013 and 2012.

3 EMC’s Emerging Storage business primarily includes product and maintenance revenues from EMC Isilon, EMC Atmos, EMC VPLEX, EMC RecoverPoint, ASD Suites and EMC Xtrem families.

EMC, Atmos, Data Domain, EMC RecoverPoint, Isilon, RSA, ViPR, VPLEX, VNX, VSPEX and Vblock are either registered trademarks or trademarks of EMC Corporation in the United States and/or other countries.  Pivotal, Pivotal Labs and Xtreme Labs are registered trademarks or trademarks of GoPivotal, Inc. and 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, the amortization of VMware's capitalized software from prior periods, special tax charges and a net gain on disposition of certain lines of business and other) 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, pay dividends, 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 millions, except per share amounts)
(unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
Product sales
$
3,165

 
$
3,084

 
$
9,535

 
$
9,332

 
Services
2,374

 
2,194

 
7,005

 
6,352

 
 
5,539

 
5,278

 
16,540

 
15,684

Cost and expenses:
 
 
 
 
 
 
 
 
Cost of product sales
1,324

 
1,292

 
4,020

 
3,849

 
Cost of services
773

 
698

 
2,271

 
2,087

 
Research and development
686

 
653

 
2,056

 
1,896

 
Selling, general and administrative
1,809

 
1,709

 
5,308

 
5,076

 
Restructuring and acquisition-related charges
40

 
27

 
195

 
81

Operating income
907

 
899

 
2,690

 
2,695

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
Investment income
26

 
29

 
93

 
85

 
Interest expense
(58
)
 
(21
)
 
(109
)
 
(58
)
 
Other income (expense), net
(55
)
 
(63
)
 
(197
)
 
(158
)
Total non-operating income (expense)
(87
)
 
(55
)
 
(213
)
 
(131
)
Income before provision for income taxes
820

 
844

 
2,477

 
2,564

Income tax provision
181

 
185

 
474

 
590

Net income
639

 
659

 
2,003

 
1,974

Less: Net income attributable to the non-controlling interest in VMware, Inc.
(53
)
 
(33
)
 
(136
)
 
(111
)
Net income attributable to EMC Corporation
$
586

 
$
626

 
$
1,867

 
$
1,863

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

 
$
0.30

 
$
0.89

 
$
0.89

Net income per weighted average share, diluted attributable to EMC Corporation common shareholders
$
0.27

 
$
0.28

 
$
0.86

 
$
0.84

 
 
 
 
 
 
 
 
Weighted average shares, basic
2,069

 
2,104

 
2,088

 
2,090

Weighted average shares, diluted
2,165

 
2,210

 
2,176

 
2,207

 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.10

 
$
—

 
$
0.20

 
$
—




EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
 
 
September 30,
 
December 31,
 
 
2013
 
2012
                                                   ASSETS
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
7,155

 
$
4,714

 
Short-term investments
3,442

 
1,422

 
Accounts and notes receivable, less allowance for doubtful accounts of $63 and $68
2,934

 
3,433

 
Inventories
1,375

 
1,201

 
Deferred income taxes
986

 
942

 
Other current assets
555

 
465

Total current assets
16,447

 
12,177

Long-term investments
6,869

 
5,260

Property, plant and equipment, net
3,373

 
3,145

Intangible assets, net
1,831

 
2,035

Goodwill
14,306

 
13,840

Other assets, net
1,776

 
1,612

 
Total assets
$
44,602

 
$
38,069

 
 
 
 
 
                LIABILITIES & SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
1,108

 
$
1,041

 
Accrued expenses
2,699

 
2,522

 
Income taxes payable
201

 
514

 
Convertible debt
1,658

 
1,652

 
Deferred revenue
5,093

 
4,575

Total current liabilities
10,759

 
10,304

Income taxes payable
310

 
293

Deferred revenue
3,416

 
2,976

Deferred income taxes
505

 
575

Long-term debt
5,493

 
—

Other liabilities
365

 
339

 
Total liabilities
20,848

 
14,487

 
 
 
 
 
Convertible debt
9

 
58

 
 
 
 
 
Commitments and contingencies
 
 
 
Shareholders' equity:
 
 
 
 
Preferred stock, par value $0.01; authorized 25 shares; none outstanding
—

 
—

 
Common stock, par value $0.01; authorized 6,000 shares; issued and outstanding 2,058 and 2,107 shares
21

