EX-99.1 2 exhibit991q12014.htm PRESS RELEASE Exhibit 99.1 Q1 2014
Exhibit 99.1


Contact:
Dave Farmer
508-293-7206
dave.farmer@emc.com



EMC Reports First-Quarter 2014 Financial Results

 
 
Highlights:

l
EMC exceeds Q1 revenue outlook by more than $80 million

l
EMC meets Q1 GAAP EPS outlook and exceeds Q1 non-GAAP EPS outlook1 by $0.01
l
EMC increases quarterly dividend by 15%
l
EMC consolidated Q1 revenue growth of 2% year over year
l
Emerging Storage business Q1 revenue up 81% year over year
l
Pivotal Q1 revenue up 41% year over year
l
VMware Q1 revenue increases 16% year over year

HOPKINTON, Mass. - April 23, 2014 - EMC Corporation (NYSE:EMC) today reported first-quarter 2014 financial results. First-quarter revenue was $5.5 billion, an increase of 2% compared with the year-ago quarter. First-quarter GAAP net income attributable to EMC was $392 million and first-quarter GAAP earnings per weighted average diluted share was $0.19. First-quarter non-GAAP2 net income attributable to EMC was $728 million and first-quarter non-GAAP2 earnings per weighted average diluted share was $0.35.

During the first quarter, EMC exceeded its first-quarter revenue outlook by more than $80 million; met outlook for GAAP earnings per weighted average diluted share and exceeded outlook1 for non-GAAP earnings per weighted average diluted share by $0.01; generated $1.3 billion in operating cash flow and $946 million in free cash flow3; and ended the first quarter with $15.3 billion in cash and investments.

In addition, EMC’s Board of Directors approved a 15% increase in the quarterly cash dividend paid to EMC shareholders. The first increased dividend of $0.115 per share of common stock will be paid on July 23, 2014 to shareholders of record as of the close of business on July 1, 2014.

Joe Tucci, EMC Chairman and Chief Executive Officer, said, “In a time of shifting market dynamics, EMC continued to generate revenue growth through our EMC Federation strategy across EMC Information Infrastructure, VMware and Pivotal. Customers are embracing these foundational and transformative technologies as core to their ability not only to maximize their existing infrastructures for many years to come, but to redefine their businesses as they seek new ways to generate growth and customer value. EMC is extremely well equipped to help our customers flourish in this next wave of computing, or what many call the Third Platform of IT.”
 



David Goulden, CEO of EMC Information Infrastructure and EMC’s Chief Financial Officer, said, “EMC is at the threshold of expansive opportunity. While planned business practice changes had a negative impact on year-over-year revenue and EPS growth in the quarter, we are very confident we are on the right track with our Federation model and technologies. With our strong foothold in Second Platform environments and some of the most exciting IT assets in the industry helping us propel customers to the Third Platform of IT, EMC is well positioned to meet our stated 2014 targets.”

First-Quarter Highlights

For the first quarter, revenue from the EMC Information Infrastructure business declined 3%. Within this, EMC’s Information Storage business declined 3% and, excluding EMC’s High-end Storage business4, increased 6% year over year. EMC’s Emerging Storage business5 revenue growth accelerated to 81% year over year, propelled by a number of products including EMC XtremIO all-flash storage, EMC ViPR software-defined storage, EMC Atmos distributed object storage and EMC Isilon scale-out storage. EMC continued its industry leadership in enterprise flash storage, selling more than 17 petabytes of flash capacity in the first quarter of 2014 alone, an increase of more than 70% year over year. Growth of EMC VSPEX reference architectures continued at a rapid pace in the quarter, with year-over-year demand more than doubling. Within the Information Intelligence Group, EMC Syncplicity revenue grew well over 100% year over year. EMC’s Service Provider partner program completed its eighth consecutive quarter as the company’s fastest-growing vertical segment. Revenue from EMC’s RSA Information Security business increased 5% in the first quarter, with Security Analytics and Archer each growing over 25%.

VCE had another strong quarter as demand for Vblocks once again grew at well over 50% year over year in the first quarter, with over half of the Vblock unit sales in the quarter going to new customers.

