EMC Reports Record Fourth Quarter and Full Year Results

HOPKINTON, Mass., Jan. 23 /PRNewswire-FirstCall/ -- EMC Corporation , the world leader in information infrastructure solutions, today reported all-time record revenue and strong profit growth for the fourth quarter and full fiscal year 2006. EMC's 14th consecutive quarter of double-digit year- over-year revenue growth was highlighted by better-than-expected revenue and profit performance.

Total consolidated revenue for the fourth quarter was a record $3.215 billion, 19% higher than the $2.710 billion for the fourth quarter of 2005 and $55 million more than the fourth-quarter revenue forecast provided by EMC in October 2006.

GAAP net income for the fourth quarter of 2006 was $389 million or $0.18 per diluted share, which includes a $0.06 per share restructuring charge, a $0.05 per share tax benefit related to prior years and a $0.02 per share tax benefit related to the first three quarters of 2006. Excluding these items, net income for the fourth quarter of 2006 was $0.17 per share, $0.02 higher than the fourth quarter forecast provided by EMC in October 2006. GAAP reported fourth-quarter net income for 2005 was $148 million or $0.06 per diluted share.

Total consolidated revenue for EMC's full 2006 fiscal year was a record $11.155 billion, 15% higher than the $9.664 billion reported for the full 2005 fiscal year.

GAAP net income for 2006 was $1.22 billion or $0.54 per diluted share. Excluding special items discussed below diluted earnings per share for 2006 also was $0.54. GAAP reported net income for 2005 was $1.13 billion or $0.47 per diluted share. Adjusting for special items in both years, and had stock options been expensed in 2005, diluted earnings per share would have increased 35% to $0.54 in 2006 from the $0.40 diluted earnings per share in 2005.

Joe Tucci, EMC Chairman, President and Chief Executive Officer, said, "EMC had another record quarter and a solid finish to 2006. We have now delivered strong, double-digit revenue growth for four straight years and we are well positioned to do it again in 2007."

"EMC has clearly joined the short list of the world's elite information technology suppliers that organizations around the world choose to partner with to drive their business," Tucci continued. "We have focused our entire company on information infrastructure, enabling our customers to put their information to work and better leverage its value. We begin 2007 with the technology portfolio, the strategy and, most importantly, the trust of our customers to help them solve their most pressing issues and gain an even greater share of our $60 billion market opportunity."

During the fourth quarter, EMC achieved double-digit revenue growth across its systems, software and services offerings, and across all four of its major geographies. EMC systems revenue grew 12%; software license and maintenance revenue increased 27%; and professional services, systems maintenance and other services revenue increased 20% compared with the fourth quarter of 2005. Quarterly revenue from North America was up 18%; revenues from Europe, Middle East and Africa grew 22%; revenue from Latin America increased 14%; and revenue from the Asia Pacific and Japan region returned to double-digit growth, increasing 13% compared with the fourth quarter of 2005.

EMC completed the fourth quarter with $5.6 billion in cash and investments. In 2006 the company spent approximately $3.8 billion to purchase 302 million EMC shares and to redeem $125 million in convertible debt.

David Goulden, EMC Executive Vice President and Chief Financial Officer, said, "Looking across our business, we are pleased with how well we performed in the quarter. We achieved solid top- and bottom-line growth, gained market share across each of our four business units, and delivered double-digit revenue growth across all four of our major geographies. We are poised for continued momentum in 2007 as we address our customers' most critical IT priorities."

Fourth-Quarter Highlights

EMC's Information Storage business, which comprises storage systems, information management, information protection and resource management software, and related customer and professional services, increased revenue 9% compared with the year-ago quarter to $2.67 billion on continued demand for the new EMC CLARiiON CX3 UltraScale and EMC Symmetrix DMX-3 networked storage systems. EMC Rainfinity File Virtualization software revenue more than doubled as more and more organizations turned to file virtualization to improve the management and utilization of files and global file systems. EMC Smarts and EMC Networker software continued to gain share on solid, double- digit license revenue growth, reflecting strong customer adoption of EMC's broad portfolio of resource management and backup and recovery software.

The EMC Content Management and Archiving business grew 43% compared with the year-ago quarter to a record $203 million. EMC continues to expand its lead in enterprise content management, as more organizations turn to EMC Documentum software to effectively manage their increasing volumes of unstructured information.

Information security revenues for the fourth quarter -- the first full quarter of operations for RSA, the Security Division of EMC -- grew 26% to $114 million compared with the results reported by the division's constituent companies (RSA Security and Network Intelligence) in the year-ago period. The division's strong performance reflected continued traction for RSA's consumer identity protection solutions as a result of federal guidelines for stronger authentication practices in online banking and concerns over credit card fraud and identity theft. It also demonstrates the early post-acquisition progress that has been made in integrating the division's operations and customers' enthusiastic response to EMC's information-centric approach to securing business information.