 
21

 
Additional paid-in capital
2,394

 
3,691

 
Retained earnings
20,298

 
18,853

 
Accumulated other comprehensive loss, net
(291
)
 
(208
)
 
Total EMC Corporation's shareholders' equity
22,422

 
22,357

Non-controlling interests
1,323

 
1,167

 
Total shareholders' equity
23,745

 
23,524

 
Total liabilities and shareholders' equity
$
44,602

 
$
38,069





EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
September 30,
 
September 30,
 
 
 
 
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Cash received from customers
$
18,065

 
$
16,557

 
Cash paid to suppliers and employees
(12,740
)
 
(11,951
)
 
Dividends and interest received
118

 
65

 
Interest paid
(19
)
 
(17
)
 
Income taxes paid
(691
)
 
(291
)
 
 
 
Net cash provided by operating activities
4,733

 
4,363

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
(673
)
 
(523
)
 
Capitalized software development costs
(342
)
 
(316
)
 
Purchases of short- and long-term available-for-sale securities
(8,630
)
 
(5,012
)
 
Sales of short- and long-term available-for-sale securities
3,540

 
4,154

 
Maturities of short- and long-term available-for-sale securities
1,386

 
844

 
Business acquisitions, net of cash acquired
(616
)
 
(1,878
)
 
Purchases of strategic and other related investments
(109
)
 
(62
)
 
Sales of strategic and other related investments
10

 
79

 
Joint venture funding
(268
)
 
(218
)
 
Proceeds from divestiture of businesses
38

 
—

 
 
 
Net cash used in investing activities
(5,664
)
 
(2,932
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from the issuance of EMC's common stock
302

 
388

 
Proceeds from the issuance of VMware's common stock
185

 
214

 
EMC repurchase of EMC's common stock
(1,965
)
 
(380
)
 
EMC purchase of VMware's common stock
(160
)
 
(132
)
 
VMware repurchase of VMware's common stock
(392
)
 
(307
)
 
Excess tax benefits from stock-based compensation
102

 
212

 
Payment of long-term and short-term obligations
(14
)
 
(1,714
)
 
Proceeds from long-term and short-term obligations
5,460

 
4

 
Interest rate contract settlement
—

 
(70
)
 
Dividend payment
(209
)
 
—

 
Third party contribution to Pivotal
105

 
—

 
 
 
Net cash provided by (used in) financing activities
3,414

 
(1,785
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(42
)
 
(18
)
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
2,441

 
(372
)
Cash and cash equivalents at beginning of period
4,714

 
4,492

Cash and cash equivalents at end of period
$
7,155

 
$
4,120

 
 
 
 
 
 
 
 
Reconciliation of net income to net cash provided by operating activities:
 
 
 
Net income
$
2,003

 
$
1,974

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
1,215

 
1,128

 
Non-cash interest expense on debt
82

 
34

 
Non-cash restructuring and other special charges
10

 
9

 
Stock-based compensation expense
700

 
659

 
Provision for (recovery of) doubtful accounts
(2
)
 
21

 
Deferred income taxes, net
(31
)
 
(73
)


 
Excess tax benefits from stock-based compensation
(102
)
 
(212
)
 
Other, net
23

 
(20
)
 
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts and notes receivable
521

 
(207
)
 
 
Inventories
(382
)
 
(337
)
 
 
Other assets
122

 
63

 
 
Accounts payable
45

 
119

 
 
Accrued expenses
(321
)
 
(226
)
 
 
Income taxes payable
(176
)
 
372

 
 
Deferred revenue
1,006

 
1,059

 
 
Other liabilities
20

 
—

 
 
 
Net cash provided by operating activities
$
4,733

 
$
4,363




Reconciliation of GAAP to Non-GAAP*
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
September 30,
 
Earnings
 
September 30,
 
Earnings
 
2013
 
Per Share
 
2012
 
Per Share
Net Income Attributable to EMC GAAP
$
586

 
$
0.270

 
$
626

 
$
0.283

Stock-based compensation expense
163

 
0.075

 
164

 
0.074

Intangible asset amortization
66

 
0.030

 
60

 
0.027

Restructuring and acquisition-related charges
29

 
0.013

 
24

 
0.011

Amortization of VMware's capitalized software from prior periods
4

 
0.002

 
7

 
0.003

Special tax charges
23

 
0.011

 
—

 
—

Net gain on disposition of certain lines of business and other
(11
)
 
(0.005
)
 
—

 
—

Net Income Attributable to EMC Non-GAAP
$
860

 
$
0.397

 
$
881

 
$
0.398

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,165

 
 
 
2,210

Incremental VMware dilution
 
 
$
2

 
 
 
$
2


*
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 or recalculate due to rounding.