In the first quarter, VMware (NYSE: VMW) continued to gain traction as revenues increased 16% year over year. VMware continues to help customers build out their software-defined data centers, improve the end-user computing experience, and add seamless connections to external clouds with vCHS. VMware’s hybrid cloud business, which includes the VSPP program and vCHS, more than doubled year over year in the first quarter. VMware also completed its acquisition of AirWatch in the quarter.

After its successful first full year of operations, Pivotal has laid a solid foundation for growth with revenue increasing 41% over the year-ago quarter. Pivotal is winning many flagship enterprise customers -- including a marquee customer in almost every major industry sector -- who want to build modern cloud-agnostic applications and reason over massive volumes of data. In the first quarter of 2014, Pivotal increased its focus on software and strategic services with the transfer of Data Computing Appliance and implementation services into EMC Information Infrastructure.

EMC’s consolidated first-quarter revenue from the United States remained flat year over year at $2.8 billion, representing 52% of consolidated first-quarter revenue.  Revenue from EMC’s business operations outside of the United States increased 3% year over year to $2.6 billion and represented 48% of consolidated first-quarter revenue. Within this, on a year-over-year basis, revenue from EMC’s Europe, Middle East and Africa region grew 8%.



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 2014 financial results.

All dollar amounts and percentages set forth below should be considered to be approximations.
 
Consolidated revenues are expected to be $24.575 billion for 2014.

Consolidated GAAP operating income is expected to range from 16.5% - 17.0% of revenues for 2014 and consolidated non-GAAP6 operating income is expected to range from 24.0% - 24.5% of revenues for 2014.

Consolidated GAAP earnings per weighted average diluted share are expected to be $1.29 for 2014 and consolidated non-GAAP6 earnings per weighted average diluted share are expected to be $1.90 for 2014.

The consolidated GAAP income tax rate is expected to be 23.0% and the consolidated non-GAAP6 income tax rate is expected to be 23.5% for 2014. This assumes that the U.S. research and development tax credit is extended during 2014.

Consolidated net cash provided by operating activities is expected to be $7.2 billion for 2014 and free cash flow3 is expected to be $5.8 billion for 2014.

The weighted average outstanding diluted shares are expected to be 2.06 billion for 2014.

EMC expects to repurchase an aggregate of $2.0 billion of the company’s common stock in 2014.

Supporting Resources

EMC will host its first-quarter 2014 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 first-quarter 2014 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 Based on Q1 outlook including the acquisition of AirWatch by VMware in the first quarter.

2Items excluded from the non-GAAP results for the first quarters of 2014 and 2013 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition-related charges and the amortization of VMware’s capitalized software from prior periods. A benefit of the U.S. research and development (“R&D”) tax credit for the first quarter of 2014 is included in the non-GAAP results for the first quarter of 2014 as if the credit had been extended. The benefit of the R&D tax credit for 2012 is excluded in the non-GAAP results for the first quarter 2013. See attached schedules for GAAP to non-GAAP reconciliations.

3 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 months ended March 31, 2014 and 2013 and for the full year 2014 business outlook.

4 EMC’s High-end Storage business includes product and maintenance revenues from EMC Symmetrix.

5 EMC’s Emerging Storage business primarily includes product and maintenance revenues from EMC Isilon, EMC Atmos, EMC VPLEX, EMC ViPR, EMC ScaleIO, EMC RecoverPoint, Data Computing Appliance, ASD Suites and EMC vFlash and EMC XtremIO families.

6 Items excluded from the non-GAAP business outlook for 2014 are amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges and acquisition related charges. The benefit of the R&D tax credit is included in the GAAP and non-GAAP business outlook for 2014. See attached schedules for GAAP to non-GAAP reconciliations.

EMC, Archer, Atmos, EMC RecoverPoint, Isilon, RSA, ScaleIO, Syncplicity, Symmetrix, Vblock, ViPR, VPLEX, VSPEX and XtremIO are either registered trademarks or trademarks of EMC Corporation 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," (a) certain items noted on each such specific schedule (including, where noted, amounts relating to stock-based compensation expense, intangible asset amortization, restructuring charges, acquisition-related charges, the amortization of VMware’s capitalized software from prior periods and the benefit of the R&D tax credit for 2012) are excluded from the non-GAAP financial measures and (b) a benefit of the R&D tax credit for the first quarter of 2014 is included in the non-GAAP financial measures for the first quarter of 2014.

