Edgar Filing: EMC CORP

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 1-9853

EMC CORPORATION

(Exact name of registrant as specified in its charter)


Massachusetts		04-2680009
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

176 South Street Hopkinton, Massachusetts		01748
(Address of principal executive offices)		(Zip Code)

(508) 435-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of September 30, 2007 was 2,098,224,897.

EMC CORPORATION


		Page No.
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Balance Sheets at September 30, 2007 and December 31, 2006		3

Consolidated Income Statements for the Three and Nine Months Ended September 30, 2007 and 2006		4

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006		5

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2007 and 2006		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3. Quantitative and Qualitative Disclosures About Market Risk		33

Item 4. Controls and Procedures		33

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		34

Item 1A. Risk Factors		34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		41

Item 3. Defaults Upon Senior Securities		41

Item 4. Submission of Matters to a Vote of Security Holders		41

Item 5. Other Information		41

Item 6. Exhibits		41

SIGNATURES		42

EXHIBIT INDEX		43

FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Federal securities laws, about our business and prospects. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “plans,” “intends,” “expects,” “goals” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Our future results may differ materially from our past results and from those projected in the forward-looking statements due to various uncertainties and risks, including those described in Item 1A of Part II (Risk Factors). The forward-looking statements speak only as of the date of this Quarterly Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Quarterly Report.

PART I

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

EMC CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	September 30, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	4,546,010		$	1,828,106
Short-term investments		1,281,930			1,521,925
Accounts and notes receivable, less allowance for doubtful accounts of $30,819 and $39,509		1,920,172			1,692,214
Inventories		886,729			834,800
Deferred income taxes		447,224			418,146
Other current assets		298,571			225,396

Total current assets		9,380,636			6,520,587
Long-term investments		1,699,368			2,246,290
Property, plant and equipment, net		2,106,207			2,035,559
Deferred income taxes		—			104,446
Intangible assets, net		942,510			1,003,549
Other assets, net		684,261			638,655
Goodwill		6,408,993			6,017,161

Total assets	$	21,221,975		$	18,566,247

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	805,592		$	680,263
Accrued expenses		1,547,502			1,592,022
Income taxes payable		114,154			63,806
Deferred revenue		1,618,435			1,325,671

Total current liabilities		4,085,683			3,661,762
Income taxes payable		239,675			219,342
Deferred revenue		904,513			780,124
Deferred income taxes		351,910			—
Long-term convertible debt		3,450,000			3,450,000
Other liabilities		128,135			129,312

Total liabilities		9,159,916			8,240,540
Minority interest in VMware		173,347			—
Commitments and contingencies
Stockholders’ equity:
Series 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 2,098,225 and 2,122,339 shares		20,982			21,223
Additional paid-in capital		2,957,177			2,560,935
Retained earnings		8,944,555			7,798,112
Accumulated other comprehensive loss, net		(34,002	)		(54,563	)

Total stockholders’ equity		11,888,712			10,325,707

Total liabilities and stockholders’ equity	$	21,221,975		$	18,566,247

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share amounts)

(unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			September 30, 2006			September 30, 2007			September 30, 2006
Revenues:
Product sales	$	2,332,884		$	2,035,652		$	6,667,665		$	5,717,780
Services		966,870			779,654			2,731,766			2,222,736

		3,299,754			2,815,306			9,399,431			7,940,516
Costs and expenses:
Cost of product sales		1,056,714			992,272			3,131,434			2,794,910
Cost of services		421,396			339,295			1,175,600			970,532
Research and development		383,600			312,302			1,123,958			895,220
Selling, general and administrative		983,774			809,086			2,783,813			2,339,326
In-process research and development		800			23,000			800			35,410
Restructuring credits		(571	)		(2,779	)		(3,241	)		(4,359	)

Operating income		454,041			342,130			1,187,067			909,477
Net gain on investments, including gain on sale of VMware stock		137,330			—			137,330			—
Investment income		67,192			51,160			170,181			174,676
Interest expense		(17,937	)		(5,807	)		(54,366	)		(8,438	)
Other (expense) income, net		(6,857	)		(947	)		951			2,248

Income before taxes, minority interest in VMware and cumulative effect of a change in accounting principle		633,769			386,536			1,441,163			1,077,963
Income tax provision		136,390			102,872			296,770			239,378

Income before minority interest in VMware and cumulative effect of a change in accounting principle		497,379			283,664			1,144,393			838,585
Minority interest in VMware, net of taxes		(4,459	)		—			(4,459	)		—

Income before cumulative effect of a change in accounting principle		492,920			283,664			1,139,934			838,585
Cumulative effect of a change in accounting principle, net of taxes of $107		—			—			—			247

Net income	$	492,920		$	283,664		$	1,139,934		$	838,832

Net income per weighted average share, basic:
Income before cumulative effect of a change in accounting principle	$	0.24		$	0.13		$	0.55		$	0.37
Cumulative effect of a change in accounting principle		—			—			—			—

Net income	$	0.24		$	0.13		$	0.55		$	0.37

Net income per weighted average share, diluted:
Income before cumulative effect of a change in accounting principle	$	0.23		$	0.13		$	0.53		$	0.36
Cumulative effect of a change in accounting principle		—			—			—			—

Net income	$	0.23		$	0.13		$	0.53		$	0.36

Weighted average shares, basic		2,080,507			2,215,039			2,077,289			2,290,157

Weighted average shares, diluted		2,177,259			2,240,291			2,140,555			2,327,365

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	For the Nine Months Ended
	September 30, 2007			September 30, 2006
Cash flows from operating activities:
Cash received from customers	$	9,620,908		$	8,074,003
Cash paid to suppliers and employees		(7,455,043	)		(6,311,034	)
Dividends and interest received		182,840			198,721
Interest paid		(41,706	)		(3,115	)
Income taxes paid		(159,106	)		(471,078	)

Net cash provided by operating activities		2,147,893			1,487,497

Cash flows from investing activities:
Additions to property, plant and equipment		(501,462	)		(506,054	)
Capitalized software development costs		(163,350	)		(152,614	)
Purchases of short and long-term available for sale securities		(5,053,999	)		(5,011,854	)
Sales and maturities of short and long-term available for sale securities		5,871,715			6,016,126
Proceeds from the sale of EMC’s interest in VMware to Cisco		150,000			—
Business acquisitions, net of cash acquired		(508,574	)		(2,464,187	)
Other		(10,860	)		(20,860	)

Net cash used in investing activities		(216,530	)		(2,139,443	)

Cash flows from financing activities:
Issuance of common stock from the exercise of stock options		553,319			144,602
Proceeds from the sale of VMware’s common stock		1,253,533			—
Issuance of VMware’s common stock from the exercise of stock options		2,760			—
Repurchase of EMC common stock		(1,102,602	)		(2,464,888	)
Excess tax benefits from stock-based compensation		55,250			12,036
Payment of short and long-term obligations		(4,369	)		(127,538	)
Proceeds from short and long-term obligations		19,550			2,200,085

Net cash provided by (used in) financing activities		777,441			(235,703	)

Effect of exchange rate changes on cash and cash equivalents		9,100			23,599

Net increase (decrease) in cash and cash equivalents		2,717,904			(864,050	)
Cash and cash equivalents at beginning of period		1,828,106			2,322,370

Cash and cash equivalents at end of period	$	4,546,010		$	1,458,320

Reconciliation of net income to net cash provided by operating activities:
Net income	$	1,139,934		$	838,832
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of a change in accounting principle		—			(247	)
Minority interest in VMware		4,459			—
Net gain on investments, including gain on sale of VMware’s stock		(137,330	)		—
Depreciation and amortization		669,168			555,965
In-process research and development		800			35,410
Stock-based compensation expense		271,189			299,510
Increase in provision for doubtful accounts		2,605			9,512
Deferred income taxes, net		(31,495	)		(80,647	)
Excess tax benefits from stock-based compensation		(55,250	)		(12,036	)
Other		5,262			23,934
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable		(188,486	)		2,013
Inventories		(2,702	)		(131,284	)
Other assets		(125,538	)		(53,473	)
Accounts payable		109,594			141,775
Accrued expenses		(87,235	)		(115,146	)
Income taxes payable		169,065			(151,320	)
Deferred revenue		407,357			121,962
Other liabilities		(3,504	)		2,737

Net cash provided by operating activities	$	2,147,893		$	1,487,497

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			September 30, 2006			September 30, 2007			September 30, 2006
Net income	$	492,920		$	283,664		$	1,139,934		$	838,832
Other comprehensive income, net of (benefit) taxes:
Foreign currency translation adjustments, net of taxes of $0, $0, $0 and $0		11,386			588			7,480			13,927
Changes in market value of investments, including unrealized gains and losses and reclassification adjustment to net income, net of taxes (benefits) of $3,300, $4,882, $(70) and $2,474		16,208			45,420			13,540			20,833
Changes in market value of derivatives, net of tax benefits of $0, $(8), $(7), and $(71)		(348	)		(72	)		(459	)		(640	)

Other comprehensive income		27,246			45,936			20,561			34,120

Comprehensive income	$	520,166		$	329,600		$	1,160,495		$	872,952

The accompanying notes are an integral part of the consolidated financial statements.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Company

EMC Corporation (“EMC”) and its subsidiaries develop, deliver and support the Information Technology (“IT”) industry’s broadest range of information infrastructure technologies and solutions that are designed to help individuals and organizations handle everything they need to do with their digital information.

EMC’s systems, software and services support our customers’ critical business processes by helping them build information infrastructures from the most comprehensive systems available to store, manage and protect information at the right service levels and the right costs. We refer to this as an information lifecycle management strategy. Our information management software and solutions empower our customers to capture, manage and leverage structured and unstructured information – documents, images or emails – to support their business processes. Our virtual infrastructure software helps organizations respond to changing IT requirements by dynamically altering their computing and storage environments with flexible virtualization technologies. Our resource management software allows organizations to better understand, manage and automate the operation of their information infrastructure. Our information security division offers customers security solutions to assess the risk to their information, secure the people accessing information and the infrastructure, protect the confidentiality and integrity of the information itself, and manage security information and events to assure effectiveness and ease the burdens of compliance.

General

The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These consolidated financial statements include the accounts of EMC, its wholly owned subsidiaries and VMware, Inc. (“VMware”), a company majority-owned by EMC. All intercompany transactions have been eliminated.

As described in Footnote 2, in August 2007, EMC and VMware completed transactions involving the sale of VMware common stock which reduced EMC’s interest in VMware from 100% to approximately 85%. VMware’s financial results have been consolidated with that of EMC for all periods presented, as EMC is VMware’s controlling stockholder. The portion of the results of operations of VMware allocable to its other owners is shown as Minority interest in VMware, net of taxes on EMC’s consolidated income statements. Additionally, the cumulative portion of the results of operations of VMware allocable to its other owners, along with changes in its stockholders’ equity, attributable to those other owners is shown as Minority interest in VMware on EMC’s consolidated balance sheets.

Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2007.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. The interim consolidated financial statements, in the opinion of management, reflect all adjustments necessary to fairly state the results as of and for the three and nine month periods ended September 30, 2007 and 2006.

We have revised our presentation from filings made prior to the quarter ended June 30, 2007 of the cumulative effect of adopting the provisions of Statement of Financial Accounting Standard (“FAS”) No. 123R, “Share-Based Payment” (“FAS No. 123R”) to now present the impact of recording the pro forma balance sheet amounts related to capitalized software, inventory and accrued warranty costs as a credit to additional paid-in capital as opposed to a cumulative effect of accounting change that impacted net income, as previously presented. The effect of this change was immaterial to the consolidated financial statements and increased net income for the full year 2006 and the nine months ended September 30, 2006 by $3.6 million and decreased additional paid-in capital at January 1, 2006 by the same amount. This change had no impact on the previously reported income before cumulative effect of a change in accounting principle or on cash flows from operating, financing or investing activities. In connection with the adoption of FAS No. 123R, we recorded a cumulative effect adjustment in the first quarter of 2006 of $0.2 million related to the application of an estimated forfeiture rate on our previously recognized expense on unvested restricted stock and restricted stock units.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Sale of Stock by a Subsidiary

EMC accounts for the sale of stock by a subsidiary in accordance with the Securities and Exchange Commissions’ Staff Accounting Bulletin No. 51 “Accounting for Sales of Stock by a Subsidiary” (“SAB 51”). SAB 51 requires that the difference between the carrying amount of the parent’s investment in a subsidiary and the underlying net book value of the subsidiary after the issuance of stock by the subsidiary be reflected as either a gain or loss in the income statement or as an equity transaction increasing or decreasing additional paid-in capital. EMC has elected to record gains or losses resulting from the sale of a subsidiary’s stock as equity transactions.

Earnings Per Share

Basic income per common share and diluted income per common share are presented in conformity with the Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“FAS 128”). In accordance with FAS 128, basic income per common share has been computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of stock options, unvested restricted stock, the $125.0 million 4.5% Senior Convertible notes due April 1, 2007 that we assumed in connection with the acquisition of Documentum (“the Documentum Notes”), our $1.725 billion 1.75% convertible senior notes due 2011 (the “2011 Notes”), our $1.725 billion 1.75% convertible senior notes due 2013 (the “2013 Notes” and, together with the 2011 Notes, the “Notes”), and associated warrants (the “Sold Warrants”). Additionally, for purposes of calculating diluted net income per common share, net income is adjusted for the difference between VMware’s reported diluted and basic earnings per share, if any, multiplied by the number of shares of VMware held by EMC.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FAS No. 157, “Fair Value Measurements” (“FAS 157”), which addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and should be applied prospectively, except in the case of a limited number of financial instruments that require retrospective application. We do not expect the standard to have a material impact on our financial position or results of operations.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115” (“FAS 159”), which will become effective in 2008. FAS 159 permits entities to measure eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other generally accepted accounting principles. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. We do not expect the standard to have a material impact on our financial position or results of operations.