VMware, an EMC subsidiary, had its 31st consecutive record quarter and grew total revenues 101% year-over-year to $232 million. VMware has delivered accelerating year-over-year growth for the past five quarters. VMware's exceptional performance was fueled by rapid customer adoption of VMware Infrastructure 3, which began shipping in June 2006. VMware's fourth-quarter momentum and expanding customer base were driven in part by the release of 64- bit support for VMware Infrastructure 3, VMware Lab Manager - an automation suite designed to improve software development processes, and a new virtual appliance marketplace and certification program now delivering more than 380 virtual appliances.

2006 Highlights

EMC had double-digit revenue growth across its systems, software and services offerings in 2006 as organizations turned to EMC's portfolio to better store, protect, optimize and leverage their expanding volumes of information in increasingly complex IT environments.

Systems revenue grew 15% during the year to $5.14 billion, helped by the introduction of new models and enhancements to EMC's entire line of networked storage platforms. Software license and maintenance revenue grew 20% to a record $4.27 billion. Professional services, systems maintenance and other services revenue grew 10% in 2006, as more customers engaged EMC Global Services professionals to help plan, build, manage and support their information infrastructures.

EMC's Information Storage business annual revenue increased 9% in 2006 to $9.6 billion, driven in large part by EMC Symmetrix systems, which had their strongest growth in six years. Annual revenue for EMC's Content Management and Archiving business grew 42% compared to 2005. Had EMC owned RSA and Network Intelligence for all of 2005 and 2006, 2006 annual revenues for the RSA security division would have been up 26% year over year. VMware revenue also achieved accelerated revenue growth throughout the year, increasing revenues 83% to $709 million for 2006.

Business Outlook

The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially. These statements do not give effect to the potential impact of mergers, acquisitions, divestitures or business combinations that may be announced after the date hereof. These statements supersede all prior statements regarding business outlook set forth in prior EMC news releases.

-- Consolidated revenue for 2007 is expected to be at least $12.7 billion, representing 14% growth over 2006. -- GAAP diluted earnings per share for 2007 are expected to be at least $0.64, representing 19% growth over 2006 diluted earnings per share of $0.54. -- The tax rate for 2007 is expected to be in the mid-20s. -- Stock option expense is expected to be approximately $0.09 per diluted share and the cost associated with acquisition amortization is expected to be approximately $0.07 per diluted share. Special Items

The net impact of special items on full-year 2006 EPS was $0.00 per diluted share maintaining diluted earnings per share at $0.54 on both a GAAP and adjusted basis. These items included a:

-- $129 million after-tax net restructuring charge. -- $35 million in-process research and development charge relating to various acquisitions. -- $144 million in tax benefits, primarily from the favorable resolution of income tax audits.

The net impact of special items on full-year 2005 EPS was $0.07 per diluted share, decreasing GAAP diluted earnings per share from $0.47 to $0.40. These items included a:

-- $14 million in-process research and development charge relating to various acquisitions. -- $180 million charge for income taxes related to the repatriation of approximately $3 billion of accumulated income earned abroad. -- $70 million after-tax net restructuring charge. -- $106 million in tax benefits from an income tax settlement. -- $320 million of after-tax stock option expense had EMC expensed options in 2005. About EMC

EMC Corporation is the world's leading developer and provider of information infrastructure technology and solutions that enable organizations of all sizes to transform the way they compete and create value from their information. Information about EMC's products and services can be found at http://www.emc.com/.

EMC, Symmetrix, CLARiiON, Rainfinity, Documentum and Smarts are registered trademarks, and Global File Virtualization, Networker, RecoverPoint, and UltraScale are trademarks of EMC and its subsidiaries. VMware is a registered trademark of VMware Inc. RSA is a registered trademark of RSA. All other trademarks used are the property of their respective owners.

Contact: Greg Eden 508-293-7195 eden_greg@emc.com

This release contains "forward-looking statements" as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) risks associated with acquisitions and investments, including the challenges and costs of integration, restructuring and achieving anticipated synergies; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (vi) component and product quality and availability; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) insufficient, excess or obsolete inventory; (ix) war or acts of terrorism; (x) the ability to attract and retain highly qualified employees; (xi) fluctuating currency exchange rates; and (xii) other one-time events and other important factors disclosed previously and from time to time in EMC's filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this release.

This release contains non-GAAP financial measures. These non-GAAP financial measures, which are used as measures of EMC's performance, should be considered in addition to, not as a substitute for, measures of EMC's financial performance prepared in accordance with GAAP. The reconciliation for the diluted earnings per share for the fourth quarter of 2006 and the fourth quarter of 2005 and diluted earnings per share for 2006 and 2005 are in the tables entitled "Selected Non-GAAP Data" for the quarters and years ended December 31, 2006 and 2005 attached to this release. EMC's non-GAAP financial measures may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures.