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 includes the benefit of the R&D tax credit in, 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
 
 
March 31,
 
March 31,
 
 
2014
 
2013
Revenues:
 
 
 
 
Product sales
$
3,008

 
$
3,112

 
Services
2,471

 
2,275

 
 
5,479

 
5,387

Cost and expenses:
 
 
 
 
Cost of product sales
1,296

 
1,356

 
Cost of services
836

 
733

 
Research and development
731

 
676

 
Selling, general and administrative
1,852

 
1,713

 
Restructuring and acquisition-related charges
119

 
148

Operating income
645

 
761

 
 
 
 
Non-operating income (expense):
 
 
 
 
Investment income
36

 
33

 
Interest expense
(34
)
 
(21
)
 
Other income (expense), net
(76
)
 
(82
)
Total non-operating income (expense)
(74
)
 
(70
)
Income before provision for income taxes
571

 
691

Income tax provision
139

 
76

Net income
432

 
615

Less: Net income attributable to the non-controlling interests in VMware, Inc.
(40
)
 
(35
)
Net income attributable to EMC Corporation
$
392

 
$
580

 
 
 
 
Net income per weighted average share, basic attributable to EMC Corporation common shareholders
$
0.19

 
$
0.28

Net income per weighted average share, diluted attributable to EMC Corporation common shareholders
$
0.19

 
$
0.26

 
 
 
 
Weighted average shares, basic
2,029

 
2,102

Weighted average shares, diluted
2,076

 
2,189

 
 
 
 
 
Cash dividends declared per common share
$
0.10

 





EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
 
 
March 31,
 
December 31,
 
 
2014
 
2013
                                                   ASSETS
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
6,291

 
$
7,891

 
Short-term investments
1,964

 
2,773

 
Accounts and notes receivable, less allowance for doubtful accounts of $62 and $62
2,981

 
3,861

 
Inventories
1,421

 
1,334

 
Deferred income taxes
941

 
912

 
Other current assets
597

 
507

Total current assets
14,195

 
17,278

Long-term investments
7,006

 
6,924

Property, plant and equipment, net
3,568

 
3,478

Intangible assets, net
1,941

 
1,780

Goodwill
15,301

 
14,424

Other assets, net
2,036

 
1,965

 
Total assets
$
44,047

 
$
45,849

 
 
 
 
 
                LIABILITIES & SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
1,070

 
$
1,434

 
Accrued expenses
2,668

 
2,783

 
Notes converted and payable

 
1,665

 
Income taxes payable
71

 
639

 
Deferred revenue
5,556

 
5,278

Total current liabilities
9,365

 
11,799

Income taxes payable
285

 
296

Deferred revenue
4,116

 
3,701

Deferred income taxes
428

 
421

Long-term debt
5,494

 
5,494

Other liabilities
364

 
352

 
Total liabilities
20,052

 
22,063

 
 
 
 
 
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 2,047 and 2,020 shares
20

 
20

 
Additional paid-in capital
1,363

 
1,406

 
Retained earnings
21,297

 
21,114

 
Accumulated other comprehensive loss, net
(228
)
 
(239
)
 
Total EMC Corporation's shareholders' equity
22,452

 
22,301

Non-controlling interests
1,543

 
1,485

 
Total shareholders' equity
23,995

 
23,786

 
Total liabilities and shareholders' equity
$
44,047

 
$
45,849






EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
 
 
 
 
Three Months Ended
 
 
 
 
 
March 31,
 
March 31,
 
 
 
 
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Cash received from customers
$
6,965

 
$
6,616

 
Cash paid to suppliers and employees
(4,962
)
 
(4,405
)
 
Dividends and interest received
55

 
39

 
Interest paid

 
(1
)
 
Income taxes paid
(720
)
 
(536
)
 
 
 
Net cash provided by operating activities
1,338

 
1,713

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
(275
)
 
(165
)
 
Capitalized software development costs
(117
)
 
(106
)
 
Purchases of short- and long-term available-for-sale securities
(2,931
)
 
(1,819
)
 
Sales of short- and long-term available-for-sale securities
2,362

 
1,414

 
Maturities of short- and long-term available-for-sale securities
1,307

 
387

 
Business acquisitions, net of cash acquired
(1,068
)
 
(184
)
 
Purchases of strategic and other related investments
(22
)
 
(35
)
 