Reconciliation of GAAP to Non-GAAP
Q3'13 vs Q3'12 Constant Currency Revenue Growth
(unaudited)
 
EMC Consolidated

Revenue growth - GAAP
5
%
 
 
Impact of currency
1
%
 
 
Revenue growth on a constant currency basis
6
%

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


Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)

 
Three Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
Gross Margin GAAP
$
3,442

 
$
3,288

Stock-based compensation expense
32

 
33

Intangible asset amortization
58

 
51

Restructuring and acquisition related charges
—

 
—

Amortization of VMware's capitalized software from prior periods
8

 
13

Gross Margin Non-GAAP
$
3,540

 
$
3,385

 
 
 
 
Revenues
$
5,539

 
$
5,278

 
 
 
 
Gross Margin Percentages:
 
 
 
GAAP
62.1
%
 
62.3
%
Non-GAAP
63.9
%
 
64.1
%


 
Three Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
Operating Margin GAAP
$
907

 
$
899

Stock-based compensation expense
244

 
250

Intangible asset amortization
97

 
93

Restructuring and acquisition-related charges
40

 
27

Amortization of VMware's capitalized software from prior periods
8

 
13

Operating Margin Non-GAAP
$
1,296

 
$
1,282


 
 
 
Revenues
$
5,539

 
$
5,278

 
 
 
 
Operating Margin Percentages:
 
 
 
GAAP
16.4
%
 
17.0
%
Non-GAAP
23.4
%
 
24.3
%

Note: Schedules may not add or recalculate due to rounding.






Reconciliation of GAAP to Non-GAAP
(in millions)
(unaudited)

 
Three Months Ended September 30, 2013
 
Income Before
 
Tax
 
Tax
 
Tax
 
Provision
 
Rate
EMC Consolidated GAAP
$
820

 
$
181

 
22.1
 %
Stock-based compensation expense
244

 
64

 
26.0
 %
Intangible asset amortization
97

 
27

 
27.6
 %
Restructuring and acquisition-related charges
40

 
10

 
29.0
 %
Amortization of VMware's capitalized software from prior periods
8

 
2

 
32.4
 %
Special tax charges
—

 
(23
)
 
—
 %
Net gain on disposition of certain lines of business and other
(12
)
 
2

 
(17.9
)%
EMC Consolidated Non-GAAP
$
1,197

 
$
263

 
22.0
 %




 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2013
 
2012
 
2013
 
2012
Cash Flow from Operations
 
$
1,793

 
$
1,438

 
$
4,733

 
$
4,363

Capital expenditures
 
(236
)
 
(191
)
 
(673
)
 
(523
)
Capitalized software development costs
 
(123
)
 
(110
)
 
(342
)
 
(316
)
Free Cash Flow
 
$
1,434

 
$
1,137

 
$
3,718

 
$
3,524


Note: Schedules may not add or recalculate due to rounding.




Supplemental Information
For the Three Months Ended September 30, 2013
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring and Acquisition-Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
Special Tax Charges
 
Net Gain on Disposition of Certain Lines of Business and Other
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(32
)
 
$
(58
)
 
$
—

 
$
(8
)
 
$
—

 
$
—

Research and development
(90
)
 
(2
)
 
—

 
—

 
—

 
—

Selling, general and administrative
(122
)
 
(37
)
 
—

 
—

 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(40
)
 
—

 
—

 
—

Non-operating (income) expense
—

 
—

 
—

 
—

 
—

 
(12
)
Income tax provision
64

 
27

 
10

 
2

 
(23
)
 
2

Net income attributable to VMware
(17
)
 
(4
)
 
(1
)
 
(2
)
 
—

 
3

 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(23
)
 
$
(36
)
 
$
—

 
$
—

 
$
—

 
$
—

Research and development
(38
)
 
(1
)
 
—

 
—

 
—

 
—

Selling, general and administrative
(69
)
 
(36
)
 
—

 
—

 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(34
)
 
—

 
—

 
—

Non-operating (income) expense
—

 
—

 
—

 
—

 
—

 
—

Income tax provision
37

 
23

 
9

 
—

 
23

 
—

Net income attributable to VMware
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
$
(9
)
 