As specified, certain non-GAAP financial measures in the accompanying schedule entitled "Selected Non-GAAP Data For the Three Months Ended December 31, 2006" are adjusted for restructuring charges and the tax impact of such restructuring charges and certain tax benefits. Where specified, in the accompanying schedule entitled "Selected Non-GAAP Data For the Year Ended December 31, 2006," in-process research and development charges, restructuring charges, the related tax impact and certain tax benefits are excluded from the non-GAAP financial measures in such schedule. In addition, stock option expense was included, and in-process research and development charges, restructuring charges, the related tax impact and certain tax charges are excluded from the non-GAAP financial measures in the accompanying schedule entitled "Selected Non-GAAP Data For the Three Months Ended December 31, 2005" where specified. Stock option expense was included, and in-process research and development charges, restructuring charges, the related tax impact and certain tax charges are excluded from the non-GAAP financial measures in the accompanying schedule entitled "Selected Non-GAAP Data For the Year Ended December 31, 2005" where specified. Stock option expense, restricted stock expense, intangible amortization, restructuring charges, the related tax impact and certain tax benefits are excluded from the non-GAAP financial measures in the accompanying schedule entitled "Selected Non-GAAP Data For the Three Months Ended December 31, 2006" where specified. Finally, stock option expense, restricted stock expense, intangible amortization, in-process research and development, restructuring charges, the related tax impact and certain tax benefits are excluded from the non-GAAP financial measures in the accompanying schedule entitled "Selected Non-GAAP Data For the Year Ended December 31, 2006" where specified.

EMC's management uses non-GAAP financial measures to gain an understanding of EMC's comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes the above listed expenses from its internal financial statements for purposes of its internal budgets and each reporting segment's financial goals. Non-GAAP financial measures are used by EMC's management in their financial and operating decision-making because management believes they reflect EMC's ongoing business in a manner that allows meaningful period-to-period comparisons. EMC's management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC's current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner the Company's current financial results with the Company's past financial results. These non-GAAP financial measures have limitations, however, because they do not include all items of income and expense that affect EMC's operations. Specifically, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and with respect to the non-GAAP financial measures that exclude stock-based compensation, intangible amortization, in-process research and development, restructuring charges, the related tax impact of each and certain tax charges and benefits, do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC's financial results as determined in accordance with GAAP.