Joint venture funding

 
(95
)
 
Increase in restricted cash
(76
)
 

 
 
 
Net cash used in investing activities
(820
)
 
(603
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from the issuance of EMC's common stock
194

 
42

 
Proceeds from the issuance of VMware's common stock
88

 
68

 
EMC repurchase of EMC's common stock
(390
)
 
(323
)
 
EMC purchase of VMware's common stock

 
(125
)
 
VMware repurchase of VMware's common stock
(169
)
 
(182
)
 
Excess tax benefits from stock-based compensation
29

 
33

 
Payment of long- and short-term obligations
(1,665
)
 
(5
)
 
Dividend payment
(202
)
 

 
 
 
Net cash used in financing activities
(2,115
)
 
(492
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(3
)
 
(28
)
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(1,600
)
 
590

Cash and cash equivalents at beginning of period
7,891

 
4,714

Cash and cash equivalents at end of period
$
6,291

 
$
5,304

 
 
 
 
 
 
 
 
Reconciliation of net income to net cash provided by operating activities:
 
 
 
Net income
$
432

 
$
615

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
442

 
391

 
Non-cash interest expense on debt

 
12

 
Non-cash restructuring and other special charges
5

 
7

 
Stock-based compensation expense
239

 
236

 
Provision for (recovery of) doubtful accounts
4

 
(8
)
 
Deferred income taxes, net
(47
)
 
(62
)
 
Excess tax benefits from stock-based compensation
(29
)
 
(33
)
 
Other, net
17

 
6

 
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
Accounts and notes receivable
910

 
654




 
 
Inventories
(139
)
 
(46
)
 
 
Other assets
(13
)
 
53

 
 
Accounts payable
(369
)
 
(110
)
 
 
Accrued expenses
(236
)
 
(194
)
 
 
Income taxes payable
(535
)
 
(393
)
 
 
Deferred revenue
650

 
582

 
 
Other liabilities
7

 
3

 
 
 
Net cash provided by operating activities
$
1,338

 
$
1,713





Reconciliation of GAAP to Non-GAAP*
(in millions, except per share amounts)
(unaudited)

 
Three Months Ended
 
 
 
Diluted
 
 
 
Diluted
 
March 31,
 
Earnings
 
March 31,
 
Earnings
 
2014
 
Per Share
 
2013
 
Per Share
Net Income Attributable to EMC GAAP
$
392

 
$
0.188

 
$
580

 
$
0.264

Stock-based compensation expense
168

 
0.081

 
156

 
0.072

Intangible asset amortization
62

 
0.030

 
62

 
0.028

Restructuring charges
84

 
0.041

 
101

 
0.046

Acquisition-related charges
14

 
0.006

 
3

 
0.001

Amortization of VMware's capitalized software from prior periods

 

 
7

 
0.003

R&D tax credit
8

 
0.004

 
(59
)
 
(0.027
)
Net Income Attributable to EMC Non-GAAP
$
728

 
$
0.350

 
$
850

 
$
0.387

 
 
 
 
 
 
 
 
Weighted average shares, diluted
 
 
2,076

 
 
 
2,189

Incremental VMware dilution
 
 
$
2

 
 
 
$
1


*
Net of tax and non-controlling interests 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
(in millions)
(unaudited)

 
Three Months Ended
 
March 31,
 
March 31,
 
2014
 
2013
Gross Margin GAAP
$
3,347

 
$
3,298

Stock-based compensation expense
35

 
30

Intangible asset amortization
58

 
58

Amortization of VMware's capitalized software from prior periods

 
12

Gross Margin Non-GAAP
$
3,440

 
$
3,398

 
 
 
 
Revenues
$
5,479

 
$
5,387

 
 
 
 
Gross Margin Percentages:
 
 
 
GAAP
61.1
%
 
61.2
%
Non-GAAP
62.8
%
 
63.1
%


 
Three Months Ended
 
March 31,
 
March 31,
 
2014
 
2013
Operating Margin GAAP
$
645

 
$
761

Stock-based compensation expense
246

 
234

Intangible asset amortization
94

 
97

Restructuring charges
114

 
145

Acquisition-related charges
24

 
3

Amortization of VMware's capitalized software from prior periods

 
12

Operating Margin Non-GAAP
$
1,123

 
$
1,252


 
 