2. VMware, Inc. Transactions

In the third quarter of 2007, VMware completed an initial public offering (“IPO”) of its Class A common stock. Prior to the IPO, EMC amended VMware’s certificate of incorporation to authorize shares of Class A and Class B common stock. After a conversion of existing common stock into Class A and Class B common stock, EMC held 32.5 million shares of Class A common stock and 300.0 million shares of Class B common stock. The ownership rights of Class A and Class B common stock are the same, except with respect to voting, conversion, certain actions that require the consent of holders of Class B common stock and other protective provisions. Each share of Class B common stock has ten votes, while each share of Class A common stock has one vote for all matters to be voted on by stockholders. In the IPO in August 2007, VMware sold 37.95 million shares of its Class A common stock at $29.00 per share, resulting in net proceeds of approximately $1,035.2 million. The SAB 51 gain of $881.9 million from this transaction was recorded as an increase to additional paid-in capital.

In connection with the IPO, EMC and VMware conducted a voluntary exchange offer enabling VMware employees in the United States the ability to exchange their existing EMC options and restricted stock awards for options to purchase VMware

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Class A common stock and restricted stock awards of VMware Class A common stock, respectively, at an exchange ratio based upon EMC’s two-day weighted average trading price prior to the consummation of the offering and the IPO offering price of Class A common stock. The exchange ratio was designed to preserve the intrinsic value of the tendered EMC awards. Eligible employees tendered approximately 4.7 million EMC restricted stock awards and approximately 11.0 million EMC stock options in the exchange offer. Based on an initial public offering price of $29.00 per share and an EMC two-day weighted average trading price of $17.74, approximately 2.9 million shares of VMware Class A common stock in the form of restricted stock awards and approximately 6.7 million shares of Class A common stock underlying options were granted in exchange for the tendered EMC awards. The incremental charge associated with the exchange offer did not have a material impact on our financial position or results of operations.

In August 2007, Intel Corporation, through its affiliate, Intel Capital, purchased from VMware 9.5 million newly issued shares of VMware’s Class A common stock at $23.00 per share, resulting in net proceeds to VMware of approximately $218.3 million. The SAB 51 gain of $216.1 million from this transaction was recorded as an increase to additional paid-in capital.

In August 2007, Cisco Systems purchased 6.0 million shares of VMware’s Class A common stock held by EMC at $25.00 per share, resulting in net proceeds to EMC of approximately $150.0 million. This transaction resulted in a pre-tax gain of $148.6 million which is reflected in the income statement within net gain on investments, including gain on sale of VMware stock.

As of September 30, 2007, the minority stockholders’ proportionate share of equity in VMware of $173.3 million is reflected as Minority interest in VMware in the accompanying balance sheet. At September 30, 2007, EMC held approximately 98% of the combined voting power of VMware’s outstanding common stock and approximately 85% of the economic interest in VMware.

3. Acquisitions

During the first nine months of 2007, we acquired nine companies for an aggregate purchase price, net of cash acquired, of $508.6 million. Based on our preliminary purchase price allocation, acquired intangibles totaling $76.6 million have been recorded with estimated useful lives of between four and eleven years. The total goodwill recorded from the acquisitions was $398.1 million. The results of the acquired companies have been included in our consolidated results of operations from their respective closing dates.

The following pro forma information gives effect to all the acquisitions that were completed by EMC in the three and nine months ended September 30, 2007 as if the acquisitions occurred at the beginning of the periods indicated. The pro forma results are not necessarily indicative of what actually would have occurred had the acquisitions been in effect for the periods presented (table in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Revenue	$	3,363,827	$	2,883,833	$	9,674,806	$	8,156,023
Net income		490,518		281,118		1,129,733		823,787
Net income per weighted average share, basic	$	0.24	$	0.13	$	0.54	$	0.36
Net income per weighted average share, diluted	$	0.23	$	0.13	$	0.53	$	0.35

4. Investments

Our investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. Investments with remaining maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining maturities of more than 12 months from the balance sheet date are classified as long-term investments. As of September 30, 2007, we had total short and long-term investments of approximately $2.98 billion.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Investments with unrealized losses at September 30, 2007 by investment category and length of time the investment has been in an unrealized loss position are as follows (table in thousands):


	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	21,507	$	(74	)	$	29,319	$	(137	)	$	50,826	$	(211	)
U.S. corporate debt securities		45,467		(242	)		74,000		(407	)		119,467		(649	)
Asset and mortgage-backed securities		56,845		(259	)		27,344		(471	)		84,189		(730	)
Municipal obligations		167,573		(804	)		168,210		(2,344	)		335,783		(3,148	)
Foreign debt securities		22,031		(47	)		10,877		(54	)		32,908		(101	)

Total	$	313,423	$	(1,426	)	$	309,750	$	(3,413	)	$	623,173	$	(4,839	)

We evaluate investments with unrealized losses to determine if the losses are other than temporary. The gross unrealized losses were primarily due to changes in interest rates. We have determined that the gross unrealized losses at September 30, 2007 are temporary. In making this determination, we considered the financial condition and near-term prospects of the issuers, the magnitude of the losses compared to the investments’ cost, the length of time the investments have been in an unrealized loss position and our ability to hold the investment to maturity.

5. Inventories

Inventories consist of (table in thousands):


	September 30, 2007		December 31, 2006
Purchased parts	$	75,392	$	75,206
Work-in-process		463,455		451,045
Finished goods		347,882		308,549

	$	886,729	$	834,800

6. Property, Plant and Equipment

Property, plant and equipment consist of (table in thousands):


	September 30, 2007			December 31, 2006
Furniture and fixtures	$	214,007		$	190,925
Equipment		3,080,717			2,799,367
Buildings and improvements		1,174,077			1,039,409
Land		125,423			116,222
Building construction in progress		83,224			141,196

		4,677,448			4,287,119
Accumulated depreciation and amortization		(2,571,241	)		(2,251,560	)

	$	2,106,207		$	2,035,559

Building construction in progress at September 30, 2007 includes $25.7 million for a facility not yet placed in service that we are holding for future use.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. Accrued Expenses

Accrued expenses consist of (table in thousands):


	September 30, 2007		December 31, 2006
Salaries and benefits	$	562,457	$	595,691
Product warranties		254,306		242,744
Restructuring (See Note 10)		110,166		199,538
Other		620,573		554,049

	$	1,547,502	$	1,592,022

Product Warranties

Systems sales include a standard product warranty. At the time of the sale, we accrue for the systems’ warranty costs. The initial systems’ warranty accrual is based upon our historical experience, expected future costs and specific identification of the systems’ requirements. Upon expiration of the initial warranty, we may sell additional maintenance contracts to our customers. Revenue from these additional maintenance contracts is deferred and recognized ratably over the service period. The following represents the activity in our warranty accrual for our standard product warranty (table in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			September 30, 2006			September 30, 2007			September 30, 2006
Balance, beginning of the period	$	250,754		$	235,544		$	242,744		$	206,608
Current period provision		36,105			31,887			107,284			119,530
Amounts charged to the accrual		(32,553	)		(31,692	)		(95,722	)		(90,399	)

Balance, end of the period	$	254,306		$	235,739		$	254,306		$	235,739

The provision includes amounts accrued for systems at the time of shipment, adjustments for changes in estimated costs for warranties on systems shipped in the period and changes in estimated costs for warranties on systems shipped in prior periods. It is not practicable to determine the amounts applicable to each of the components. The provision for the nine months ended September 30, 2006 includes $22.0 million associated with stock-based compensation expense associated with the cumulative effect of adoption of FAS No. 123R.

8. Net Income Per Share

The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in thousands, except per share amounts):


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
Numerator:
Net income, as reported, basic	$	492,920	$	283,664	$	1,139,934	$	838,832
Adjustment for interest expense on assumed conversion of Documentum Notes		—		—		—		643

Net income, diluted	$	492,920	$	283,664	$	1,139,934	$	839,475

Denominator:
Basic weighted average common shares outstanding		2,080,507		2,215,039		2,077,289		2,290,157
Weighted average common stock equivalents		62,687		25,252		51,787		34,222
Assumed conversion of the Notes		34,065		—		11,479		—
Assumed conversion of Documentum Notes		—		—		—		2,986

Diluted weighted average shares outstanding		2,177,259		2,240,291		2,140,555		2,327,365

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Options to acquire 48.5 million and 108.1 million shares of our common stock for the three and nine months ended September 30, 2007, respectively, and options to acquire 264.2 million and 213.8 million shares of our common stock for the three and nine months ended September 30, 2006, respectively, were excluded from the calculation of diluted earnings per share because of their antidilutive effect. There were no adjustments for the effect of VMware potential dilutive securities because there was no difference between their basic and diluted earnings per share for the periods indicated. For the three and nine months ended September 30, 2007, there were 34.1 million and 11.5 million shares, respectively, potentially issuable under our Notes. For the three and nine months ended September 30, 2007, there were no shares potentially issuable for the associated Sold Warrants because these instruments were not considered “in-the-money.” The Notes and the Sold Warrants did not impact the calculation of diluted net income per weighted average share for the three and nine months ended September 30, 2006 because we did not enter into these transactions until November 2006. The effect of the Documentum Notes on the calculation of diluted net income per weighted average share for the three and nine months ended September 30, 2006 was calculated using the “if converted” method. We redeemed all of the outstanding Documentum Notes in April 2006.

9. Stockholders’ Equity

Repurchases of Common Stock

We utilize authorized and unissued shares (including repurchased shares) to satisfy all shares issued under our equity plans. In April 2006, our Board of Directors authorized the repurchase of 250.0 million shares of our common stock. For the three and nine months ended September 30, 2007, we repurchased 12.4 million and 73.3 million shares of our common stock, respectively. Of the 250.0 million shares authorized for repurchase, we have repurchased 183.1 million shares at a total cost of $2.3 billion, leaving a remaining balance of 66.9 million shares authorized for future repurchases. For the nine months ended September 30, 2007, we spent $1.1 billion to repurchase common stock. We plan to spend an additional $0.9 billion on common stock repurchases from October 1, 2007 through March 31, 2008.

VMware Equity and Incentive Plan

In June 2007, VMware adopted the 2007 Equity and Incentive Plan (the “VMware Plan”). Awards under the VMware Plan may be in the form of stock options or other stock-based awards, including awards of restricted stock. The maximum number of shares of VMware’s Class A common stock reserved for the grant or settlement of awards under the VMware Plan is 80.0 million. The exercise price for a stock option awarded under the VMware Plan shall not be less than 100% of the fair market value of VMware’s common stock on the date of the grant. Most options granted under the VMware Plan vest 25% after the first year and then monthly thereafter over the following three years. The options expire six years from the date of grant. The exercise of stock options and the vesting of restricted stock grants of VMware will give rise to additional SAB 51 gains or losses and will also increase the minority interest in VMware.

The following table summarizes activity in VMware stock options and restricted stock (shares in thousands):


	VMware Stock Options				VMware Restricted Stock
	Number of Shares		Weighted Average Exercise Price		Number of Shares	Weighted Average Grant Date Fair Value
Outstanding, January 1, 2007	—			—	—		—
Granted at fair market value	37,198		$	23.36	453	$	23.00
Exchanged from EMC awards	6,732			19.94	2,872		21.48
Forfeited	(70	)		23.07	—		—
Exercised, subject to repurchase	(120	)		23.00	120		23.00

Outstanding, September 30, 2007	43,740		$	22.83	3,445	$	21.74

As of September 30, 2007, 3.4 million shares of VMware restricted stock were outstanding and unvested, with an aggregate intrinsic value of $290.0 million and a weighted average remaining contractual life of approximately 3.2 years. These shares are scheduled to vest through 2011.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In June 2007, options were granted to non-employee directors to purchase 120,000 shares of Class A common stock with an exercise price of $23.00. The options are exercisable immediately, subject to termination if not exercised within one year from the date of grant, and vest one-third on each of the first three anniversaries of the grant. In July 2007, the 120,000 options to purchase shares of Class A common stock were exercised prior to vesting, resulting in the outstanding shares being subject to repurchase and hence restricted until such time as the underlying options vest.

In July 2007, a grant of 85,000 restricted stock units was made to an executive officer of VMware. These restricted stock units vest in 2009 only if goals established by the VMware Compensation and Corporate Governance Committee are met. As these goals have not yet been established, these restricted stock units are not considered granted for accounting purposes. Therefore, they are not included as grants in the table shown above.

The fair value of each VMware option granted during the three and nine months ended September 30, 2007 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


Stock Options	For the Three Months Ended September, 30 2007	For the Nine Months Ended September 30, 2007
Dividend yield	None	None
Expected volatility	39.2%	39.2%
Risk-free interest rate	4.5%	5.0%
Expected life (in years)	3.4	3.4
Weighted-average fair value at grant date	$13.55	$8.19

The volatility for the VMware stock options is based on an analysis of historical and implied volatility of publicly-traded companies with similar characteristics, including industry, stage of life cycle, size and financial leverage. The expected term was calculated based on the historical experience VMware employees have had with EMC stock option grants as well as the expected term of similar grants of comparable companies. The risk-free interest rate was based on a treasury instrument whose term is consistent with the expected life of the stock options.