EMC CORPORATION Consolidated Income Statements (in thousands, except per share amounts) Unaudited Three Months Ended Twelve Months Ended ---------------------- --------------------- December 31, December 31, December 31, December 31, 2006 2005 2006 2005 ------------------------ ----------------------- Revenues: Product sales $2,360,262 $2,012,916 $8,078,042 $7,009,026 Services 854,312 697,351 3,077,048 2,654,929 ---------- ---------- ---------- ---------- 3,214,574 2,710,267 11,155,090 9,663,955 Cost and expenses: Cost of product sales 1,111,861 937,638 3,906,771 3,363,017 Cost of services 364,588 288,290 1,335,120 1,108,119 Research and development 358,973 262,470 1,254,193 1,004,829 Selling, general and administrative 913,948 706,358 3,253,274 2,605,977 In-process research and development - 14,270 35,410 17,370 Restructuring charges 166,923 80,504 162,564 84,221 ---------- ---------- ---------- ---------- Operating income 298,281 420,737 1,207,758 1,480,422 Investment income 50,273 55,959 224,949 190,434 Interest expense (25,685) (2,065) (34,123) (7,988) Other expense, net (10,814) (9,691) (8,566) (10,625) ---------- ---------- ---------- ---------- Income before taxes 312,055 464,940 1,390,018 1,652,243 Income tax (benefit) provision (76,714) 316,645 162,664 519,078 ---------- ---------- ---------- ---------- Income before cumulative effect of a change in accounting principle 388,769 148,295 1,227,354 1,133,165 Cumulative effect of a change in accounting principle, net of tax benefit of $808 - - (3,372) - ---------- ---------- ---------- ---------- Net income $388,769 $148,295 $1,223,982 $1,133,165 ========== ========== ========== ========== Net income per weighted average share, basic: Income before cumulative effect of a change in accounting principle $0.18 $0.06 $0.55 $0.48 Cumulative effect of a change in accounting principle - - - - ---------- ---------- ---------- ---------- Net income $0.18 $0.06 $0.54 $0.48 ========== ========== ========== ========== Net income per weighted average share, diluted: Income before cumulative effect of a change in accounting principle $0.18 $0.06 $0.54 $0.47 Cumulative effect of a change in accounting principle - - - - ---------- ---------- ---------- ---------- Net income $0.18 $0.06 $0.54 $0.47 ========== ========== ========== ========== Weighted average shares, basic 2,124,625 2,361,223 2,248,431 2,382,977 Weighted average shares, diluted 2,164,518 2,411,855 2,286,304 2,432,582 As a % of total revenue: Gross margin 54.1% 54.8% 53.0% 53.7% Selling, general and administrative 28.4% 26.1% 29.2% 27.0% Research and development 11.2% 9.7% 11.2% 10.4% Operating income 9.3% 15.5% 10.8% 15.3% Net income 12.1% 5.5% 11.0% 11.7% EMC CORPORATION Selected Non-GAAP Data For the Three Months Ended December 31, 2006 (in thousands, except per share amounts) Unaudited Costs and Expenses --------------------------------------- Selling, General Research and Restruc- Cost of and Adminis- turing Operating Revenue Development trative Charges Income ------- ----------- ------- ------- --------- GAAP $1,476,449 $358,973 $913,948 $166,923 $298,281 Adjustments to reconcile to Non- GAAP: Restructuring Charges (1) - - - (166,923) 166,923 -------- -------- -------- -------- -------- Non-GAAP $1,476,449 $358,973 $913,948 $- $465,204 ======== ======== ======== ======== ======== Net Net Income Income per per Income Weighted Weighted Income Tax Average Average Before Provision Net Share, Share, Tax (Benefit) Income Basic Diluted ------ --------- ------ ----- ------- GAAP $312,055 $(76,714) $388,769 $0.18* $0.18* Adjustments to reconcile to Non-GAAP: Restructuring Charges (1) 166,923 37,833 129,090 0.06 0.06 Tax Benefits (2) - 111,590 (111,590) (0.05) (0.05) ------ ------ ------ ------ ------ Non-GAAP $478,978 $72,709 $406,269 $0.19* $0.19* ====== ====== ====== ====== ====== (1)Represents Q4 06 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (2)Represents income tax benefits consisting primarily of favorable audit resolutions. * Includes a $0.02 income tax benefit relating to the first three quarters of 2006. EMC CORPORATION Selected Non-GAAP Data For the Year Ended December 31, 2006 (in thousands, except per share amounts) Unaudited Costs and Expenses --------------------------------------------------- Selling, In-process General Research Research and and Restruc- Cost of and Adminis- Develop- turing Operating Revenue Development trative ment Charges Income ---------- ----------- ---------- -------- -------- ---------- GAAP $5,241,891 $1,254,193 $3,253,274 $35,410 $162,564 $1,207,758 Adjustments to reconcile to Non-GAAP: In-process Research and Development (1) - - - (35,410) - 35,410 Restructuring Charges (2) - - - - (162,564) 162,564 ---------- ----------- ---------- -------- --------- ---------- Non-GAAP $5,241,891 $1,254,193 $3,253,274 $- $- $1,405,732 ========== ========== ========== ======== ========= ========== Net Net Income Income per per Weighted Weighted Income Income Average Average Before Tax Net Share, Share, Tax Provision Income Basic Diluted ------ --------- ------ ----- ------- GAAP $1,390,018 $162,664 $1,223,982 $0.54 $0.54 Adjustments to reconcile to Non-GAAP: In-process Research and Development (1) 35,410 - 35,410 0.02 0.02 Restructuring Charges (2) 162,564 34,033 128,531 0.06 0.06 Tax Benefits (3) - 144,376 (144,376) (0.06) (0.06) ------- ------- ------- ------- ------- Non-GAAP $1,587,992 $341,073 $1,243,547 $0.55 # $0.54 # ======= ======= ======= ======= ======= (1)Represents in-process research and development charges related to business combinations. (2)Represents Q4 06 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (3)Represents income tax benefits consisting