 
Revenues
$
5,479

 
$
5,387

 
 
 
 
Operating Margin Percentages:
 
 
 
GAAP
11.8
%
 
14.1
%
Non-GAAP
20.5
%
 
23.2
%

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







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

 
Three Months Ended March 31, 2014
 
Income Before
 
Tax Provision
 
Tax
 
Tax
 
(Benefit)
 
Rate
EMC Consolidated GAAP
$
571

 
$
139

 
24.3
%
Stock-based compensation expense
246

 
58

 
23.3
%
Intangible asset amortization
94

 
28

 
29.4
%
Restructuring charges
114

 
30

 
25.8
%
Acquisition-related charges
24

 
7

 
30.5
%
R&D tax credit

 
(9
)
 
%
EMC Consolidated Non-GAAP
$
1,049

 
$
253

 
24.0
%




 
 
Three Months Ended
 
 
March 31,
 
March 31,
 
 
2014
 
2013
Cash Flow from Operations
 
$
1,338

 
$
1,713

Capital expenditures
 
(275
)
 
(165
)
Capitalized software development costs
 
(117
)
 
(106
)
Free Cash Flow
 
$
946

 
$
1,442


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





Reconciliation of GAAP to Non-GAAP
(in millions, except per share amounts)
(unaudited)
 
Twelve Months Ending December 31,
 
2014
Operating Income as a % of Revenue - GAAP
16.5% - 17.0%
 
 
Stock-based compensation expense
4.5%
Intangible asset amortization
1.6%
Restructuring charges
0.8%
Acquisition-related charges
0.6%
 
 
Operating Income as a % of Revenue - Non-GAAP
24.0% - 24.5%

 
Twelve Months Ending December 31,
 
2014
Diluted Earnings Per Share - GAAP
$
1.29

 
 
Stock-based compensation expense
0.36

Intangible asset amortization
0.13

Restructuring charges
0.08

Acquisition-related charges
0.04

 
 
Diluted Earnings Per Share - Non-GAAP
$
1.90


 
Twelve Months Ending December 31,
 
2014
Tax Rate - GAAP
23.0
%
 
 
Impact of stock-based compensation expense, intangible asset amortization, restructuring charges and acquisition-related charges
0.5
%
 
 
Tax Rate - Non-GAAP
23.5
%

 
Twelve Months Ending December 31,
 
2014
Cash Flow from Operations
$
7,230

 
 
Capital expenditures
(950
)
Capitalized software development costs
(480
)
 
 
Free Cash Flow
$
5,800


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




Supplemental Information
For the Three Months Ended March 31, 2014
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition-Related Costs
 
R&D Tax Credit
EMC Consolidated
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(35
)
 
$
(58
)
 
$

 
$

 
$

Research and development
(92
)
 
(2
)
 

 

 

Selling, general and administrative
(119
)
 
(34
)
 

 
(19
)
 

Restructuring and acquisition-related charges

 

 
(114
)
 
(5
)
 

Income tax provision (benefit)
58

 
28

 
30

 
7

 
(9
)
Net income attributable to VMware
(20
)
 
(4
)
 

 
(3
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(25
)
 
$
(34
)
 
$

 
$

 
$

Research and development
(32
)
 
(1
)
 

 

 

Selling, general and administrative
(61
)
 
(31
)
 

 

 

Restructuring and acquisition-related charges

 

 
(114
)
 

 

Income tax provision (benefit)
30

 
21

 
30

 

 
(5
)
Net income attributable to VMware

 

 

 

 

 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(10
)
 
$
(24
)
 
$

 
$

 
$

Research and development
(60
)
 
(1
)
 

 

 

Selling, general and administrative
(58
)
 
(3
)
 

 
(19
)
 

Restructuring and acquisition-related charges

 

 

 
(5
)
 

Income tax provision (benefit)
28

 
7

 

 
7

 
(4
)
Net income attributable to VMware
(20
)
 
(4
)
 

 
(3
)
 
(1
)



Supplemental Information
For the Three Months Ended March 31, 2013
(in millions)
(unaudited)
 
Stock-Based Compensation Expense
 
Intangible Asset Amortization
 
Restructuring Charges
 
Acquisition-Related Charges
 
Amortization of VMware's Capitalized Software from Prior Periods
 
R&D Tax Credit
EMC Consolidated
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(30
)
 