VMware Employee Stock Purchase Plan

In June 2007, VMware adopted its 2007 Employee Stock Purchase Plan with a total of 6.4 million shares of VMware Class A common stock reserved for issuance. Under the plan, VMware employees will be able to purchase shares at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. The initial grant period began August 13, 2007 and will be exercisable on December 31, 2007. Thereafter, options to purchase shares will be granted twice yearly, on or about January 1 and July 1, and will be exercisable on or about the succeeding June 30 or December 31. The fair value of each option granted during the three and nine months ended September 30, 2007 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	For the Three Months Ended September, 30 2007	For the Nine Months Ended September 30, 2007
Dividend yield	None	None
Expected volatility	34.8%	34.8%
Risk-free interest rate	4.8%	4.8%
Expected life (in years)	0.4	0.4
Weighted-average fair value at grant date	$6.99	$6.99

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. Restructuring Credits

During the three months ended September 30, 2007 and 2006, we recognized restructuring credits of $0.6 million and $2.8 million, respectively. For the nine months ended September 30, 2007 and 2006, we recognized restructuring credits of $3.2 million and $4.4 million, respectively.

The restructuring credits for the three and nine months ended September 30, 2007 were primarily attributable to lower than expected costs of vacating excess facilities.

The restructuring credits for the three and nine months ended September 30, 2006 were primarily attributable to lower than expected severance payments and lower than expected costs associated with vacating leased facilities.

2006 Restructuring Programs

The activity for the 2006 restructuring programs, the majority of which were initiated in the fourth quarter of 2006, for the three and nine months ended September 30, 2007 and 2006 is presented below (table in thousands):

Three Months Ended September 30, 2007


Category	Balance as of June 30, 2007		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	82,883	$	(40	)	$	(10,557	)	$	72,286
Consolidation of excess facilities		5,092		(496	)		(1,703	)		2,893
Contractual and other obligations		201		40			(120	)		121

Total	$	88,176	$	(496	)	$	(12,380	)	$	75,300

Nine Months Ended September 30, 2007
Category	Balance as of December 31, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	127,820	$	(40	)	$	(55,494	)	$	72,286
Consolidation of excess facilities		5,536		(146	)		(2,497	)		2,893
Contractual and other obligations		4,814		40			(4,733	)		121

Total	$	138,170	$	(146	)	$	(62,724	)	$	75,300

Three Months Ended September 30, 2006
Category	Balance as of June 30, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Consolidation of excess facilities	$	398	$	—		$	(87	)	$	311

Total	$	398	$	—		$	(87	)	$	311

Nine Months Ended September 30, 2006
Category	Balance as of December 31, 2005		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Consolidation of excess facilities	$	—	$	427		$	(116	)	$	311

Total	$	—	$	427		$	(116	)	$	311

The 2006 restructuring programs included a workforce reduction that commenced in the fourth quarter of 2006 which covered approximately 1,350 employees worldwide. The workforce reduction’s objective is to further integrate EMC and the majority of

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the businesses we have acquired over the past three years. These actions impacted our major business functions and major geographic regions. Approximately 70% of the affected employees are or were based in North America, excluding Mexico, and 30% are or were based in Europe, Latin America, Mexico and the Asia Pacific region. As of September 30, 2007, approximately 900 employees have terminated employment with EMC. The remaining cash portion owed for the 2006 restructuring programs is $71.5 million and is expected to be paid out through 2018.

Prior Restructuring Programs

We implemented restructuring programs from 1998 through 2005. The activity for these programs for the three and nine months ended September 30, 2007 and 2006, respectively, is presented below (tables in thousands):

Three Months Ended September 30, 2007


Category	Balance as of June 30, 2007		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	8,922	$	111		$	(2,674	)	$	6,359
Consolidation of excess facilities		30,724		(186	)		(2,031	)		28,507

Total	$	39,646	$	(75	)	$	(4,705	)	$	34,866

Nine Months Ended September 30, 2007
Category	Balance as of December 31, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	21,135	$	111		$	(14,887	)	$	6,359
Consolidation of excess facilities		40,233		(3,206	)		(8,520	)		28,507

Total	$	61,368	$	(3,095	)	$	(23,407	)	$	34,866

Three Months Ended September 30, 2006
Category	Balance as of June 30, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Workforce reductions	$	48,607	$	(933	)	$	(15,091	)	$	32,583
Consolidation of excess facilities		57,190		(1,846	)		(3,872	)		51,472

Total	$	105,797	$	(2,779	)	$	(18,963	)	$	84,055

Nine Months Ended September 30, 2006
Category	Balance as of December 31, 2005		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Workforce reductions	$	89,199	$	(4,073	)	$	(52,543	)	$	32,583
Consolidation of excess facilities		65,414		(713	)		(13,229	)		51,472

Total	$	154,613	$	(4,786	)	$	(65,772	)	$	84,055

Substantially all employees included in these programs have been terminated. The remaining balance owed for the consolidation of excess facilities represents lease obligations on vacated facilities. These amounts are expected to be paid out through 2015.

11. Commitments and Contingencies

Line of Credit

We have available for use a credit line of $50.0 million in the United States. As of September 30, 2007, we had no borrowings outstanding on the line of credit. The credit line bears interest at the bank’s base rate and requires us, upon utilization of the credit

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

line, to meet certain financial covenants with respect to limitations on losses. In the event the covenants are not met, the lender may require us to provide collateral to secure the outstanding balance. At September 30, 2007, we were in compliance with the covenants.

Litigation

We are a party to various litigation matters which we consider routine and incidental to our business. Management does not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial condition.

12. Segment Information

Following the completion of VMware’s initial public offering, management has organized the Company around our two primary businesses: EMC Information Infrastructure and VMware Virtual Infrastructure. The EMC Information Infrastructure business operates in three segments: Information Storage, Content Management and Archiving, and RSA Information Security, while VMware Virtual Infrastructure operates in a single segment. Our management measures are designed to assess performance of these operating segments excluding certain items. As a result, the corporate reconciling items are used to capture the items excluded from the segment operating performance measures, including stock-based compensation expense, acquisition-related intangible asset amortization expense and the effects of capitalizing and amortizing the costs of computer software development. Additionally, in certain instances, in-process research and development charges, restructuring charges and infrequently occurring gains or losses are also excluded from assessing segment performance. As a result of preparing separate financial statements for VMware’s initial public offering, there have been some adjustments to VMware’s standalone consolidated financial statements that have been recorded in different periods by both EMC and VMware. These differences were not considered material to the consolidated financial statements and segment disclosures of EMC. The VMware Virtual Infrastructure amounts represent the revenues and expenses of VMware as reflected within EMC’s consolidated financial statements. Research and development expenses, selling, general and administrative expenses, and other income associated with the EMC Information Infrastructure business are not allocated to the segments within the EMC Information Infrastructure business, as they are managed centrally at the business unit level. For the three segments within the EMC Information Infrastructure business, gross profit is the segment operating performance measure.

Prior to the initial public offering, we operated within the same segments, however our management made financial decisions and allocated resources based on our revenues and gross profits achieved at the segment level. As a result of the initial public offering, our VMware Virtual Infrastructure segment is now run independently and income before taxes and minority interest is now the segment operating performance measure for this segment. We have restated the presentation of our segments for prior periods to conform to the current presentation.

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our segment information for the three months ended September 30, 2007 and 2006 is as follows (tables in thousands, except percentages):


	EMC Information Infrastructure									EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
	Information Storage			Content Management and Archiving			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Three Months Ended:
September 30, 2007
Revenues:
Systems revenues	$	1,405,139		$	1,485		$	4,743		$	1,411,367		$	—		$	—		$	1,411,367
Software revenues		515,055			79,247			82,979			677,281			244,236			—			921,517
Services revenues		703,093			108,580			45,142			856,815			110,055			—			966,870

Total revenues		2,623,287			189,312			132,864			2,945,463			354,291			—			3,299,754
Cost of sales		1,245,375			61,951			38,154			1,345,480			41,679			90,951			1,478,110

Gross profit	$	1,377,912		$	127,361		$	94,710			1,599,983			312,612			(90,951	)		1,821,644

Gross profit percentage		52.5	%		67.3	%		71.3	%		54.3	%		88.2	%					55.2	%
Research and development											340,548			77,121			(34,069	)		383,600
Selling, general, and administrative											760,880			148,021			74,873			983,774
In-process research and development											800			—			—			800
Restructuring credits											(571	)		—			—			(571	)

Total costs and expenses											1,101,657			225,142			40,804			1,367,603

Operating income											498,326			87,470			(131,755	)		454,041
Other income, net											41,860			538			137,330			179,728

Income before taxes and minority interest										$	540,186		$	88,008		$	5,575		$	633,769


	EMC Information Infrastructure
	Information Storage			Content Management and Archiving			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Three Months Ended:
September 30, 2006
Revenues:
Systems revenues	$	1,295,524		$	87		$	3,710		$	1,299,321		$	—		$	—		$	1,299,321
Software revenues		524,679			59,092			27,084			610,855			125,476			—			736,331
Services revenues		619,496			90,173			6,961			716,630			63,024			—			779,654

Total revenues		2,439,699			149,352			37,755			2,626,806			188,500			—			2,815,306
Cost of sales		1,166,890			53,995			8,950			1,229,835			24,707			77,025			1,331,567

Gross profit	$	1,272,809		$	95,357		$	28,805			1,396,971			163,793			(77,025	)		1,483,739

Gross profit percentage		52.2	%		63.8	%		76.3	%		53.2	%		86.9	%					52.7	%
Research and development											293,157			43,285			(24,140	)		312,302
Selling, general, and administrative											671,798			70,579			66,709			809,086
In-process research and development											—			—			23,000			23,000
Restructuring credits											(2,779	)		—			—			(2,779	)

Total costs and expenses											962,176			113,864			65,569			1,141,609

Operating income											434,795			49,929			(142,594	)		342,130
Other income, net											44,047			359			—			44,406

Income before taxes										$	478,842		$	50,288		$	(142,594	)	$	386,536

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our segment information for the nine months ended September 30, 2007 and 2006 is as follows (tables in thousands, except percentages):


	EMC Information Infrastructure
	Information Storage			Content Management and Archiving			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Nine Months Ended:
September 30, 2007
Revenues:
Systems revenues	$	4,055,237		$	3,261		$	13,073		$	4,071,571		$	—		$	—		$	4,071,571
Software revenues		1,514,135			216,765			246,213			1,977,113			618,981			—			2,596,094
Services revenues		2,008,861			315,086			118,394			2,442,341			289,425			—			2,731,766

Total revenues		7,578,233			535,112			377,680			8,491,025			908,406			—			9,399,431
Cost of sales		3,657,793			181,124			102,862			3,941,779			105,018			260,237			4,307,034

Gross profit	$	3,920,440		$	353,988		$	274,818			4,549,246			803,388			(260,237	)		5,092,397

Gross profit percentage		51.7	%		66.2	%		72.8	%		53.6	%		88.4	%					54.2	%
Research and development											996,799			209,870			(82,711	)		1,123,958
Selling, general, and administrative											2,198,153			381,049			204,611			2,783,813
In-process research and development											800			—			—			800
Restructuring credits											(3,241	)		—			—			(3,241	)

Total costs and expenses											3,192,511			590,919			121,900			3,905,330

Operating income											1,356,735			212,469			(382,137	)		1,187,067
Other income, net											118,415			(1,649	)		137,330			254,096

Income before taxes and minority interest										$	1,475,150		$	210,820		$	(244,807	)	$	1,441,163


	EMC Information Infrastructure
	Information Storage			Content Management and Archiving			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Nine Months Ended:
September 30, 2006
Revenues:
Systems revenues	$	3,666,040		$	8,099		$	3,710		$	3,677,849		$	—		$	—		$	3,677,849
Software revenues		1,464,401			217,291			27,084			1,708,776			331,155			—			2,039,931
Services revenues		1,812,520			257,405			6,961			2,076,886			145,850			—			2,222,736

Total revenues		6,942,961			482,795			37,755			7,463,511			477,005			—			7,940,516
Cost of sales		3,317,335			150,838			8,950			3,477,123			55,786			232,533			3,765,442

Gross profit	$	3,625,626		$	331,957		$	28,805			3,986,388			421,219			(232,533	)		4,175,074

Gross profit percentage		52.2	%		68.8	%		76.3	%		53.4	%		88.3	%					52.6	%
Research and development											850,188			106,924			(61,892	)		895,220
Selling, general, and administrative											1,957,299			179,294			202,733			2,339,326
In-process research and development											—			—			35,410			35,410
Restructuring credits											(3,973	)		—			(386	)		(4,359	)

Total costs and expenses											2,803,514			286,218			175,865			3,265,597

Operating income											1,182,874			135,001			(408,398	)		909,477
Other income, net											167,825			661			—			168,486

Income before taxes and cumulative effect of a change in accounting principle										$	1,350,699		$	135,662		$	(408,398	)	$	1,077,963

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our revenues are attributed to the geographic areas according to the location of the customers. Revenues by geographic area are included in the following table (table in thousands):


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
United States	$	1,884,307	$	1,652,212	$	5,311,857	$	4,551,594
Europe, Middle East and Africa		940,826		762,489		2,715,059		2,255,326
Asia Pacific		334,375		283,540		1,001,940		798,276
Latin America, Mexico and Canada		140,246		117,065		370,575		335,320

Total	$	3,299,754	$	2,815,306	$	9,399,431	$	7,940,516

No country other than the United States accounted for 10% or more of revenues during the three or nine months ended September 30, 2007 or 2006.