$
(22
)
 
$
—

 
$
(8
)
 
$
—

 
$
—

Research and development
(52
)
 
(1
)
 
—

 
—

 
—

 
—

Selling, general and administrative
(53
)
 
(1
)
 
—

 
—

 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(6
)
 
—

 
—

 
—

Non-operating (income) expense
—

 
—

 
—

 
—

 
—

 
(12
)
Income tax provision
27

 
4

 
1

 
2

 
—

 
2

Net income attributable to VMware
(17
)
 
(4
)
 
(1
)
 
(2
)
 
—

 
3



Supplemental Information
For the Three Months Ended September 30, 2012
(in millions)
(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
$
(33
)
 
$
(51
)
 
$
—

 
$
(13
)
Research and development
85

 
(3
)
 
—

 
—

Selling, general and administrative
(132
)
 
(39
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(27
)
 
—

Non-operating (income) expense
(1
)
 
—

 
—

 
—

Income tax provision
67

 
30

 
3

 
4

Net income attributable to VMware
(20
)
 
(3
)
 
—

 
(2
)
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
Cost of revenue
$
(22
)
 
$
(33
)
 
$
—

 
$
—

Research and development
(29
)
 
(2
)
 
—

 
—

Selling, general and administrative
(70
)
 
(36
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(25
)
 
—

Non-operating (income) expense
(1
)
 
—

 
—

 
—

Income tax provision
28

 
25

 
3

 
—

Net income attributable to VMware
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
Cost of revenue
$
(11
)
 
$
(18
)
 
$
—

 
$
(13
)
Research and development
(56
)
 
(1
)
 
—

 
—

Selling, general and administrative
(62
)
 
(3
)
 
—

 
—

Restructuring and acquisition-related charges
—

 
—

 
(2
)
 
—

Non-operating (income) expense
—

 
—

 
—

 
—

Income tax provision
39

 
5

 
—

 
4

Net income attributable to VMware
(20
)
 
(3
)
 
—

 
(2
)



Supplemental Information
For the Three Months Ended September 30, 2013
(in millions)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
1,289

 
$
(4
)
 
$
1,285

Cost of revenue
183

 
—

 
183

Gross margin
1,106

 
(4
)
 
1,102

Research and development
266

 
(5
)
 
261

Selling, general and administrative
552

 
(3
)
 
549

Restructuring and acquisition-related charges
1

 
5

 
6

Operating income
287

 
(1
)
 
286

Non-operating income (expense)
21

 
(1
)
 
20

Income before taxes
308

 
(2
)
 
306

Income tax provision
47

 
(14
)
 
33

Net income
$
261

 
12

 
273

Net income attributable to VMware
 
 
(53
)
 
(53
)
Net income attributable to EMC
 
 
$
(41
)
 
$
220


Note: Schedule may not add due to rounding.


Supplemental Information
For the Three Months Ended September 30, 2012
(in millions)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenue
$
1,134

 
$
(33
)
 
$
1,101

Cost of revenue
179

 
(13
)
 
166

Gross margin
955

 
(20
)
 
935

Research and development
260

 
(25
)
 
235

Selling, general and administrative
505

 
(19
)
 
486

Restructuring and acquisition-related charges
—

 
2

 
2

Operating income
190

 
22

 
212

Non-operating income (expense)
5

 
3

 
8

Income before taxes
195

 
25

 
220

Income tax provision
38

 
(1
)
 
37

Net income
$
157

 
26

 
183

Net income attributable to VMware
 
 
(33
)
 
(33
)
Net income attributable to EMC
 
 
$
(6
)
 
$
150


Note: Schedule may not add due to rounding.



Segment Information
For the Three Months Ended September 30, 2013
(in millions)
(unaudited)
 
EMC Information Infrastructure
 
 
 
 
 
 
 
Information
Storage
 
Information
Intelligence
Group
 
RSA
Information
Security
 
EMC
Information
Infrastructure
 
Pivotal
 
EMC Information Infrastructure plus Pivotal
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Product revenues
$
2,415

 
$
32

 
$
120

 
$
2,567

 
$
35

 
$
2,602

Services revenues
1,358

 
117

 
132

 
1,607

 
45

 
1,652

Total consolidated revenues
3,773

 
149

 
252

 
4,174

 
80

 
4,254

Gross profit
$
2,101

 
$
94

 
$
170

 
2,365

 
34

 
2,399

Gross profit percentage
55.7
%
 
63.3
%
 
67.6
%
 
56.6
%
 
42.6
 %
 
56.4
%
Research and development
 
 
 