$
(58
)
 
$

 
$

 
$
(12
)
 
$

Research and development
(91
)
 
(2
)
 

 

 

 

Selling, general and administrative
(113
)
 
(37
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(145
)
 
(3
)
 

 

Income tax provision (benefit)
59

 
31

 
35

 

 
4

 
65

Net income attributable to VMware
(19
)
 
(4
)
 
(9
)
 

 
(1
)
 
6

 
 
 
 
 
 
 
 
 
 
 
 
EMC Information Infrastructure plus Pivotal
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(20
)
 
$
(35
)
 
$

 
$

 
$

 
$

Research and development
(33
)
 
(1
)
 

 

 

 

Selling, general and administrative
(65
)
 
(35
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(85
)
 
(2
)
 

 

Income tax provision (benefit)
29

 
24

 
17

 

 

 
33

Net income attributable to VMware

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
VMware within EMC
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues
$
(10
)
 
$
(23
)
 
$

 
$

 
$
(12
)
 
$

Research and development
(58
)
 
(1
)
 

 

 

 

Selling, general and administrative
(48
)
 
(2
)
 

 

 

 

Restructuring and acquisition-related charges

 

 
(60
)
 
(1
)
 

 

Income tax provision (benefit)
30

 
7

 
18

 

 
4

 
32

Net income attributable to VMware
(19
)
 
(4
)
 
(9
)
 

 
(1
)
 
6





Supplemental Information
For the Three Months Ended March 31, 2014
(in millions)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenues
$
1,360

 
$
(8
)
 
$
1,352

Cost of Revenues
201

 
1

 
202

Gross margin
1,159

 
(9
)
 
1,150

Research and development
293

 
(3
)
 
290

Selling, general and administrative
625

 
(8
)
 
617

Restructuring and acquisition-related charges

 
5

 
5

Operating income
241

 
(3
)
 
238

Non-operating income (expense)
4

 
2

 
6

Income before taxes
245

 
(1
)
 
244

Income tax provision (benefit)
46

 
(1
)
 
45

Net income
$
199

 

 
199

Net income attributable to VMware
 
 
(40
)
 
(40
)
Net income attributable to EMC
 
 
$
(40
)
 
$
159





Supplemental Information
For the Three Months Ended March 31, 2013
(in millions)
(unaudited)
 
VMware
Standalone
GAAP
 
GAAP Adjustments and Eliminations
 
VMware within EMC
GAAP
Revenues
$
1,191

 
$
(25
)
 
$
1,166

Cost of revenues
182

 
(13
)
 
169

Gross margin
1,009

 
(12
)
 
997

Research and development
271

 
(21
)
 
250

Selling, general and administrative
515

 
(16
)
 
499

Restructuring and acquisition-related charges
63

 
(2
)
 
61

Operating income
160

 
27

 
187

Non-operating income (expense)
4

 

 
4

Income before taxes
164

 
27

 
191

Income tax provision (benefit)
(9
)
 
2

 
(7
)
Net income
$
173

 
25

 
198

Net income attributable to VMware
 
 
(35
)
 
(35
)
Net income attributable to EMC
 
 
$
(10
)
 
$
163


Note: Schedule may not add due to rounding.




Segment Information
For the Three Months Ended March 31, 2014
(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 sales
$
2,302

 
$
35

 
$
104

 
$
2,441

 
$
11

 
$
2,452

Services
1,378

 
119

 
140

 
1,637

 
38

 
1,675

Total consolidated revenues
3,680

 
154

 
244

 
4,078

 
49

 
4,127

Gross profit
$
1,976

 
$
99

 
$
162

 
2,237

 
19

 
2,256

Gross profit percentage
53.7
%
 
64.7
%
 
66.2
%
 
54.9
%
 
38.1
 %
 
54.7
%
Research and development
 
 
 
 
 
 
377

 
31

 
408

Selling, general and administrative
 
 
 
 
 
 
1,102

 
41

 
1,143

Restructuring and acquisition-related charges
 
 
 
 
 
 

 

 

Total costs and expenses
 
 
 
 
 
 
1,479

 
72

 
1,551

Operating income (expense)
 
 
 
 
 
 
$
758

 
$
(53
)
 
$
705

Operating margin percentage
 
 
 
 
 