Long-lived assets, excluding financial instruments and deferred tax assets in the United States were $9,574.2 million at September 30, 2007 and $9,352.9 million at December 31, 2006. No country other than the United States accounted for 10% or more of these assets at September 30, 2007 or December 31, 2006. Long-lived assets, excluding financial instruments and deferred tax assets, internationally were $547.6 million at September 30, 2007 and $342.0 million at December 31, 2006.

For the three and nine months ended September 30, 2007, sales to Dell, Inc. (“Dell”) accounted for 15.8% and 15.0%, respectively, of our total revenues. For the three and nine months ended September 30, 2006, sales to Dell accounted for 15.1% and 14.5%, respectively, of our total revenues. Revenues from Dell are included in all segments. Additionally, accounts receivable from Dell accounted for 9.7% and 10.2% of our total accounts receivable as of September 30, 2007 and December 31, 2006, respectively.

13. Income Taxes

Our effective income tax rate was 21.5% and 20.6% for the three and nine months ended September 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three and nine months ended September 30, 2007 and 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and nine months ended September 30, 2007, we incurred discrete net tax costs of $23.0 million and $0.8 million, respectively. The net discrete tax costs incurred during the third quarter of 2007 primarily included taxes from the capital gain on the sale of VMware stock, partially offset by a release of a valuation reserve on capital loss carryforwards. The net discrete tax costs incurred during the nine months ended September 30, 2007 also include tax benefits from the reduction of income tax contingencies and tax benefits from employees’ disqualifying dispositions of qualified stock options.

Our effective income tax rate was 26.6% and 22.2% for the three and nine months ended September 30, 2006, respectively. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, during the three and nine months ended September 30, 2006, we recognized discrete tax benefits of $12.2 million and $56.9 million, respectively. The $12.2 million benefit recognized during the third quarter of 2006 resulted primarily from a reduction in certain income tax contingencies. The net benefit recognized during the nine months ended September 30, 2006 included a $33.3 million benefit from the favorable resolution of certain income tax audits and a $23.6 million benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible in-process research and development charges totaling $23.0 million for the three months ended September 30, 2006 and $35.4 million for the nine months ended September 30, 2006.

EMC adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”), at the beginning of fiscal year 2007. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a two-step process to

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As a result of implementing FIN No. 48, we recognized a cumulative effect adjustment of $6.5 million to increase the January 1, 2007 retained earnings balance and decrease our accrued tax liabilities. Prior to the adoption of FIN No. 48, our policy was to classify accruals for uncertain positions as a current liability unless it was highly probable that there would not be a payment or settlement for such identified risks for a period of at least a year. With the adoption of FIN No. 48, we reclassified $219.3 million of income tax liabilities from current to non-current liabilities because a cash settlement of these liabilities was not anticipated within one year of the balance sheet date.

As of January 1, 2007, we had $175.1 million of remaining unrecognized tax benefits. If recognized, $143.9 million would be recognized as a reduction of income tax expense impacting the effective income tax rate. The remainder would be an adjustment of $17.9 million to goodwill and $13.3 million to additional paid-in capital.

As of September 30, 2007, we had $200.7 million of unrecognized tax benefits. If recognized, $156.7 million would be recognized as a reduction of income tax expense impacting the effective income tax rate. The remainder would be an adjustment of $25.1 million to goodwill and $18.9 million to additional paid-in capital.

We have substantially concluded all U.S. federal income tax matters for years through 2004. The U.S. federal income tax audit for 2005 and 2006 commenced in the second half of 2007. We have income tax audits in process in numerous state, local and international jurisdictions in which we operate. In our international jurisdictions that comprise a significant portion of our operations, the years that may be examined vary, with the earliest year being 2000. Based on the outcome of examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. However, based on the status of these examinations, and the protocol of finalizing such audits, it is not possible to estimate the impact of any amount of such changes, if any, to our previously recorded uncertain tax positions.

We recognize interest expense and penalties related to income tax matters in income tax expense. In addition to the unrecognized tax benefits noted above, we had accrued $32.0 million of interest and penalties as of January 1, 2007. Such amount as of September 30, 2007 was $34.7 million.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our interim consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and the MD&A contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2007. The following discussion contains forward-looking statements and should also be read in conjunction with the risk factors set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q. The forward-looking statements do not include the impact of any potential mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof.

All dollar amounts expressed numerically in the MD&A are in millions, except per share amounts.

Certain tables may not add due to rounding.

INTRODUCTION

We manage our business in two broad categories: EMC Information Infrastructure and VMware Virtual Infrastructure. Our EMC Information Infrastructure business consists of three of our segments: Information Storage, Content Management and Archiving and RSA Information Security. Our objective for our EMC Information Infrastructure business is to achieve profitable growth by increasing our operating income, measured on a cash basis, at a rate greater than our revenue growth. Management believes that by providing a combination of systems, software, services and solutions to meet customers’ needs, we will be able to further profitably increase revenues. Our efforts over the past few years have been primarily focused on growing revenues by enhancing and expanding our portfolio of offerings to satisfy our customers’ information infrastructure requirements. We have enhanced and expanded our portfolio of offerings through both internal research and development (“R&D”) and through acquisitions. We have increased our overall investment in R&D from $265.4 and $799.0, respectively, for the three and nine months ended September 30, 2006 to $315.8 and $919.3, respectively, for the three and nine months ended September 30, 2007. These R&D expenditures have enabled us to introduce new and enhanced offerings. We plan to continue our R&D efforts to enable further innovation so we can continue to introduce new and enhanced offerings. Revenue from new and enhanced product offerings introduced in the last twelve months, including all product revenues from companies acquired during the last twelve months, contributed $537.5 of revenue to the current quarter and $1,334.1 to the nine months ended September 30, 2007.

Concurrent with our objective of growing revenues, we are focused on controlling our costs. In 2006, we implemented an integration plan for EMC and most of the acquisitions we have made over the past three years. The objectives of the plan are to improve efficiencies across our EMC Information Infrastructure business and reduce costs, while helping us to present a more unified “One EMC” to our customers. The plan includes a workforce reduction of approximately 1,350 employees worldwide, consolidation of facilities, termination of contracts and abandoning of assets from which we will no longer derive a benefit. Once fully implemented, we believe the annualized recurring pre-tax savings we will achieve from this plan is approximately $129.1, favorably impacting the three segments within our Information Infrastructure business. As of September 30, 2007, there were approximately 450 employees remaining to be terminated. Our objective is to complete the majority of the remainder of the workforce reductions by the end of 2007. We anticipate the remaining cash obligation under the plan to be approximately $71.5, which will be funded through existing capital resources as well as cash to be generated from operations and is expected to be paid out through 2018.

Our VMware Virtual Infrastructure business has achieved significant revenue growth to date and is focused on extending its growth by broadening its product portfolio, enabling choice for customers and driving standards, expanding its network of technology and distribution partners, increasing market awareness and promoting the adoption of server virtualization. In addition to selling to new customers, the segment is also focused on expanding the use of its products within its existing customer base, as much of its license revenue is based on a per desktop or per server arrangement. VMware will continue to invest in its corporate infrastructure, including customer support, information technology and general and administrative functions.

VMware’s current financial focus is on sustaining its growth in revenue to generate cash flow to expand its market segment share and its virtualization solutions. Although VMware is currently the leading provider of virtualization solutions, management believes the adoption by customers of virtualization solutions is at very early stages. The business expects to face competitive threats to its leadership position from a number of companies, some of whom may have significantly greater resources. As a result,

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

management believes it is important to continue to invest in research and product development, sales and marketing and the support function to maintain or expand its leadership in the virtualization solutions market. This investment could result in contracting operating margins as VMware invests in its future.

Management is also focused on enhancing our capital structure. In 2006, we issued $3,450.0 of long-term senior unsecured obligations. We utilized $2,200.0 of the net proceeds to repay the outstanding indebtedness under our nine-month unsecured credit facility which was used to finance our acquisition of RSA Security, Inc. (“RSA”). We utilized the majority of the remaining proceeds to purchase 75.0 million shares of our common stock. From December 31, 2005 through September 30, 2007, we purchased 375.6 million shares of our common stock at a total cost of $4,758.0. During this time frame, we decreased our total outstanding shares by 12.0%. We plan to spend an additional $900.0 to purchase shares of our common stock from October 1, 2007 through March 31, 2008.

In the third quarter of 2007, we further enhanced our capital structure through the initial public offering of approximately 37.95 million shares, or 10%, of the capital stock of VMware. In the quarter, VMware also sold 9.5 million shares of its capital stock to Intel Capital. Net proceeds to VMware from these transactions were $1,253.5. We also sold 6.0 million shares of VMware Class A common stock held by us to Cisco Systems, resulting in net proceeds to EMC of approximately $150.0.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:


	For the Three Months Ended
	September 30, 2007		September 30, 2006		$ Change		% Change
Information Storage	$	2,623.3	$	2,439.7	$	183.6	7.5	%
Content Management and Archiving		189.3		149.4		39.9	26.7
RSA Information Security		132.9		37.8		95.1	251.6
VMware Virtual Infrastructure		354.3		188.5		165.8	88.0

Total revenues	$	3,299.8	$	2,815.3	$	484.5	17.2	%


	For the Nine Months Ended
	September 30, 2007		September 30, 2006		$ Change		% Change
Information Storage	$	7,578.2	$	6,943.0	$	635.2	9.1	%
Content Management and Archiving		535.1		482.8		52.3	10.8
RSA Information Security		377.7		37.8		339.9	899.2
VMware Virtual Infrastructure		908.4		477.0		431.4	90.4

Total revenues	$	9,399.4	$	7,940.5	$	1,458.9	18.4	%

The Information Storage segment revenues include systems, software license and services revenues. Systems revenues were $1,405.1 and $1,295.5 for the third quarters of 2007 and 2006, respectively, representing an increase of 8.5% and were $4,055.2 and $3,666.0 for the first nine months of 2007 and 2006, respectively, representing an increase of 10.6%. The increases in systems revenues were due to greater demand for these products, attributable to increased demand for our Information Technology (“IT”) infrastructure offerings and a broadened product portfolio. Revenue from new and enhanced product offerings introduced in the last twelve months, including all product revenues from companies acquired during the last twelve months, contributed $498.6 of revenue to the current quarter and $1,260.2 to the nine months ended September 30, 2007. In addition, revenue growth was driven by higher sales volumes from our channel partners. Our channel partners contributed 66.2% and 64.7% toward revenue growth for the three and nine months ended September 30, 2007, respectively. Software license revenues were $515.1 and $524.7 for the third quarters of 2007 and 2006, respectively, representing a decrease of 1.8% and were $1,514.1 and $1,464.4 for the first nine months of 2007 and 2006, respectively, representing an increase of 3.4%. The decline in software license revenue for the third quarter of 2007 and the slower level of software license revenue growth for the nine months ended September 30, 2007 compared to systems

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

revenue growth was due to a combination of factors, including existing systems’ customers migrating to higher end systems but continuing to utilize their existing software licenses and increased lower end systems sales which utilize less software. Services revenues were $703.1 and $619.5 for the third quarters of 2007 and 2006, respectively, representing an increase of 13.5% and were $2,008.9 and $1,812.5 for the first nine months of 2007 and 2006, respectively, representing an increase of 10.8%. Services revenues consist of software and hardware maintenance and professional services revenues. Services revenues increased due to greater demand for our professional services, largely to support and implement information lifecycle management-based solutions. Additionally, demand for both software and systems maintenance increased. Professional services accounted for 64.0% and 63.9% of the increases in services revenues for the three and nine months ended September 30, 2007, respectively. Software and systems maintenance accounted for 36.0% and 36.1% of the increases in services revenues for the three and nine months ended September 30, 2007, respectively.

The Content Management and Archiving segment revenues include software license, services and systems revenues. Software license revenues were $79.2 and $59.1 for the quarters ended September 30, 2007 and 2006, respectively, representing an increase of 34.0% and were $216.8 and $217.3 for the first nine months of 2007 and 2006, respectively. The increase in software license revenues for the quarter ended September 30, 2007 was attributable to greater demand of our content management offerings. The decrease in software license revenue for the nine months ended September 30, 2007 was partially attributable to a consolidation of IT vendors who provide enterprise content management solutions, which we believe resulted in a short-term pause in customer purchases. Additionally, we realigned our go-to-market model in the second quarter of 2007, which we also believe impacted our revenues for the nine months ended September 30, 2007. Revenue from new and enhanced product offerings introduced in the last twelve months, including all product revenues from companies acquired during the last twelve months, contributed $27.0 of revenue to the current quarter and $51.3 to the nine months ended September 30, 2007. Services revenues were $108.6 and $90.2 for the quarters ended September 30, 2007 and 2006, respectively, representing an increase of 20.4% and were $315.1 and $257.4 for the nine months ended September 30, 2007 and 2006, respectively, representing an increase of 22.4%. The increases in services revenues were attributable to greater demand for our professional services and higher software maintenance revenues. Professional services accounted for 64.0% and 59.8% of the increases in services revenues for the three and nine month periods ended September 30, 2007. Software maintenance accounted for 36.0% and 40.2% of the increases in services revenues for the three and nine months ended September 30, 2007.