primarily of favorable audit resolutions. # May not foot due to rounding. EMC CORPORATION Selected Non-GAAP Data For the Three Months Ended December 31, 2005 (in thousands, except per share amounts) Unaudited Costs and Expenses --------------------------------------- In-process Research Selling, and General Development Research and and Cost of and Adminis- Restruc- Operating Revenue Development trative turing Income ------- ----------- ------- -------- --------- GAAP $1,225,928 $262,470 $706,358 $94,774 $420,737 Adjustments to reconcile to Non- GAAP: Stock Option Expense (1) 14,140 22,989 48,190 - (85,319) In-process Research and Development (2) - - - (14,270) 14,270 Restructuring Charges (3) - - - (80,504) 80,504 -------- -------- -------- -------- -------- Non-GAAP $1,240,068 $285,459 $754,548 $- $430,192 ======== ======== ======== ======== ======== Net Net Income Income per per Weighted Weighted Income Income Average Average Before Tax Net Share, Share, Tax Provision Income Basic Diluted ------ --------- ------ ----- ------- GAAP $464,940 $316,645 $148,295 $0.06 $0.06 Adjustments to reconcile to Non-GAAP: Stock Option Expense (1) (85,319) (16,807) (68,512) (0.03) (0.03) In-process Research and Development (2) 14,270 - 14,270 0.01 0.01 Restructuring Charges (3) 80,504 14,737 65,767 0.03 0.03 Tax Charges (4) - (180,223) 180,223 0.08 0.07 ------ ------ ------ ------ ------ Non-GAAP $474,395 $134,352 $340,043 $0.14 # $0.14 ====== ====== ====== ====== ====== (1)Represents stock option expense had we expensed stock options in 2005. (2)Represents in-process research and development charges related to business combinations. (3)Represents Q4 05 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (4)Represents tax expense associated with the repatriation under the 2004 American Jobs Creation Act. # May not foot due to rounding. EMC CORPORATION Selected Non-GAAP Data For the Year Ended December 31, 2005 (in thousands, except per share amounts) Unaudited Costs and Expenses -------------------------------------------- In-Process Selling, Research General and Research and Development Cost of and Adminis- and Operating Revenue Development trative Restructuring Income ---------- ----------- -------- ----------- --------- GAAP $4,471,136 $1,004,829 $2,605,977 $101,591 $1,480,422 Adjustments to reconcile to Non-GAAP: Stock Option Expense (1) 69,733 98,051 213,008 - (380,792) In-process Research and Development(2) - - - (14,270) 14,270 Restructuring Charges (3) - - - (86,353) 86,353 ---------- ---------- ---------- -------- ---------- Non-GAAP $4,540,869 $1,102,880 $2,818,985 $968 $1,200,253 ========== ========== ========== ======== ========== Net Net Income Income per per Weighted Weighted Income Income Average Average Before Tax Net Share, Share, Tax Provision Income Basic Diluted ------ --------- ------ ----- ------- GAAP $1,652,243 $519,078 $1,133,165 $0.48 $0.47 Adjustments to reconcile to Non- GAAP: Stock Option Expense (1) (380,792) (61,242) (319,550) (0.13) (0.13) In-process Research and Development (2) 14,270 - 14,270 0.01 0.01 Restructuring Charges (3) 86,353 16,352 70,001 0.03 0.03 Tax Charges (4) - (74,541) 74,541 0.03 0.03 ------- ------- ------- ------- ------- Non-GAAP $1,372,074 $399,647 $972,427 $0.41 # $0.40 # ======= ======= ======= ======= ======= (1)Represents stock option expense had we expensed stock options in 2005. (2)Represents in-process research and development charges related to business combinations. (3)Represents Q4 05 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (4)Represents tax expense associated with the repatriation under the 2004 American Jobs Creation Act, net of income tax benefits consisting primarily of favorable audit resolutions. # May not foot due to rounding. EMC CORPORATION Selected Non-GAAP Data For the Three Months Ended December 31, 2006 (in thousands, except per share amounts) Unaudited Costs and Expenses --------------------------------------- Selling, General Research and Restruc- Cost of and Adminis- turing Operating Revenue Development trative Charges Income ------- ----------- ------- ------- ------- GAAP $1,476,449 $358,973 $913,948 $166,923 $298,281 Adjustments to reconcile to Non- GAAP: Stock Option Expense (1) (13,704) (15,261) (33,329) - 62,294 Restricted Stock Expense (1) (3,210) (12,656) (21,016) - 36,882 Intangible Amortization (2) (27,757) (1,977) (13,931) - 43,665 Restructuring Charges (3) - - - (166,923) 166,923 Tax Benefits (4) - - - - - -------- -------- -------- -------- -------- Non-GAAP $1,431,778 $329,079 $845,672 $- $608,045 ======== ======== ======== ======== ======== Net Net Income Income per per Income Weighted Weighted Income Tax Average Average Before Provision Net Share, Share, Tax (Benefit) Income Basic Diluted ------ --------- ------ ----- ------- GAAP $312,055 $(76,714) $388,769 $0.18 $0.18 Adjustments to reconcile to Non-GAAP: Stock Option Expense (1) 62,294 13,011 49,283 0.02 0.02 Restricted Stock Expense (1) 36,882 12,769 24,113 0.01 0.01 Intangible Amortization (2) 43,665 15,654 28,011 0.01 0.01 Restructuring Charges (3) 166,923 37,833 129,090 0.06 0.06 Tax Benefits (4) - 111,590 (111,590) (0.05) (0.05) ------ ------ ------ ------ ------ Non-GAAP $621,819 $114,143 $507,676 $0.24 # $0.23 ====== ====== ====== ====== ====== (1)Represents equity compensation recognized pursuant to FAS No. 123R "Share-Based Payment". (2)Represents amortization associated with intangible assets acquired in connection with business combinations. (3)Represents Q4 06 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (4)Represents income tax benefits consisting primarily of favorable audit resolutions. # May not foot due to rounding. EMC