 
 
 
354

 
32

 
386

Selling, general and administrative
 
 
 
 
 
 
1,114

 
43

 
1,157

Restructuring and acquisition-related charges
 
 
 
 
 
 
—

 
—

 
—

Total costs and expenses
 
 
 
 
 
 
1,468

 
75

 
1,543

Operating income
 
 
 
 
 
 
$
897

 
$
(41
)
 
$
856

Operating margin percentage
 
 
 
 
 
 
21.5
%
 
(51.1
)%
 
20.1
%

 
EMC
Information
Infrastructure plus Pivotal
 
VMware
Virtual
Infrastructure
within EMC
 
Corp
Reconciling
Items
 
Consolidated
Revenues:
 
 
 
 
 
 
 
Product revenues
$
2,602

 
$
563

 
$
—

 
$
3,165

Services revenues
1,652

 
722

 
—

 
2,374

Total consolidated revenues
4,254

 
1,285

 
—

 
5,539

Gross profit
$
2,399

 
$
1,141

 
$
(98
)
 
$
3,442

Gross profit percentage
56.4
%
 
88.8
%
 
—

 
62.1
%
Research and development
386

 
208

 
92

 
686

Selling, general and administrative
1,157

 
493

 
159

 
1,809

Restructuring and acquisition-related charges
—

 
—

 
40

 
40

Total costs and expenses
1,543

 
701

 
291

 
2,535

Operating income
856

 
440

 
(389
)
 
907

Operating margin percentage
20.1
%
 
34.2
%
 
—

 
16.4
%
Non-operating income (expense)
(106
)
 
7

 
12

 
(87
)
Income tax provision
193

 
70

 
(82
)
 
181

Net income
557

 
377

 
(295
)
 
639

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

 
(74
)
 
21

 
(53
)
Net income attributable to EMC Corporation
$
557

 
$
303

 
$
(274
)
 
$
586


Note: This segment information is presented on a consistent basis with the presentation in our quarterly and annual filings with the SEC. This schedule may not recalculate due to rounding.


Segment Information
For the Three Months Ended September 30, 2012
(in millions)
(unaudited)
 
EMC Information Infrastructure
 
 
 
 
 
 
 
Information
Storage
 
Information
Intelligence
Group
 
RSA
Information
Security
 
EMC
Information
Infrastructure
 
Pivotal
 
EMC Information Infrastructure plus Pivotal
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Product revenues
$
2,420

 
$
50

 
$
106

 
$
2,576

 
$
23

 
$
2,599

Services revenues
1,306

 
108

 
121

 
1,535

 
43

 
1,578

Total consolidated revenues
3,726

 
158

 
227

 
4,111

 
66

 
4,177

Gross profit
$
2,119

 
$
108

 
$
146

 
2,373

 
37

 
2,410

Gross profit percentage
56.9
%
 
68.1
%
 
64.2
%
 
57.7
%
 
55.6
 %
 
57.7
%
Research and development
 
 
 
 
 
 
356

 
31

 
387

Selling, general and administrative
 
 
 
 
 
 
1,079

 
38

 
1,117

Restructuring and acquisition-related charges
 
 
 
 
 
 
—

 
—

 
—

Total costs and expenses
 
 
 
 
 
 
1,435

 
69

 
1,504

Operating income
 
 
 
 
 
 
$
938

 
$
(32
)
 
$
906

 
 
 
 
 
 
 
22.8
%
 
(48.4
)%
 
21.7
%

 
EMC
Information
Infrastructure plus Pivotal
 
VMware
Virtual
Infrastructure
within EMC
 
Corp
Reconciling
Items
 
Consolidated
Revenues:
 
 
 
 
 
 
 
Product revenues
$
2,599

 
$
485

 
$
—

 
$
3,084

Services revenues
1,578

 
616

 
—

 
2,194

Total consolidated revenues
4,177

 
1,101

 
—

 
5,278

Gross profit
$
2,410

 
$
975

 
$
(97
)
 
$
3,288

Gross profit percentage
57.7
%
 
88.6
%
 
—

 
62.3
%
Research and development
387

 
178

 
88

 
653

Selling, general and administrative
1,117

 
421

 
171

 
1,709

Restructuring and acquisition-related charges
—

 
—

 
27

 
27

Total costs and expenses
1,504

 
599

 
286

 
2,389

Operating income
906

 
376

 
(383
)
 