The RSA Information Security segment was created during the third quarter of 2006 as a result of our acquisitions of RSA and Network Intelligence Corporation in September 2006. The RSA Information Security segment provides technologies to secure information no matter where it resides or travels inside or outside of an organization and throughout its lifecycle and includes systems, software license, software maintenance and other services revenues. Total revenues for the three and nine months ended September 30, 2007 were $132.9 and $377.7, respectively, representing an increase of 251.6% and 899.2% when compared to the comparable 2006 periods. As a result of the formation of the segment in the last month of the third quarter in 2006, the growth rates are not representative of future growth rates.

The VMware Virtual Infrastructure segment includes software license and services revenues. Total revenues were $354.3 and $188.5 for the third quarters of 2007 and 2006, respectively, representing an increase of 88.0% and were $908.4 and $477.0 for the first nine months of 2007 and 2006, respectively, representing an increase of 90.4%.

VMware software license revenues were $244.2 and $125.5 for the third quarters of 2007 and 2006, respectively, representing an increase of 94.6% and were $619.0 and $331.2 for the first nine months of 2007 and 2006, respectively, representing an increase of 86.9%. The increase in software license revenues is the result of increased sales volume, driven largely by greater demand for virtualization product offerings attributable to wider market acceptance of virtualization as part of organizations’ IT infrastructure, a broadened product portfolio and expansion of VMware’s network of indirect channel partners. The increase in sales and marketing spending and the increase in distribution channels, which grew by over 1,000 and 2,000 new partners for the three and nine months ended September 30, 2007, respectively, also contributed to this additional demand. Orders from new indirect channel partners contributed less than 5% to the increase in software license revenue for both the three and nine months ended September 30, 2007 when compared to the comparable 2006 periods.

The percentage of orders greater than fifty thousand dollars in the third quarter of 2007, compared to the third quarter of 2006, remained essentially flat. The percentage of orders from distributors and end-user customers which were greater than fifty thousand dollars was approximately 28% of revenue in both the third quarter of 2007 and 2006, respectively. The percentage of orders from distributors and end-user customers which were greater than fifty thousand dollars was approximately 29% and 26% of revenue in

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

the first nine months of 2007 and 2006, respectively. Although this remains a high-volume transaction business, we believe the increase in the percentage of orders greater than fifty thousand dollars in the comparative nine month periods is a result of broader acceptance of virtualization solutions for organizations’ IT infrastructure and a trend toward end-user customers using VMware’s products broadly across their organizations.

VMware services revenues were $110.1 and $63.0 for the third quarters of 2007 and 2006, respectively, representing an increase of 74.8% and were $289.4 and $145.9 for the first nine months of 2007 and 2006, respectively, representing an increase of 98.4%. The increase in services revenues for both the three and nine months ended September 30, 2007 was attributable to greater maintenance and professional services revenues.

Revenues by geography were as follows:


	For the Three Months Ended
	September 30, 2007		September 30, 2006		% Change
United States	$	1,884.3	$	1,652.2	14.0	%
Europe, Middle East and Africa		940.8		762.5	23.4
Asia Pacific		334.4		283.5	18.0
Latin America, Mexico and Canada		140.2		117.1	19.7

	For the Nine Months Ended
	September 30, 2007		September 30, 2006		% Change
United States	$	5,311.9	$	4,551.6	16.7	%
Europe, Middle East and Africa		2,715.1		2,255.3	20.4
Asia Pacific		1,001.9		798.3	25.5
Latin America, Mexico and Canada		370.6		335.3	10.5

Revenue increased for the three and nine months ended September 30, 2007 compared to the same periods in 2006 in all of our markets due to greater demand for our products and services. Also contributing to the increase were revenues generated from the acquisition of RSA. Changes in exchange rates favorably impacted revenue growth by 1.8% and 2.0% for the three and nine months ended September 30, 2007, respectively. The impact of the change in rates in both periods was most significant in the European market, primarily Germany, France, Italy and the United Kingdom.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Costs and Expenses

The following table presents our costs and expenses, other income and net income.


	For the Three Months Ended
	September 30, 2007			September 30, 2006			$ Change			% Change
Cost of revenue:
Information Storage	$	1,245.4		$	1,166.9		$	78.5		6.7	%
Content Management and Archiving		62.0			54.0			8.0		14.8
RSA Information Security		38.2			9.0			29.2		324.4
VMware Virtual Infrastructure		41.7			24.7			17.0		68.8
Corporate Reconciling Items		91.0			77.0			14.0		18.2

Total cost of revenue		1,478.1			1,331.6			146.5		11.0

Gross margins:
Information Storage		1,377.9			1,272.8			105.1		8.3
Content Management and Archiving		127.4			95.4			32.0		33.5
RSA Information Security		94.7			28.8			65.9		228.8
VMware Virtual Infrastructure		312.6			163.8			148.8		90.8
Corporate Reconciling Items		(91.0	)		(77.0	)		(14.0	)	18.2

Total gross margin		1,821.6			1,483.7			337.9		22.8

Operating expenses:
Research and development (1)		383.6			312.3			71.3		22.8
Selling, general and administrative (2)		983.8			809.1			174.7		21.6
In-process research and development		0.8			23.0			(22.2	)	(96.5	)
Restructuring credits		(0.6	)		(2.8	)		2.2		(78.6	)

Total operating expenses		1,367.6			1,141.6			226.0		19.8

Operating income		454.0			342.1			111.9		32.7
Investment income, interest expense and other income, net (3)		179.7			44.4			135.3		304.7

Income before income taxes		633.8			386.5			247.3		64.0
Provision for income taxes		136.4			102.9			33.5		32.6
Minority interest, net of taxes		(4.5	)		—			(4.5	)	NM

Net income	$	492.9		$	283.7		$	209.2		73.7	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)



	For the Nine Months Ended
	September 30, 2007			September 30, 2006			$ Change			% Change
Cost of revenue:
Information Storage	$	3,657.8		$	3,317.3		$	340.5		10.3	%
Content Management and Archiving		181.1			150.8			30.3		20.1
RSA Information Security		102.9			9.0			93.9		1,043.3
VMware Virtual Infrastructure		105.0			55.8			49.2		88.2
Corporate Reconciling Items		260.2			232.5			27.7		11.9

Total cost of revenue		4,307.0			3,765.4			541.6		14.4

Gross margins:
Information Storage		3,920.4			3,625.6			294.8		8.1
Content Management and Archiving		354.0			332.0			22.0		6.6
RSA Information Security		274.8			28.8			246.0		854.2
VMware Virtual Infrastructure		803.4			421.2			382.2		90.7
Corporate Reconciling Items		(260.2	)		(232.5	)		(27.7	)	11.9

Total gross margin		5,092.4			4,175.1			917.3		22.0

Operating expenses:
Research and development (4)		1,124.0			895.2			228.8		25.6
Selling, general and administrative (5)		2,783.8			2,339.3			444.5		19.0
In-process research and development		0.8			35.4			(34.6	)	(97.7	)
Restructuring credits		(3.2	)		(4.4	)		1.2		(27.3	)

Total operating expenses		3,905.3			3,265.6			639.7		19.6

Operating income		1,187.1			909.5			277.6		30.5
Investment income, interest expense and other income, net (6)		254.1			168.5			85.6		50.8

Income before taxes and cumulative effect of a change in accounting principle		1,441.2			1,078.0			363.2		33.7
Provision for income taxes		296.8			239.4			57.4		24.0
Minority interest, net of taxes		(4.5	)		—			(4.5	)	NM
Cumulative effect of a change in accounting principle		—			0.2			(0.2	)	NM

Net income	$	1,139.9		$	838.8		$	301.1		35.9	%

(1)	Amount includes reconciling items of ($34.1) and ($24.1) for the three months ended September 30, 2007 and 2006, respectively.

(2)	Amount includes reconciling items of $74.9 and $66.7 for the three months ended September 30, 2007 and 2006, respectively.

(3)	Amount includes reconciling items of $137.3 for the three months ended September 30, 2007.

(4)	Amount includes reconciling items of ($82.7) and ($61.9) for the nine months ended September 30, 2007 and 2006, respectively.

(5)	Amount includes reconciling items of $204.6 and $202.7 for the nine months ended September 30, 2007 and 2006, respectively.

(6)	Amount includes reconciling items of $137.3 for the nine months ended September 30, 2007.

NM	– not measurable

Gross Margins

Overall our gross margin percentages were 55.2% and 52.7% for the third quarters of 2007 and 2006, respectively. The gross margin percentages for the third quarter improved across all operating segments. The VMware Virtual Infrastructure segment contributed 196 basis points, the RSA Information Security segment contributed 48 basis points, the Content Management and Archiving segment contributed 34 basis points and the Information Storage segment contributed 18 basis points. Corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization and amortization of capitalized software development costs decreased the consolidated gross margin by 46 basis points.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

For the nine months ended September 30, 2007 the gross margin increased to 54.2% from 52.6% for the comparable prior year period. The VMware Virtual Infrastructure segment contributed 177 basis points and the RSA Information Security segment contributed 75 basis points. These improvements were partially offset by reductions in the Information Storage segment gross margin which decreased by 52 basis points and the Content Management and Archiving segment gross margin which decreased by 7 basis points. Corporate reconciling items also decreased the consolidated gross margin by 32 basis points.

For segment reporting purposes, stock-based compensation, acquisition-related intangible asset amortization and amortization of capitalized software development costs are recognized as corporate expenses and are not allocated among our various operating segments. The increase of $14.0 in the corporate reconciling items for the quarter ended September 30, 2007 was primarily attributable to a $7.2 increase in intangible asset amortization expense associated with acquisitions and a $5.3 increase in amortization expense of capitalized software costs. The increase of $27.7 in the corporate reconciling items for the nine month period ended September 30, 2007 was attributable to an increase in intangible asset amortization expense associated with acquisitions of $22.0 and greater amortization expenses associated with capitalized software development costs which increased by $13.0, offset by a $7.3 decrease in stock-based compensation expense. The decrease in stock-based compensation expense was due to higher valued options becoming fully vested in 2006.

The gross margin percentages for the Information Storage segment were 52.5% and 52.2% for the third quarters of 2007 and 2006, respectively. The increase was primarily attributable to an improvement in systems margins of 290 basis points and services margins of 110 basis points, partially offset by a decrease in the mix of software revenue as a percentage of total revenues. Software license revenues generally provide a higher gross margin percentage than systems and services revenues. Software revenues as a percentage of total revenue decreased from 21.5% in the third quarter of 2006 to 19.6% for the third quarter of 2007. For the nine months ended September 30, 2007 the gross margin percentage decreased to 51.7% from 52.2% for the comparable prior period. The decrease was primarily attributable to a decrease in the mix of software revenue as a percentage of total revenue, partially offset by an improvement in systems margins of 40 basis points and service margins of 10 basis points. Software revenues as a percentage of total revenue decreased to 20.0% in the nine months ended September 30, 2007 from 21.1% for the prior comparable period.

The gross margin percentages for the Content Management and Archiving segment were 67.3% and 63.8% for the third quarters of 2007 and 2006, respectively. The increase in the gross margin percentage for the three months ended September 30, 2007 compared to the comparable 2006 period was primarily due to an increase in the mix of software license revenues as a percentage of total segment revenues. Software license revenues generally provide a higher gross margin percentage than services revenue. Software license revenues as a percentage of total revenues increased from 39.6% for the three months ended September 30, 2006 to 41.9% for the three months ended September 30, 2007. For the nine months ended September 30, 2007, the Content Management and Archiving gross margin decreased to 66.2% from 68.8%. The decrease in the gross margin percentage was primarily due to a reduction in the mix of software license revenue as a percentage of total segment revenues. Software license revenues as a percentage of total segment revenues declined to 40.5% for the nine months ended September 30, 2007 from 45.0% for the nine months ended September 30, 2006.

The gross margin percentages for the RSA Information Security segment were 71.3% and 72.8% for the three and nine months ended September 30, 2007 and were 76.3% for both the three and nine months ended September 30, 2006. As a result of the formation of the segment in the last month of the third quarter of 2006, the change in the gross margin percentages are not meaningful.

The VMware gross margin percentages were 88.2% and 86.9% for the three months ended September 30, 2007 and 2006, respectively. The gross margin percentages were 88.4% and 88.3% for the nine months ended September 30, 2007 and 2006, respectively. The increase in the gross margin percentage for the three months ended September 30, 2007 was primarily attributable to an increase in the mix of software license revenue as a percentage of total segment revenues. Software license revenues generally provide a higher gross margin percentage than services revenues. Software license revenues as a percentage of total revenues increased to 68.9% for the quarter ended September 30, 2007 from 66.6% for the comparable prior period. The gross margin percentages for the nine months ended September 30, 2007 and 2006 remained relatively consistent.