 
18.6
%
 
(108.5
)%
 
17.1
%

 
EMC
Information
Infrastructure plus Pivotal
 
VMware
Virtual
Infrastructure
within EMC
 
Corp
Reconciling
Items
 
Consolidated
Revenues:
 
 
 
 
 
 
 
Product sales
$
2,452

 
$
556

 
$

 
$
3,008

Services
1,675

 
796

 

 
2,471

Total consolidated revenues
4,127

 
1,352

 

 
5,479

Gross profit
$
2,256

 
$
1,184

 
$
(93
)
 
$
3,347

Gross profit percentage
54.7
%
 
87.6
%
 

 
61.1
%
Research and development
408

 
229

 
94

 
731

Selling, general and administrative
1,143

 
537

 
172

 
1,852

Restructuring and acquisition-related charges

 

 
119

 
119

Total costs and expenses
1,551

 
766

 
385

 
2,702

Operating income (expense)
705

 
418

 
(478
)
 
645

Operating margin percentage
17.1
%
 
31.0
%
 

 
11.8
%
Non-operating income (expense)
(80
)
 
6

 

 
(74
)
Income tax provision
170

 
83

 
(114
)
 
139

Net income
455

 
341

 
(364
)
 
432

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

 
(68
)
 
28

 
(40
)
Net income attributable to EMC Corporation
$
455

 
$
273

 
$
(336
)
 
$
392


Note: During the first quarter of 2014, EMC acquired Pivotal's Data Computing Appliance and implementation services. The results of the acquired businesses have been adjusted in this presentation to be included in the Information Storage segment and excluded from the Pivotal segment as if the transaction had occurred retroactively.   None of the segment reclassifications impact EMC’s previously reported consolidated financial statements.  This schedule may not recalculate due to rounding.




Segment Information
For the Three Months Ended March 31, 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 sales
$
2,472

 
$
43

 
$
100

 
$
2,615

 
$
13

 
$
2,628

Services
1,326

 
112

 
133

 
1,571

 
22

 
1,593

Total consolidated revenues
3,798

 
155

 
233

 
4,186

 
35

 
4,221

Gross profit
$
2,088

 
$
99

 
$
152

 
2,339

 
17

 
2,356

Gross profit percentage
55.0
%
 
63.6
%
 
65.4
%
 
55.9
%
 
48.3
 %
 
55.8
%
Research and development
 
 
 
 
 
 
366

 
26

 
392

Selling, general and administrative
 
 
 
 
 
 
1,076

 
37

 
1,113

Restructuring and acquisition-related charges
 
 
 
 
 
 

 

 

Total costs and expenses
 
 
 
 
 
 
1,442

 
63

 
1,505

Operating income (expense)
 
 
 
 
 
 
$
897

 
$
(46
)
 
$
851

Operating margin percentage
 
 
 
 
 
 
21.4
%
 
(133.4
)%
 
20.2
%

 
EMC
Information
Infrastructure plus Pivotal
 
VMware
Virtual
Infrastructure
within EMC
 
Corp
Reconciling
Items
 
Consolidated
Revenues:
 
 
 
 
 
 
 
Product sales
$
2,628

 
$
484

 
$

 
$
3,112

Services
1,593

 
682

 

 
2,275

Total consolidated revenues
4,221

 
1,166

 

 
5,387

Gross profit
$
2,356

 
$
1,042

 
$
(100
)
 
$
3,298

Gross profit percentage
55.8
%
 
89.3
%
 

 
61.2
%
Research and development
392

 
191

 
93

 
676

Selling, general and administrative
1,113

 
450

 
150

 
1,713

Restructuring and acquisition-related charges

 

 
148

 
148

Total costs and expenses
1,505

 
641

 
391

 
2,537

Operating income (expense)
851

 
401

 
(491
)
 
761

Operating margin percentage
20.2
%
 
34.4
%
 

 
14.1
%
Non-operating income (expense)
(74
)
 
4

 

 
(70
)
Income tax provision
187

 
83

 
(194
)
 
76

Net income
590

 
322

 
(297
)
 
615

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

 
(62
)
 
27

 
(35
)
Net income attributable to EMC Corporation
$
590

 
$
260

 
$
(270
)
 
$
580


Note: During the first quarter of 2014, EMC acquired Pivotal's Data Computing Appliance and implementation services. The results of the acquired businesses have been adjusted in this presentation to be included in the Information Storage segment and excluded from the Pivotal segment as if the transaction had occurred retroactively.   None of the segment reclassifications impact EMC’s previously reported consolidated financial statements.  This schedule may not recalculate due to rounding.