899

Operating margin percentage
21.7
%
 
34.2
%
 
—

 
17.0
%
Non-operating income (expense)
(63
)
 
9

 
(1
)
 
(55
)
Income tax provision
202

 
87

 
(104
)
 
185

Net income
641

 
298

 
(280
)
 
659

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

 
(58
)
 
25

 
(33
)
Net income attributable to EMC Corporation
$
641

 
$
240

 
$
(255
)
 
$
626


Note: This segment information is presented on a consistent basis with the presentation in our quarterly and annual filings with the SEC. The segment disclosures have been recast to separately present the operations of the Pivotal segment.  None of the segment reclassifications impact EMC’s previously reported consolidated financial statements.  This schedule may not recalculate due to rounding.



Supplemental Information
(in millions)
(unaudited)
 
 Q1 2012
 
 Q2 2012
 
Q3 2012
 
Q4 2012
 
FY 2012
 
 Q1 2013
 
 Q2 2013
 
Q3 2013
Information Storage:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
2,437

 
$
2,500

 
$
2,420

 
$
2,925

 
$
10,283

 
$
2,461

 
$
2,568

 
$
2,415

Services Revenue
1,226

 
1,287

 
1,306

 
1,338

 
5,157

 
1,303

 
1,358

 
1,358

Total Information Storage Revenue
$
3,663

 
$
3,787

 
$
3,726

 
$
4,263

 
$
15,440

 
$
3,764

 
$
3,926

 
$
3,773

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Information Intelligence Group:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
37

 
$
45

 
$
50

 
$
69

 
$
200

 
$
43

 
$
39

 
$
32

Services Revenue
109

 
108

 
108

 
115

 
440

 
112

 
113

 
117

Total Information Intelligence Group Revenue
$
146

 
$
153

 
$
158

 
$
184

 
$
640

 
$
155

 
$
152

 
$
149

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSA Information Security:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
96

 
$
103

 
$
106

 
$
106

 
$
413

 
$
100

 
$
98

 
$
120

Services Revenue
110

 
117

 
121

 
128

 
476

 
133

 
130

 
132

Total RSA Information Security Revenue
$
206

 
$
220

 
$
227

 
$
234

 
$
889

 
$
233

 
$
228

 
$
252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
2,570

 
$
2,648

 
$
2,576

 
$
3,100

 
$
10,896

 
$
2,604

 
$
2,705

 
$
2,567

Services Revenue
1,445

 
1,512

 
1,535

 
1,581

 
6,073

 
1,548

 
1,601

 
1,607

Total EMC Information Infrastructure Revenue
$
4,015

 
$
4,160

 
$
4,111

 
$
4,681

 
$
16,969

 
$
4,152

 
$
4,306

 
$
4,174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pivotal:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
21

 
$
23

 
$
23

 
$
39

 
$
106

 
$
24

 
$
24

 
$
35

Services Revenue
23

 
40

 
43

 
58

 
164

 
45

 
46

 
45

Total Pivotal Revenue
$
44

 
$
63

 
$
66

 
$
97

 
$
270

 
$
69

 
$
70

 
$
80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VMware:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
478

 
$
508

 
$
485

 
$
589

 
$
2,058

 
$
484

 
$
529

 
$
563

Services Revenue
557

 
580

 
616

 
663

 
2,417

 
682

 
709

 
722

Total VMware Revenue
$
1,035

 
$
1,088

 
$
1,101

 
$
1,252

 
$
4,475

 
$
1,166

 
$
1,238

 
$
1,285

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product Revenue
$
3,069

 
$
3,179

 
$
3,084

 
$
3,728

 
$
13,060

 
$
3,112

 
$
3,258

 
$
3,165

Services Revenue
2,025

 
2,132

 
2,194

 
2,302

 
8,654

 
2,275

 
2,356

 
2,374

Total Consolidated Revenues
$
5,094

 
$
5,311

 
$
5,278

 
$
6,030

 
$
21,714

 
$
5,387

 
$
5,614

 
$
5,539

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year
(0.5)%
 
(2.1)%
 
(1.5)%
 
(0.5)%
 
(1.1)%
 
(0.5)%
 
(0.7
)%
 
(0.8
)%
Note: Schedule may not add or recalculate due to rounding.