Research and Development

As a percentage of revenues, R&D expenses were 11.6% and 11.1% for the third quarters of 2007 and 2006, respectively, and were 12.0% and 11.3% for the first nine months of 2007 and 2006, respectively. R&D expenses increased $71.3 and $228.8 for the

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

three and nine months ended September 30, 2007 compared to the same periods in 2006, primarily due to higher personnel-related costs, including salaries, benefits, recruiting, contract labor and consulting, and higher cost of facilities. Personnel-related costs increased by $73.2 and $183.2 and the cost of facilities increased by $6.7 and $17.3 for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006. Partially offsetting the increase for the three months ended September 30, 2007, was a decrease in the cost of supplies to support new product development of $8.1.

Corporate reconciling items within R&D consist of stock-based compensation, intangible asset amortization and the capitalization of software development costs. The benefit to R&D from the corporate reconciling items increased $10.0 and $20.8 for the three and nine months ended September 30, 2007, respectively. Stock-based compensation increased $0.6 for the three months ended September 30, 2007 and decreased $2.4 for the nine months ended September 30, 2007. Intangible asset amortization decreased $1.8 and $4.1 for the three and nine months ended September 30, 2007. Capitalized software development costs, which reduce the corporate reconciling items, increased $8.8 and $14.3 for the three and nine months ended September 30, 2007. The increase in stock-based compensation of $0.6 for the three months ended September 30, 2007, consisted of a $3.2 decrease within EMC’s Information Infrastructure business offset by a $3.8 increase within the VMware Virtual Infrastructure business. The decrease in stock-based compensation of $2.4 for the nine months ended September 30, 2007 consisted of a $12.7 decrease within EMC’s Information Infrastructure business offset by a $10.3 increase within the VMware Virtual Infrastructure business. The decreases in stock-based compensation within EMC’s Information Infrastructure business for the three and nine months ended September 30, 2007 as compared to the same periods in 2006 were primarily due to higher valued options that became fully vested in 2006. The increases in stock-based compensation within the VMware Virtual Infrastructure business for the three and nine months ended September 30, 2007 as compared to the same periods in 2006 were primarily attributable to grants of equity-based compensation made in conjunction with VMware’s initial public offering. The decreases in intangible asset amortization for the three and nine months ended September 30, 2007 were primarily attributable to intangible assets from acquisitions completed in previous years by the EMC Information Infrastructure business becoming fully amortized. The increase in capitalized software development costs for the three months ended September 30, 2007 consisted of a decrease in EMC’s Information Infrastructure business of $7.9, offset by an increase within the VMware Virtual Infrastructure business of $16.7. The increase in capitalized software development costs for the nine months ended September 30, 2007 was primarily attributable to an increase in EMC’s Information Infrastructure business of $9.5 and an increase within the VMware Virtual Infrastructure business of $4.8. The change in capitalized software development costs results from the timing as to when projects reach technological feasibility and the costs incurred subsequent to reaching technological feasibility. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

R&D expenses within EMC’s Information Infrastructure business, as a percentage of EMC’s Information Infrastructure business revenues, were 11.6% and 11.2% for the third quarters of 2007 and 2006, respectively, and 11.7% and 11.4% for the first nine months of 2007 and 2006, respectively. R&D expenses increased $47.4 and $146.6 for the three and nine months ended September 30, 2007 compared to the same periods in 2006, primarily due to higher personnel-related costs and higher cost of facilities to support new product development. Personnel-related costs increased by $40.6 and $108.4 and the cost of facilities increased by $5.9 and $14.0 for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006.

R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware’s revenues, were 21.8% and 23.0% for the third quarters of 2007 and 2006, respectively, and 23.1% and 22.4% for the first nine months of 2007 and 2006, respectively. R&D expenses increased $33.8 and $102.9 for the three and nine months ended September 30, 2007 compared to the same periods in 2006. The increase in R&D expenses for both the three and nine months ended September 30, 2007 consisted primarily of increased salaries, benefits, and consulting resulting from the deployment of additional resources to support new product development and other costs, including travel, facilities, expensed equipment and depreciation. Salaries, benefits and consulting expense increased by $22.1 and $77.7 for the three and nine months ended September 30, 2007 over the comparable prior periods. The other costs increased by $9.4 and $18.8 for the three and nine months ended September 30, 2007 over the comparable prior periods.

Selling, General and Administrative

As a percentage of revenues, selling, general and administrative (“SG&A”) expenses were 29.8% and 28.7% for the third quarters of 2007 and 2006, respectively, and 29.6% and 29.5% for the first nine months of 2007 and 2006, respectively. SG&A expenses increased by $174.7 and $444.5 for the three and nine months ended September 30, 2007 compared to the same periods in 2006, primarily due to higher personnel-related costs, commissions, depreciation, travel and facilities costs to support the overall growth of the business. Personnel-related costs increased by $122.6 and $292.2, depreciation increased by $16.4 and $47.5, travel

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

increased by $19.8 and $40.5 and facilities increased by $6.0 and $16.0 for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006.

Corporate reconciling items within SG&A, which consist of stock-based compensation and intangible asset amortization, increased $8.2 and $1.9 for the three and nine months ended September 30, 2007. Stock-based compensation increased $1.1 for the three months ended September 30, 2007 and decreased $18.7 for the nine months ended September 30, 2007. Intangible asset amortization increased $7.1 for the three months ended September 30, 2007 and increased $20.6 for the nine months ended September 30, 2007. The increase in stock-based compensation of $1.1 for the three months ended September 30, 2007, consisted of a $9.7 decrease within EMC’s Information Infrastructure business offset by an $8.6 increase within the VMware Virtual Infrastructure business. The decrease in stock-based compensation of $18.7 for the nine months ended September 30, 2007 consisted of a $30.5 decrease within EMC’s Information Infrastructure business offset by an $11.8 increase within the VMware Virtual Infrastructure business. The decreases in stock-based compensation within EMC’s Information Infrastructure business for the three and nine months ended September 30, 2007 as compared to the same periods in 2006 was primarily due to higher valued options that became fully vested in 2006. The increases in stock-based compensation within the VMware Virtual Infrastructure business for the three and nine months ended September 30, 2007 were primarily attributable to grants of equity-based compensation made in conjunction with VMware’s initial public offering. The increase in intangible asset amortization in both the three and nine month periods ended September 30, 2007 were primarily attributable to amortization of intangible assets associated with the RSA acquisition in the third quarter of 2006. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

SG&A expenses within EMC’s Information Infrastructure business, as a percentage of EMC’s Information Infrastructure business revenues were 25.8% and 25.6% for the third quarters of 2007 and 2006, respectively, and 25.9% and 26.2% for the first nine months of 2007 and 2006, respectively. SG&A expenses increased by $89.1 and $240.9 for the three and nine months ended September 30, 2007 compared to the same periods in 2006, primarily due to higher personnel-related costs, depreciation and travel costs to support the overall growth of the business. Personnel-related costs increased by $60.3 and $148.5, depreciation increased by $14.6 and $43.1 and travel increased by $13.4 and $27.1 for the three and nine months ended September 30, 2007, respectively, compared to the same periods in 2006.

SG&A expenses within the VMware Virtual Infrastructure business, as a percentage of VMware’s revenues were 41.8% and 37.4% for the third quarters of 2007 and 2006, respectively, and 41.9% and 37.6% for the first nine months of 2007 and 2006, respectively. SG&A expenses increased $77.4 and $201.8 for the three and nine months ended September 30, 2007 compared to the same periods in 2006. The increase in SG&A expenses in the third quarter of 2007 was primarily the result of higher salaries and benefits costs of $48.1 due to increases in sales, marketing and administrative personnel to support the growth of the business and higher commission expense resulting from increased sales volume. Administrative costs, including travel, expensed equipment, facilities and depreciation increased by $17.2. Marketing expenses increased by $5.6 compared to the third quarter of 2006 as a result of the annual VMworld conference being held in the third quarter of 2007 as compared to the fourth quarter of 2006. The increase in SG&A expenses in the first nine months of 2007 was primarily the result of higher salaries and benefits costs of $123.8 due to increases in sales, marketing and administrative personnel to support the growth of the business and higher commission expense resulting from increased sales volume. Additionally, administrative costs, including travel, expensed equipment, facilities and depreciation increased by $37.2. Marketing expenses increased by $11.9 compared to the nine months ended September 30, 2006 as a result of the annual VMworld conference being held in the third quarter of 2007 as compared to the fourth quarter of 2006.

In-Process Research and Development

In-process research and development (“IPR&D”) was $0.8 and $23.0 for the three months ended September 30, 2007 and 2006, respectively, and was $0.8 and $35.4 for the nine months ended September 30, 2007 and 2006, respectively. The decrease in IPR&D for the three and nine months ended September 30, 2007 as compared to the same periods in 2006 was primarily attributable to lower levels of in-process R&D of acquisitions consummated during the respective periods.

Restructuring Credits

During the three months ended September 30, 2007 and 2006, we recognized restructuring credits of $0.6 and $2.8, respectively. For the nine months ended September 30, 2007 and 2006, we recognized restructuring credits of $3.2 and $4.4, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

The restructuring credits for the three and nine months ended September 30, 2007 were primarily attributable to lower than expected costs of vacating excess facilities.

2006 Restructuring Programs

Three Months Ended September 30, 2007


Category	Balance as of June 30, 2007		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	82.9	$	—		$	(10.6	)	$	72.3
Consolidation of excess facilities		5.1		(0.5	)		(1.7	)		2.9
Contractual and other obligations		0.2		—			(0.1	)		0.1

Total	$	88.2	$	(0.5	)	$	(12.4	)	$	75.3


Nine Months Ended September 30, 2007
Category	Balance as of December 31, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	127.8	$	—		$	(55.5	)	$	72.3
Consolidation of excess facilities		5.5		(0.1	)		(2.5	)		2.9
Contractual and other obligations		4.8		—			(4.7	)		0.1

Total	$	138.2	$	(0.1	)	$	(62.7	)	$	75.3

Three Months Ended September 30, 2006
Category	Balance as of June 30, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Consolidation of excess facilities	$	0.4	$	—		$	(0.1	)	$	0.3

Total	$	0.4	$	—		$	(0.1	)	$	0.3

Nine Months Ended September 30, 2006
Category	Balance as of December 31, 2005		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Consolidation of excess facilities	$	—	$	0.4		$	(0.1	)	$	0.3

Total	$	—	$	0.4		$	(0.1	)	$	0.3

The 2006 restructuring programs included a workforce reduction that commenced in the fourth quarter of 2006 and covers approximately 1,350 employees worldwide. The workforce reduction’s objective is to further integrate EMC and the majority of the businesses we have acquired over the past three years. These actions impacted our major business functions and major geographic regions. Approximately 70% of the affected employees are or were based in North America, excluding Mexico, and 30% are or were based in Europe, Latin America, Mexico and the Asia Pacific region. As of September 30, 2007, approximately 900 employees have terminated employment with EMC. The remaining cash portion owed for the 2006 restructuring programs is $71.5 and is expected to be paid out through 2018.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Prior Restructuring Programs

We implemented restructuring programs from 1998 through 2005. The activity for these programs for the three and nine months ended September 30, 2007 and 2006, respectively, is presented below:

Three Months Ended September 30, 2007


Category	Balance as of June 30, 2007		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	8.9	$	0.1		$	(2.7	)	$	6.4
Consolidation of excess facilities		30.7		(0.2	)		(2.0	)		28.5

Total	$	39.6	$	(0.1	)	$	(4.7	)	$	34.9

Nine Months Ended September 30, 2007
Category	Balance as of December 31, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2007
Workforce reductions	$	21.1	$	0.1		$	(14.9	)	$	6.4
Consolidation of excess facilities		40.2		(3.2	)		(8.5	)		28.5

Total	$	61.4	$	(3.1	)	$	(23.4	)	$	34.9

Three Months Ended September 30, 2006
Category	Balance as of June 30, 2006		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Workforce reductions	$	48.6	$	(0.9	)	$	(15.1	)	$	32.6
Consolidation of excess facilities		57.2		(1.8	)		(3.9	)		51.5

Total	$	105.8	$	(2.8	)	$	(19.0	)	$	84.1

Nine Months Ended September 30, 2006
Category	Balance as of December 31, 2005		Adjustment to the Provision			Utilization			Balance as of September 30, 2006
Workforce reductions	$	89.2	$	(4.1	)	$	(52.5	)	$	32.6
Consolidation of excess facilities		65.4		(0.7	)		(13.2	)		51.5

Total	$	154.6	$	(4.8	)	$	(65.8	)	$	84.1

Net Gain on Investments, Including Gain on Sale of VMware Stock

Net gain on investments, including gain on sale of VMware stock for both the three and nine months ended September 30, 2007 was $137.3 and consisted primarily of a $148.6 gain on the sale of 6.0 million shares of Class A common stock of VMware to Cisco.

Investment Income

Investment income was $67.2 and $51.2 for the third quarters of 2007 and 2006, respectively, and was $170.2 and $174.7 for the first nine months of 2007 and 2006, respectively. Investment income increased for the three months ended September 30, 2007 compared to the same period in 2006 due to higher average outstanding cash and investment balances and lower realized losses on investments. Investment income decreased for the nine months ended September 30, 2007 compared to the same period in 2006 primarily due to lower average outstanding cash and investment balances, partially offset by lower realized losses on investments. The weighted average return on investments, excluding realized losses and gains, was 4.3% and 4.4% for the third quarters of 2007 and 2006, respectively, and was 4.3% and 4.2% for the first nine months of 2007 and 2006, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Interest Expense

Interest expense was $17.9 and $5.8 for the third quarters of 2007 and 2006, respectively, and was $54.4 and $8.4 for the first nine months of 2007 and 2006, respectively. Interest expense increased primarily due to higher debt balances attributable to the $3,450.0 of convertible debt issued in the fourth quarter of 2006. Under the terms of the Notes, in the event our closing stock price is greater than $20.90 for any 20 of the last 30 consecutive trading days immediately preceding and ending on the last day of a quarter then the Notes are deemed convertible for the next fiscal quarter. Should the Notes become convertible, the unamortized debt issuance costs which were $50.7 at September 30, 2007 would be fully expensed in that fiscal quarter.