Segment Information
For the Three Months Ended June 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 sales
$
2,577

 
$
39

 
$
98

 
$
2,714

 
$
15

 
$
2,729

Services
1,377

 
113

 
130

 
1,620

 
27

 
1,647

Total consolidated revenues
3,954

 
152

 
228

 
4,334

 
42

 
4,376

Gross profit
$
2,236

 
$
96

 
$
148

 
2,480

 
20

 
2,500

Gross profit percentage
56.5
%
 
63.1
%
 
65.1
%
 
57.2
%
 
48.0
 %
 
57.1
%
Research and development
 
 
 
 
 
 
377

 
26

 
403

Selling, general and administrative
 
 
 
 
 
 
1,118

 
36

 
1,154

Restructuring and acquisition-related charges
 
 
 
 
 
 

 

 

Total costs and expenses
 
 
 
 
 
 
1,495

 
62

 
1,557

Operating income (expense)
 
 
 
 
 
 
$
985

 
$
(42
)
 
$
943

Operating margin percentage
 
 
 
 
 
 
22.7
%
 
(99.6
)%
 
21.6
%

 
EMC
Information
Infrastructure plus Pivotal
 
VMware
Virtual
Infrastructure
within EMC
 
Corp
Reconciling
Items
 
Consolidated
Revenues:
 
 
 
 
 
 
 
Product sales
$
2,729

 
$
529

 
$

 
$
3,258

Services
1,647

 
709

 

 
2,356

Total consolidated revenues
4,376

 
1,238

 

 
5,614

Gross profit
$
2,500

 
$
1,109

 
$
(100
)
 
$
3,509

Gross profit percentage
57.1
%
 
89.6
%
 

 
62.5
%
Research and development
403

 
207

 
85

 
695

Selling, general and administrative
1,154

 
489

 
142

 
1,785

Restructuring and acquisition-related charges

 

 
7

 
7

Total costs and expenses
1,557

 
696

 
234

 
2,487

Operating income (expense)
943

 
413

 
(334
)
 
1,022

Operating margin percentage
21.6
%
 
33.4
%
 

 
18.2
%
Non-operating income (expense)
(77
)
 
3

 
18

 
(56
)
Income tax provision
214

 
93

 
(91
)
 
216

Net income
652

 
323

 
(225
)
 
750

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

 
(68
)
 
19

 
(49
)
Net income attributable to EMC Corporation
$
652

 
$
255

 
$
(206
)
 
$
701


Note: During the first quarter of 2014, EMC acquired Pivotal's Data Computing Appliance and implementation services. The results of the acquired businesses have been adjusted in this presentation to be included in the Information Storage segment and excluded from the Pivotal segment as if the transaction had occurred retroactively.   None of the segment reclassifications impact EMC’s previously reported consolidated financial statements.  This schedule may not recalculate 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 sales
$
2,430

 
$
32

 
$
120

 
$
2,582

 
$
20

 
$
2,602

Services
1,376

 
117

 
132

 
1,625

 
27

 
1,652

Total consolidated revenues
3,806

 
149

 
252

 
4,207

 
47

 
4,254

Gross profit
$
2,106

 
$
94

 
$
170

 
2,370

 
29

 
2,399

Gross profit percentage
55.3
%
 
63.3
%
 
67.6
%
 
56.3
%
 
61.0
 %
 
56.4
%
Research and development
 
 
 
 
 
 
356

 
30

 
386

Selling, general and administrative
 
 
 
 
 
 
1,115

 
42

 
1,157

Restructuring and acquisition-related charges
 
 
 
 
 
 

 

 

Total costs and expenses
 
 
 
 
 
 
1,471

 
72

 
1,543

Operating income (expense)
 
 
 
 
 
 
$
899

 
$
(43
)
 
$
856

Operating margin percentage
 
 
 
 
 
 
21.4
%
 
(92.9
)%
 
20.1
%

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

 
$
563

 
$

 
$
3,165

Services
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 (expense)
856

 
440

 
(389
)
 
907

Operating margin percentage
20.1