CORPORATION Selected Non-GAAP Data For the Year Ended December 31, 2006 (in thousands, except per share amounts) Unaudited Costs and Expenses --------------------------------------------------- Selling, In-process General Research Research and and Restruc- Cost of and Adminis- Develop- turing Operating Revenue Development trative ment Charges Income ---------- ----------- ---------- -------- -------- ---------- GAAP $5,241,891 $1,254,193 $3,253,274 $35,410 $162,564 $1,207,758 Adjustments to reconcile to Non-GAAP: Stock Option Expense (1) (56,603) (61,582) (146,950) - - 265,135 Restricted Stock Expense (1) (9,685) (45,899) (77,968) - - 133,552 Intangible Amortization (2) (94,333) (12,600) (46,091) - - 153,024 In-process Research and Development (3) - - - (35,410) 35,410 Restructuring Charges (4) - - - - (162,564) 162,564 ------- ------- ------- ------- ------- ------- Non-GAAP $5,081,270 $1,134,112 $2,982,265 $- $- $1,957,443 ======== ======== ======= ======= ======= ======= Net Net Income Income per per Weighted Weighted Income Income Average Average Before Tax Net Share, Share, Tax Provision Income Basic Diluted ------ --------- ------ ----- ------- GAAP $1,390,018 $162,664 $1,223,982 $0.54 $0.54 Adjustments to reconcile to Non- GAAP: Stock Option Expense (1) 265,135 49,844 218,663 $0.10 0.10 Restricted Stock Expense (1) 133,552 39,518 94,034 $0.04 0.04 Intangible Amortization (2) 153,024 53,967 99,057 $0.04 0.04 In-process Research and Development (3) 35,410 - 35,410 $0.02 0.02 Restructuring Charges (4) 162,564 34,033 128,531 $0.06 0.06 Tax Benefits (5) - 144,376 (144,376) $(0.06) (0.06) ------- ------- ------- ------- ------- Non-GAAP $2,139,703 $484,402 $1,655,301 $0.74 $0.72# ======= ======= ======= ======= ======= (1)Represents equity compensation recognized pursuant to FAS No. 123R "Share-Based Payment". (2)Represents amortization associated with intangible assets acquired in connection with business combinations. (3)Represents in-process research and development charge related to business combinations. (4)Represents Q4 06 restructuring charge net of adjustment to prior years' restructuring programs and the associated tax benefit. (5)Represents income tax benefits consisting primarily of favorable audit resolutions. # May not foot due to rounding. EMC CORPORATION Consolidated Balance Sheets (in thousands, except per share amounts) Unaudited December 31, December 31, 2006 2005 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $1,828,106 $2,322,370 Short-term investments 1,521,925 1,615,495 Accounts and notes receivable, less allowance for doubtful accounts of $39,509 and $38,126 1,692,214 1,405,564 Inventories 834,800 724,751 Deferred income taxes 418,146 326,318 Other current assets 225,396 179,478 -------- -------- Total current assets 6,520,587 6,573,976 Long-term investments 2,246,290 3,417,589 Property, plant and equipment, net 2,035,559 1,754,035 Deferred income taxes 104,446 - Intangible assets, net 1,003,549 563,024 Other assets, net 638,655 598,252 Goodwill, net 6,017,161 3,883,507 -------- -------- Total assets $18,566,247 $16,790,383 ======== ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $680,263 $583,756 Accrued expenses 1,592,022 1,279,857 Income taxes payable 283,148 645,694 Deferred revenue 1,325,671 1,164,551 -------- -------- Total current liabilities 3,881,104 3,673,858 Deferred revenue 780,124 640,598 Deferred income taxes - 175,192 Long-term convertible debt 3,450,000 126,963 Other liabilities 129,312 108,342 Commitments and contingencies Stockholders' equity: Series preferred stock, par value $.01; authorized 25,000 shares, none outstanding - - Common stock, par value $.01; authorized 6,000,000 shares; issued 2,122,339 and 2,384,147 shares 21,223 23,841 Additional paid-in capital 2,564,554 5,867,076 Deferred compensation - (332,311) Retained earnings 7,794,493 6,570,511 Accumulated other comprehensive loss (54,563) (63,687) -------- -------- Total stockholders' equity 10,325,707 12,065,430 -------- -------- Total liabilities and stockholders' equity $18,566,247 $16,790,383 ======== ======== EMC CORPORATION Consolidated Statements of Cash Flows (in thousands) Unaudited Twelve Months Ended --------------------- December 31, 2006 December 31, 2005 ----------------- ----------------- Cash flows from operating activities: Cash received from customers $11,167,249 $9,732,761 Cash paid to suppliers and employees (8,666,586) (7,539,855) Dividends and interest received 258,631 249,208 Interest paid (26,804) (9,132) Income taxes paid (592,066) (216,686) ---------- ---------- Net cash provided by operating activities 2,140,424 2,216,296 ---------- ---------- Cash flows from investing activities: Additions to property, plant and equipment (718,095) (601,145) Capitalized software development costs (192,895) (167,109) Purchases of short and long-term available for sale securities (6,611,698) (12,115,524) Sales and maturities of short and long-term available for sale securities 7,865,264 12,983,911 Business acquisitions, net of cash acquired (2,618,376) (683,663) Other (20,860) (28,155) ---------- ---------- Net cash used in investing activities (2,296,660) (611,685) ---------- ---------- Cash flows from financing activities: Issuance of common stock 257,789 263,296 Purchase of treasury stock (3,655,404) (1,003,419) Excess tax benefits from stock based compensation 20,025 - Payment of long-term and short-term obligations (2,331,587) (3,721) Proceeds from long-term and short- term obligations 5,654,004 220 Purchase of call options (669,076) - Sale of warrants 391,144 - Debt issuance costs (58,863) - ---------- ---------- Net cash used in financing activities (391,968) (743,624) ---------- ---------- Effect