Other (Expense) Income, Net

The changes in other (expense) income for both the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006 was primarily attributable to an increase in foreign currency transaction losses.

Provision for Income Taxes

Our effective income tax rate was 21.5% and 20.6% for the three and nine months ended September 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three and nine months ended September 30, 2007 and 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and nine months ended September 30, 2007, we incurred discrete net tax costs of $23.0 and $0.8, respectively. The net discrete tax costs incurred during the third quarter of 2007 primarily included taxes from the capital gain on the sale of VMware stock, partially offset by a release of a valuation reserve on capital loss carryforwards. The net discrete tax costs incurred during the nine months ended September 30, 2007 also includes tax benefits from the reduction of income tax contingencies and tax benefits from employees’ disqualifying dispositions of qualified stock options.

Our effective income tax rate was 26.6% and 22.2% for the three and nine months ended September 30, 2006, respectively. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, during the three and nine months ended September 30, 2006, we recognized discrete tax benefits of $12.2 and $56.9, respectively. The $12.2 benefit recognized during the third quarter of 2006 resulted primarily from the favorable resolution of certain income tax contingencies. The net benefit recognized during the nine months ended September 30, 2006 included a $33.3 benefit from the favorable resolution of certain income tax audits and a $23.6 benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible in-process research and development charges totaling $23.0 for the three months ended September 30, 2006 and $35.4 for the nine months ended September 30, 2006.

Minority Interests

As a result of VMware’s IPO in the third quarter of 2007, VMware is no longer a wholly-owned subsidiary of EMC. For the quarter ended September 30, 2007, the weighted average minority interest in VMware was approximately 7%, resulting in a minority interest expense of $4.5 for the period subsequent to the initial public offering. On September 30, 2007, the minority interest was approximately 15%.

Financial Condition

Cash provided by operating activities was $2,147.9 and $1,487.5 for the nine months ended September 30, 2007 and 2006, respectively. Cash received from customers were $9,620.9 and $8,074.0 for the nine months ended September 30, 2007 and 2006, respectively. The increase in cash received from customers was attributable to higher sales volume and greater cash proceeds from the sale of maintenance contracts which are typically billed and paid in advance of services being rendered. Cash paid to suppliers and employees was $7,455.0 and $6,311.0 for the nine months ended September 30, 2007 and 2006, respectively. The increase was partially attributable to higher headcount. Total headcount was approximately 36,200 and 30,600 at September 30, 2007 and 2006, respectively. The headcount increase was due to the growth of the business, as well as continued acquisition activity. Cash received from dividends and interest was $182.8 and $198.7 for the nine months ended September 30, 2007 and 2006, respectively. Cash paid for interest was $41.7 and $3.1 for the nine months ended September 30, 2007 and 2006, respectively. The increase was

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

primarily due to interest payments made on the Notes. For the nine months ended September 30, 2007 and 2006, we paid $159.1 and $471.1, respectively, in income taxes. The decrease for the nine months ended September 30, 2007 was primarily attributable to income tax payments made in 2006 for funds repatriated in 2005 under the American Jobs Creation Act of 2004.

Cash used in investing activities was $216.5 and $2,139.4 for the nine months ended September 30, 2007 and 2006, respectively. Cash paid for business acquisitions, net of cash acquired for the nine months ended September 30, 2007 was $508.6 compared to $2,464.2 for the nine months ended September 30, 2006. In 2006, we acquired RSA for $2,000.0. Capital additions were $501.5 and $506.1 for the nine months ended September 30, 2007 and 2006, respectively. Capitalized software development costs were $163.4 and $152.6 for the nine months ended 2007 and 2006, respectively. Net sales and maturities of investments were $817.7 and $1,004.3 for 2007 and 2006, respectively. This activity varies from period to period based upon our cash collections, cash requirements and maturity dates of our investments. During the nine months ended September 30, 2007, we received $150.0 in net proceeds from the sale of 6.0 million shares of our interest in VMware to Cisco.

Cash provided by (used in) financing activities was $777.4 and ($235.7) for the nine months ended September 30, 2007 and 2006, respectively. For the nine months ended September 30, 2007 and 2006, we spent $1,102.6 and $2,464.9 to repurchase 73.3 million and 207.7 million shares of our common stock, respectively. In April 2006, our Board of Directors authorized the repurchase of 250.0 million shares of our common stock. Of the 250.0 million shares authorized for repurchase, we have cumulatively repurchased 183.1 million shares at a total cost of $2,300.0, leaving a remaining balance of 66.9 million shares authorized for future repurchases. We plan to spend at least $900.0 on common stock repurchases from October 1, 2007 through March 31, 2008; however, the number of shares purchased and timing of our purchases will be dependent upon a number of factors, including the price of our stock, market conditions, our cash position and alternative demands for our cash resources. We generated $553.3 and $144.6 of cash during the nine months ended September 30, 2007 and 2006, respectively, from the exercise of stock options. Proceeds from the sale of VMware’s Class A common stock in its IPO and to Intel were $1,253.5.

In November 2006, we issued our Notes for total gross proceeds of $3,450.0. The Notes are structurally subordinated to all liabilities of our subsidiaries and are effectively subordinated to our secured indebtedness. As of September 30, 2007, the aggregate amount of liabilities of our subsidiaries was approximately $2,800.0, excluding intercompany liabilities.

We have a credit line of $50.0 in the United States. As of September 30, 2007, we had no borrowings outstanding on the line of credit. The credit line bears interest at the bank’s base rate and requires us, upon utilization of the credit line, to meet certain financial covenants with respect to limitations on losses. In the event the covenants are not met, the lender may require us to provide collateral to secure the outstanding balance. At September 30, 2007, we were in compliance with the covenants.

At September 30, 2007, our total cash, cash equivalents, and short-term and long-term investments were $7,527.3. This balance includes $1,133.9 held by VMware and $2,468.5 held by EMC in overseas entities.

To date, inflation has not had a material impact on our financial results.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K filed with the SEC on February 27, 2007. Our exposure to market risks has not changed materially from that set forth in our Annual Report.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

Item 1A.

RISK FACTORS

The risk factors that appear below could materially affect our business, financial condition and results of operations. The risks and uncertainties described below are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies. The following discussion of risk factors has been revised from the discussion in our Annual Report on Form 10-K to reflect additional risks resulting from VMware’s initial public offering.

Our business could be materially adversely affected as a result of general economic and market conditions.

We are subject to the effects of general global economic and market conditions. If these conditions deteriorate, our business, results of operations or financial condition could be materially adversely affected.

Our business could be materially adversely affected as a result of a lessening demand in the information technology market.

Our revenue and profitability depend on the overall demand for our products and services. Delays or reductions in IT spending, domestically or internationally, could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.

Our customers operate in a variety of markets, including the financial services, credit and housing and construction markets. Any adverse effects to such markets could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.

Competitive pricing, sales volume, mix and component costs could materially adversely affect our revenues, gross margins and earnings.

Our gross margins are impacted by a variety of factors, including competitive pricing, component and product design costs as well as the volume and relative mixture of product and services revenues. Increased component costs, increased pricing pressures, the relative and varying rates of increases or decreases in component costs and product price, changes in product and services revenue mixture or decreased volume could have a material adverse effect on our revenues, gross margins or earnings.

The costs of third-party components comprise a significant portion of our product costs. While we generally have been able to manage our component and product design costs, we may have difficulty managing such costs if supplies of certain components become limited or component prices increase. Any such limitation could result in an increase in our component costs. An increase in component or design costs relative to our product prices could have a material adverse effect on our gross margins and earnings. Moreover, certain competitors may have advantages due to vertical integration of their supply chain, which may include disk drives, microprocessors, memory components and servers.

The markets in which we do business are highly competitive and we encounter aggressive price competition for all of our products and services from numerous companies globally. There also has been and may continue to be a willingness on the part of certain competitors to reduce prices or provide information infrastructure products or services, together with other IT products or services, at minimal or no additional cost in order to preserve or gain market share. Such price competition may result in pressure on our product and service prices, and reductions in product and service prices may have a material adverse effect on our revenues, gross margins and earnings. We currently believe that pricing pressures are likely to continue.

Our financial performance may be impacted by the financial performance of VMware.

Because we consolidate VMware’s financial results in our results of operations, our financial performance may be impacted by the financial performance of VMware. VMware’s financial performance may be affected by a number of factors, including, but not limited to:

•

rates of customer adoption for virtualization solutions;

•

fluctuations in demand, adoption, sales cycles and pricing levels for VMware’s products and services;

•

changes in customers’ budgets for information technology purchases and in the timing of their purchasing decisions;

•

VMware’s ability to compete with existing or new competitors;

•

the timing of recognizing revenue in any given quarter as a result of software revenue recognition policies;

•

the sale of VMware products in the timeframes they anticipate, including the number and size of orders in each quarter;

•

VMware’s ability to develop, introduce and ship in a timely manner new products and product enhancements that meet customer demand, certification requirements and technical requirements;

•

the amount of equity-based compensation expense as a result of VMware equity grants;

•

VMware’s ability to effectively manage future growth and acquisitions;

•

the timing of the announcement or release of products or upgrades by VMware or by its competitors;

•

VMware’s ability to implement scalable systems of internal controls;

•

VMware’s ability to control costs, including its operating expenses;

•

VMware’s ability to attract and retain highly skilled employees, particularly those with relevant experience in software development and sales; and

•

general economic conditions in VMware’s domestic and international markets.

Our stock price is volatile and may be affected by the trading price of VMware Class A common stock and/or speculation about the possibility of future actions we might take in connection with our VMware stock ownership.

Our stock price, like that of other technology companies, is subject to significant volatility because of factors such as:

•

the announcement of acquisitions, new products, services or technological innovations by us or our competitors;

•

quarterly variations in our operating results;

•

changes in revenue or earnings estimates by the investment community; and

•

speculation in the press or investment community.

The trading price of our common stock has been and likely will continue to be affected by various factors related to VMware, including:

•

the trading price for VMware Class A common stock;

•

actions taken or statements made by us, VMware, or others concerning the potential separation of VMware from us, including by spin-off, split-off or sale; and

•

factors impacting the financial performance of VMware, including those discussed in the prior risk factor.

In addition, although we own a majority of VMware and consolidate their results, our stock price may not reflect our pro rata ownership interest of VMware.

If our suppliers are not able to meet our requirements, we could have decreased revenues and earnings.

We purchase or license many sophisticated components and products from one or a limited number of qualified suppliers, including some of our competitors. These components and products include disk drives, high density memory components, power supplies and software developed and maintained by third parties. We have experienced delivery delays from time to time because of high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements. If any of our suppliers were to cancel or materially change contracts or commitments with us or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, be unable to develop or sell certain products cost-effectively or on a timely basis, if at all, and have significantly decreased quarterly revenues and earnings, which would have a material adverse effect on our business, results of operations and financial condition. Additionally, we periodically transition our product line to incorporate new technologies. The importance of transitioning our customers smoothly to new technologies, along with our historically uneven pattern of quarterly sales, intensifies the risk that the failure of a supplier to meet our quality or delivery requirements will have a material adverse impact on our revenues and earnings.

Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.

As part of our business strategy, we seek to acquire businesses that offer complementary products, services or technologies. These acquisitions are accompanied by the risks commonly encountered in an acquisition of a business, which may include, among other things:

•

the effect of the acquisition on our financial and strategic position and reputation

•

the failure of an acquired business to further our strategies

•

the failure of the acquisition to result in expected benefits, which may include benefits relating to enhanced revenues, technology, human resources, cost savings, operating efficiencies and other synergies

•

the difficulty and cost of integrating the acquired business, including costs and delays in implementing common systems and procedures and costs and delays caused by communication difficulties or geographic distances between the two companies’ sites

•

the assumption of liabilities of the acquired business, including litigation-related liability

•

the potential impairment of acquired assets

•

the lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners

•

the diversion of our management’s attention from other business concerns

•

the impairment of relationships with customers or suppliers of the acquired business or our customers or suppliers

•

the potential loss of key employees of the acquired company

•

the potential incompatibility of business cultures

These factors could have a material adverse effect on our business, results of operations or financial condition. To the extent that we issue shares of our common stock or other rights to purchase our common stock in connection with any future acquisition, existing shareholders may experience dilution and our earnings per share may decrease.

In addition to the risks commonly encountered in the acquisition of a business as described above, we may also experience risks relating to the challenges and costs of closing a transaction. Further, the risks described above may be exacerbated as a result of managing multiple acquisitions at the same time.

We also seek to invest in businesses that offer complementary products, services or technologies. These investments are accompanied by risks similar to those encountered in an acquisition of a business.

We may be unable to keep pace with rapid industry, technological and market changes.

The markets in which we compete are characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing needs of customers. There can be no assurance that our existing products will be properly positioned in the market or that we will be able to introduce new or enhanced products into the market on a timely basis, or at all. We spend a considerable amount of money on research and development and introduce new products from time to time. There can be no assurance that enhancements to existing products and solutions or new products and solutions will receive customer acceptance. As competition in the IT industry increases, it may become increasingly difficult for us to maintain a technological advantage and to leverage that advantage toward increased revenues and profits.

Risks associated with the development and introduction of new products include delays in development and changes in data storage, networking virtualization, infrastructure management, information security and operating system technologies which could require us to modify existing products. Risks inherent in the transition to new products include:

•

the difficulty in forecasting customer preferences or demand accurately

•

the inability to expand production capacity to meet demand for new products

•

the impact of customers’ demand for new products on the products being replaced, thereby causing a decline in sales of existing products and an excessive, obsolete supply of inventory

•

delays in initial shipments of new products

Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors, competitors’ responses to the introductions and the desire by customers to evaluate new products for extended periods of time. Our failure to introduce new or enhanced products on a timely basis, keep pace with rapid industry, technological or market changes or effectively manage the transitions to new products or new technologies could have a material adverse effect on our business, results of operations or financial condition.

The markets we serve are highly competitive and we may be unable to compete effectively.

We compete with many companies in the markets we serve, certain of which offer a broad spectrum of IT products and services and others which offer specific information storage, management or virtualization products or services. Some of these companies (whether independently or by establishing alliances) may have substantially greater financial, marketing and technological resources, larger distribution capabilities, earlier access to customers and greater opportunity to address customers’ various IT requirements than us. In addition, as the IT industry consolidates, companies may improve their competitive position and ability to compete against us. We compete on the basis of our products’ features, performance and price as well as our services. Our failure to compete on any of these bases could affect demand for our products or services, which could have a material adverse effect on our business, results of operations or financial condition.

Companies may develop new technologies or products in advance of us or establish business models or technologies disruptive to us. Our business may be materially adversely affected by the announcement or introduction of new products, including hardware and software products and services by our competitors, and the implementation of effective marketing or sales strategies by our competitors. The material adverse effect to our business could include a decrease in demand for our products and services and an increase in the length of our sales cycle due to customers taking longer to compare products and services and to complete their purchases.

We may have difficulty managing operations.

Our future operating results will depend on our overall ability to manage operations, which includes, among other things:

•

retaining and hiring, as required, the appropriate number of qualified employees

•

managing, protecting and enhancing, as appropriate, our infrastructure, including but not limited to, our information systems and internal controls

•

accurately forecasting revenues

•

training our sales force to sell more software and services

•

successfully integrating new acquisitions

•

managing inventory levels, including minimizing excess and obsolete inventory, while maintaining sufficient inventory to meet customer demands

•

controlling expenses

•

managing our manufacturing capacity, real estate facilities and other assets

•

executing on our plans

An unexpected decline in revenues without a corresponding and timely reduction in expenses or a failure to manage other aspects of our operations could have a material adverse effect on our business, results of operations or financial condition.

Our business could be materially adversely affected as a result of war or acts of terrorism.

Terrorist acts or acts of war may cause damage or disruption to our employees, facilities, customers, partners, suppliers, distributors and resellers, which could have a material adverse effect on our business, results of operations or financial condition. Such conflicts may also cause damage or disruption to transportation and communication systems and to our ability to manage logistics in such an environment, including receipt of components and distribution of products.

Our business may suffer if we are unable to retain or attract key personnel.

Our business depends to a significant extent on the continued service of senior management and other key employees, the development of additional management personnel and the hiring of new qualified employees. There can be no assurance that we

will be successful in retaining existing personnel or recruiting new personnel. The loss of one or more key or other employees, our inability to attract additional qualified employees or the delay in hiring key personnel could have a material adverse effect on our business, results of operations or financial condition.

In addition, we have historically used stock options and other equity awards as key elements of our compensation packages for many of our employees. Under recent accounting rules, we are required to treat stock-based compensation as an expense. In addition, changes to regulatory or stock exchange rules and regulations and in institutional shareholder voting guidelines on equity plans may result in additional requirements or limitations on our equity plans. As a result, we may change our compensation practices with respect to the number of shares and type of equity awards used. The value of our equity awards may also be adversely affected by the volatility of our stock price. These factors may impair our ability to attract, retain and motivate employees.

Changes in generally accepted accounting principles may adversely affect us.

In July 2007, the Financial Accounting Standards Board (“FASB”) voted to issue a draft FASB Staff Position (“FSP”) to change the accounting treatment for convertible debt instruments that require or permit partial cash settlement upon conversion. The proposed accounting change would require issuers to separate the bond into two components: a non-convertible bond and a conversion option. The separation of the conversion option would create a discount in the bond component which would be accreted to its face value through interest expense over the term of the bond. This would increase an issuer’s interest rate commensurate with the issuer’s straight debt rate. If the FSP is issued, approved and requires adoption to existing convertible debt instruments, we would recognize incremental interest expense on our convertible debt instruments, negatively impacting our diluted earnings per share.

Our quarterly revenues and earnings could be materially adversely affected by uneven sales patterns and changing purchasing behaviors.

Our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter’s total sales occur in the last month and weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each financial period especially difficult and uncertain and increases the risk of unanticipated variations in quarterly results and financial condition. We believe this uneven sales pattern is a result of many factors including:

•

the relative dollar amount of our product and services offerings in relation to many of our customers’ budgets, resulting in long lead times for customers’ budgetary approval, which tends to be given late in a quarter

•

the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more competitors seeking their business

•

the fourth quarter influence of customers’ spending their remaining capital budget authorization prior to new budget constraints in the first nine months of the following year

•

seasonal influences

Our uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity accordingly. If predicted demand is substantially greater than orders, there will be excess inventory. Alternatively, if orders substantially exceed predicted demand, the ability to assemble, test and ship orders received in the last weeks and days of each quarter may be limited, which could materially adversely affect quarterly revenues and earnings.

In addition, our revenues in any quarter are substantially dependent on orders booked and shipped in that quarter and our backlog at any particular time is not necessarily indicative of future sales levels. This is because:

•

we assemble our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers

•

we generally ship products shortly after receipt of the order

•

customers may reschedule or cancel orders with little or no penalty

Loss of infrastructure, due to factors such as an information systems failure, loss of public utilities or extreme weather conditions, could impact our ability to ship products in a timely manner. Delays in product shipping or an unexpected decline in revenues without a corresponding and timely slowdown in expenses, could intensify the impact of these factors on our business, results of operations and financial condition.

In addition, unanticipated changes in our customers’ purchasing behaviors such as customers taking longer to negotiate and complete their purchases or making smaller, incremental purchases based on their current needs, also make the prediction of revenues, earnings and working capital for each financial period difficult and uncertain and increase the risk of unanticipated variations in our quarterly results and financial condition.

Risks associated with our distribution channels may materially adversely affect our financial results.

In addition to our direct sales force, we have agreements in place with many distributors, systems integrators, resellers and original equipment manufacturers to market and sell our products and services. We may, from time to time, derive a significant percentage of our revenues from such distribution channels. For the quarter ended September 30, 2007, Dell Inc., one of our channel partners, accounted for 15.8% of our revenues. Our financial results could be materially adversely affected if our contracts with channel partners were terminated, if our relationship with channel partners were to deteriorate, if the financial condition of our channel partners were to weaken, if our channel partners are not able to timely and effectively implement their planned actions or if the level of demand for our channel partners’ products and services decreases. In addition, as our market opportunities change, we may have an increased reliance on channel partners, which may negatively impact our gross margins. There can be no assurance that we will be successful in maintaining or expanding these channels. If we are not successful, we may lose sales opportunities, customers and market share. Furthermore, the partial reliance on channel partners may materially reduce the visibility to our management of potential customers and demand for products and services, thereby making it more difficult to accurately forecast such demand. In addition, there can be no assurance that our channel partners will not develop, market or sell products or services in competition with us in the future.

In addition, as we focus on new market opportunities and additional customers through our various distribution channels, including small-to-medium sized businesses, we may be required to provide different levels of service and support than we typically provided in the past. We may have difficulty managing directly or indirectly through our channels these different service and support requirements and may be required to incur substantial costs to provide such services which may adversely affect our business, results of operations or financial condition.

Changes in foreign conditions could impair our international operations.

A substantial portion of our revenues is derived from sales outside the United States. In addition, a substantial portion of our products is manufactured outside of the United States. Accordingly, our future results could be materially adversely affected by a variety of factors, including changes in foreign currency exchange rates, changes in a specific country’s or region’s political or economic conditions, trade restrictions, import or export licensing requirements, the overlap of different tax structures or changes in international tax laws, changes in regulatory requirements, compliance with a variety of foreign laws and regulations and longer payment cycles in certain countries.

Undetected problems in our products could directly impair our financial results.

If flaws in design, production, assembly or testing of our products (by us or our suppliers) were to occur, we could experience a rate of failure in our products that would result in substantial repair, replacement or service costs and potential damage to our reputation. Continued improvement in manufacturing capabilities, control of material and manufacturing quality and costs and product testing are critical factors in our future growth. There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our products will be sufficient to permit us to avoid a rate of failure in our products that results in substantial delays in shipment, significant repair or replacement costs or potential damage to our reputation, any of which could have a material adverse effect on our business, results of operations or financial condition.

Our business could be materially adversely affected as a result of the risks associated with alliances.

We have alliances with leading information technology companies and we plan to continue our strategy of developing key alliances in order to expand our reach into markets. There can be no assurance that we will be successful in our ongoing strategic alliances or that we will be able to find further suitable business relationships as we develop new products and strategies. Any failure to continue or expand such relationships could have a material adverse effect on our business, results of operations or financial condition.

There can be no assurance that companies with which we have strategic alliances, certain of which have substantially greater financial, marketing or technological resources than us, will not develop or market products in competition with us in the future, discontinue their alliances with us or form alliances with our competitors.

Our business may suffer if we cannot protect our intellectual property.

We generally rely upon patent, copyright, trademark and trade secret laws and contract rights in the United States and in other countries to establish and maintain our proprietary rights in our technology and products. However, there can be no assurance that any of our proprietary rights will not be challenged, invalidated or circumvented. In addition, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Therefore, there can be no assurance that we will be able to adequately protect our proprietary technology against unauthorized third-party copying or use, which could adversely affect our competitive position. Further, there can be no assurance that we will be able to obtain licenses to any technology that we may require to conduct our business or that, if obtainable, such technology can be licensed at a reasonable cost.

From time to time, we receive notices from third parties claiming infringement by our products of third-party patent or other intellectual property rights. Responding to any such claim, regardless of its merit, could be time-consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. In the event there is a temporary or permanent injunction entered prohibiting us from marketing or selling certain of our products or a successful claim of infringement against us requiring us to pay royalties to a third party, and we fail to develop or license a substitute technology, our business, results of operations or financial condition could be materially adversely affected.

We may become involved in litigation that may materially adversely affect us.

From time to time in the ordinary course of our business, we may become involved in various legal proceedings, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, there can be no assurance that the results of any of these actions will not have a material adverse effect on our business, results of operations or financial condition.

We may have exposure to additional income tax liabilities.

As a multinational corporation, we are subject to income taxes in both the United States and various foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. From time to time, we are subject to income tax audits. While we believe we have complied with all applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. Should we be assessed with additional taxes, there could be a material adverse effect on our results of operations or financial condition.

Changes in regulations could materially adversely affect us.

Our business, results of operations or financial conditions could be materially adversely affected if laws, regulations or standards relating to us or our products are newly implemented or changed. In addition, our compliance with existing regulations may have a material adverse impact on us. Under applicable federal securities laws, including the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal control structure and procedures for financial reporting. Should we or our independent auditors determine that we have material weaknesses in our internal controls, our results of operations or financial condition may be materially adversely affected or our stock price may decline.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES IN THE THIRD QUARTER OF 2007


Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2007 – July 31, 2007	3,174		$	19.44	—	79,321,763
August 1, 2007 – August 31, 2007	12,608,891		$	18.04	12,441,500	66,880,263
September 1, 2007 – September 30, 2007	5,218		$	20.80	—	66,880,263

Total	12,617,283	⁽²⁾	$	18.05	12,441,500	66,880,263

(1)

Except as noted in note (2), all shares were purchased in open-market transactions pursuant to a previously announced authorization by our Board of Directors in April 2006 to repurchase 250.0 million shares of our common stock. This repurchase authorization does not have a fixed termination date.

(2)

Includes an aggregate of 175,783 shares withheld from employees for the payment of taxes.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5.

OTHER INFORMATION

None.

Item 6.

EXHIBITS

(a) Exhibits

See index to Exhibits on page 43 of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	EMC CORPORATION

Date: November 8, 2007	By:	/s/ DAVID I. GOULDEN
		David I. Goulden
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX


3.1		Restated Articles of Organization of EMC Corporation, as amended. (1)

3.2		Amended and Restated By-laws of EMC Corporation. (2)

4.1		Form of Stock Certificate. (1)

31.1		Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

(1)	Incorporated by reference to EMC Corporation’s Annual Report on Form 10-K filed March 6, 2006 (No. 33-03656).

(2)	Incorporated by reference to EMC Corporation’s Current Report on Form 8-K filed February 16, 2006 (No. 33-03656).