of exchange rate changes on cash 53,940 (15,420) ---------- ---------- Net (decrease) increase in cash and cash equivalents (494,264) 845,567 Cash and cash equivalents at beginning of period 2,322,370 1,476,803 ---------- ---------- Cash and cash equivalents at end of period $1,828,106 $2,322,370 ========== ========== Reconciliation of net income to net cash provided by operating activities: Net income $1,223,982 $1,133,165 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of a change in accounting principle 3,372 - Depreciation and amortization 764,162 639,974 Non-cash restructuring and other special charges 75,889 17,370 Stock-based compensation expense 398,687 81,578 Provision for doubtful accounts 10,290 9,750 Deferred income taxes, net (131,966) (3,173) Tax benefit from stock options exercised - 42,593 Excess tax benefits from stock based compensation (20,025) - Other 27,271 56,594 Changes in assets and liabilities, net of acquisitions: Accounts and notes receivable (232,295) (221,507) Inventories (69,567) (180,442) Other assets (31,822) (65,150) Accounts payable 59,631 12,186 Accrued expenses 133,856 153,622 Income taxes payable (297,936) 263,255 Deferred revenue 234,164 280,563 Other liabilities (7,269) (4,082) ---------- ---------- Net cash provided by operating activities $2,140,424 $2,216,296 ========== ========== Non-cash activity: -Issuance of stock options exchanged in business combinations $41,151 $77,645 ========== ========== EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Revenue Components Q1 2005 Q2 2005 Q3 2005 Q4 2005 YTD 2005 -------------------------------------------------------- Revenues Systems $1,025,971 $1,068,725 $1,091,881 $1,300,290 $4,486,867 Software: Software License 594,532 619,605 595,396 712,626 2,522,159 Software Maintenance 237,894 258,622 269,145 287,587 1,053,248 -------------------------------------------------------- Total Software License & Maintenance 832,426 878,227 864,541 1,000,213 3,575,407 Professional, Systems Maintenance and Other Services 374,609 389,359 402,087 402,830 1,568,885 2,233,006 2,336,311 2,358,509 2,703,333 9,631,159 Other Businesses 10,125 8,504 7,233 6,934 32,796 -------------------------------------------------------- Total Consolidated Revenues $2,243,131 $2,344,815 $2,365,742 $2,710,267 $9,663,955 ======================================================== Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year 1.7% 1.7% 0.6% (0.5)% 0.8% EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Revenue Components Q1 2006 Q2 2006 Q3 2006 Q4 2006 YTD 2006 ----------------------------------------------------------- Revenues Systems $1,226,928 $1,151,600 $1,299,321 $1,462,777 $5,140,626 Software: Software License 621,602 681,998 736,331 897,485 2,937,416 Software Maintenance 303,202 315,189 345,650 371,163 1,335,204 ----------------------------------------------------------- Total Software License & Maintenance 924,804 997,187 1,081,981 1,268,648 4,272,620 Professional, Systems Maintenance and Other Services 396,081 423,525 431,989 481,471 1,733,066 2,547,813 2,572,312 2,813,291 3,212,896 11,146,312 Other Businesses 2,874 2,211 2,015 1,678 8,778 ----------------------------------------------------------- Total Consolidated Revenues $2,550,687 $2,574,523 $2,815,306 $3,214,574 $11,155,090 =========================================================== Percentage impact to EMC revenue growth rate due to changes in exchange rates from the prior year (2.1)% (1.1)% 0.7% 1.4% 0.2% EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Supplemental Revenue Data Q1 2005 Q2 2005 Q3 2005 ---------------------------------- Total Storage Revenue $2,050,488 $2,144,880 $2,143,799 ================================== ---------------------------------- Total Content Management and Archiving Revenue $112,553 $109,008 $120,683 ================================== ---------------------------------- Total Security Revenue $- $- $- ================================== ---------------------------------- Total VMware Revenue $80,090 $90,927 $101,260 ================================== Symmetrix Hardware and Software Revenue (a) $652,328 $677,655 $633,308 CLARiiON Hardware and Software Revenue (a) 418,641 430,960 425,375 Connectivity Revenue (b) 176,053 188,189 226,829 Platform Software License Revenue $284,485 $312,827 $284,446 Platform Software Maintenance Revenue 100,064 104,601 109,727 ---------------------------------- Total Platform Revenue $384,549 $417,428 $394,173 ================================== Multi-platform Software License Revenue: Resource Management Software License Revenue $146,708 $151,833 $141,002 Backup and Archive Software License Revenue 51,742 49,877 50,467 Content Management Software License Revenue 49,302 39,160 47,637 ---------------------------------- Total Multi-platform Software License Revenue $247,752 $240,870 $239,106 Multi-platform Software Maintenance Revenue 125,371 134,476 137,196 ---------------------------------- Total Multi-platform Software License and Maintenance Revenue $373,123 $375,346 $376,302 ================================== VMware Software License Revenue $62,295 $65,908 $71,844 VMware Maintenance and Services Revenue 17,795 25,019 29,416 ---------------------------------- Total VMware Revenue $80,090 $90,927 $101,260 ================================== (a) Includes hardware, hardware upgrades and platform software. (b) Includes Connectrix fibre channel switch/director revenues, Celerra file server revenue, exclusive of disk revenue, Rainstorage product revenues and Invista product revenues. EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Supplemental Revenue Data Q4 2005 YTD 2005 ---------------------------- Total Storage Revenue $2,453,026 $8,792,193 ============================ ---------------------------- Total Content Management and Archiving Revenue $142,032 $484,276 ============================ ---------------------------- Total Security Revenue $- $- ============================ ---------------------------- Total VMware Revenue $115,209 $387,486 ============================ Symmetrix Hardware and Software Revenue (a) $754,345 $2,717,636 CLARiiON Hardware and Software Revenue (a) 518,729 1,793,705 Connectivity Revenue (b) 242,992 834,063 Platform Software License Revenue $333,442 $1,215,200 Platform Software Maintenance Revenue 116,182 430,574 ---------------------------- Total Platform Revenue $449,624 $1,645,774 ============================ Multi-platform Software License Revenue: Resource Management Software License Revenue $167,404 $606,947 Backup and Archive Software License Revenue 59,881 211,967 Content Management Software License Revenue 64,400 200,499 ---------------------------- Total Multi-platform Software License Revenue $291,685 $1,019,413 Multi-platform Software Maintenance Revenue 149,258 546,301 ---------------------------- Total Multi-platform Software License and Maintenance Revenue $440,943 $1,565,714 ============================ VMware Software License Revenue $87,499 $287,546 VMware Maintenance and Services Revenue 27,710 99,940 ---------------------------- Total VMware Revenue $115,209 $387,486 ============================ (a) Includes hardware, hardware upgrades and platform software. (b) Includes Connectrix fibre channel switch/director revenues, Celerra file server revenue, exclusive of disk revenue, Rainstorage product revenues and Invista product revenues. EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Supplemental Revenue Data Q1 2006 Q2 2006 Q3 2006 ---------------------------------- Total Storage Revenue $2,252,354 $2,250,909 $2,439,699 ================================== ---------------------------------- Total Content Management and Archiving Revenue $167,320 $166,122 $149,352 ================================== ---------------------------------- Total Security Revenue $- $- $37,755 ================================== ---------------------------------- Total VMware Revenue $131,013 $157,492 $188,500 ================================== Symmetrix Hardware and Software Revenue (a) $718,356 $676,649 $763,770 CLARiiON Hardware and Software Revenue (a) 472,003 446,511 501,704 Connectivity Revenue (b) 204,113 211,713 234,844 Platform Software License Revenue $272,819 $291,059 $313,662 Platform Software Maintenance Revenue 124,057 118,883 124,005 ---------------------------------- Total Platform Revenue $396,876 $409,942 $437,667 ================================== Multi-platform Software License Revenue: Resource Management Software License Revenue $136,467 $150,652 $165,455 Backup and Archive Software License Revenue 40,797 56,218 51,875 Content Management Software License Revenue 79,675 70,234 52,779 ---------------------------------- Total Multi-platform Software License Revenue $256,939 $277,104 $270,109 Multi-platform Software Maintenance Revenue 149,534 162,711 166,550 ---------------------------------- Total Multi-platform Software License and Maintenance Revenue $406,473 $439,815 $436,659 ================================== VMware Software License Revenue $91,844 $113,835 $125,476 VMware Maintenance and Services Revenue 39,169 43,657 63,024 ---------------------------------- Total VMware Revenue $131,013 $157,492 $188,500 ================================== (a) Includes hardware, hardware upgrades and platform software. (b) Includes Connectrix fibre channel switch/director revenues, Celerra file server revenue, exclusive of disk revenue, Rainstorage product revenues and Invista product revenues. EMC Corporation Supplemental Financial Data Revenue Analysis (in thousands) Unaudited Supplemental Revenue Data Q4 2006 YTD 2006 ---------------------------- Total Storage Revenue $2,665,616 $9,608,578 ============================ ---------------------------- Total Content Management and Archiving Revenue $202,996 $685,790 ============================ ---------------------------- Total Security Revenue $113,931 $151,686 ============================ ---------------------------- Total VMware Revenue $232,031 $709,036 ============================ Symmetrix Hardware and Software Revenue (a) $781,357 $2,940,132 CLARiiON Hardware and Software Revenue (a) 611,781 2,031,999 Connectivity Revenue (b) 274,383 925,053 Platform Software License Revenue $324,690 $1,202,230 Platform Software Maintenance Revenue 128,972 495,917 ---------------------------- Total Platform Revenue $453,662 $1,698,147 ============================ Multi-platform Software License Revenue: Resource Management Software License Revenue $168,596 $621,170 Backup and Archive Software License Revenue 67,102 215,992 Content Management Software License Revenue 96,769 299,457 ---------------------------- Total Multi-platform Software License Revenue $332,467 $1,136,619 Multi-platform Software Maintenance Revenue 170,258 649,053 ---------------------------- Total Multi-platform Software License and Maintenance Revenue $502,725 $1,785,672 ============================ VMware Software License Revenue $163,492 $494,647 VMware Maintenance and Services Revenue 68,539 214,389 ---------------------------- Total VMware Revenue $232,031 $709,036 ============================ (a) Includes hardware, hardware upgrades and platform software. (b) Includes Connectrix fibre channel switch/director revenues, Celerra file server revenue, exclusive of disk revenue, Rainstorage product revenues and Invista product revenues.