EMC 2006 Annual Report Download - page 103

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
We believe that the terms of each of these arrangements described above were fair and not less favorable to us than could have been obtained from
unaffiliated parties.
P. Risks and Uncertainties
Our future results of operations involve a number of risks and uncertainties. Factors that could affect our future operating results and cause actual
results to vary materially from expectations include, but are not limited to: adverse changes in general economic or market conditions; delays or reductions in
information technology spending; risks associated with acquisitions and investments, including the challenges and costs of integration, restructuring and
achieving anticipated synergies; competitive factors, including but not limited to pricing pressures and new product introductions; the relative and varying
rates of product price and component cost declines and the volume and mixture of product and services revenues; component and product quality and
availability; the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change;
insufficient, excess or obsolete inventory; war or acts of terrorism; the ability to attract and retain highly qualified employees; fluctuating currency exchange
rates; risks associated with litigation; and other one-time events and other important factors disclosed previously and from time to time in our filings with the
SEC.
Q. Segment Information
Management has organized the business around our offerings. In the fourth quarter of 2006, we realigned our business into four segments: Information
storage, Content management and archiving, VMware virtual infrastructure and RSA information security. We have conformed our prior period presentations
to be consistent with our current segments. Our management measures are designed to assess segment operating performance. As a result, the corporate
reconciling items are used to capture stock-based compensation expense and acquisition related intangible asset amortization expense. Management does not
include these costs in evaluating the performance of its operating segments. Our management makes financial decisions and allocates resources based on
revenues and gross profit achieved at the segment level. We do not allocate selling, general and administrative expenses, research and development expenses
or assets to each segment, as management does not use this information to measure the performance of the operating segments.
The revenue components and gross profit attributable to these segments are set forth in the following tables (tables in thousands, except percentages):
Information
Storage
Content
Management
and Archiving
VMware
Virtual
Infrastructure
RSA
Information
Security
Corporate
Reconciling
Items
Consolidated
2006
Systems revenues $ 5,124,780 $ 8,621 $ — $ 7,225 $ — $ 5,140,626
Software revenues 2,015,257 323,593 494,647 103,919 — 2,937,416
Services revenues 2,468,541 353,576 214,389 40,542 — 3,077,048
Total revenues 9,608,578 685,790 709,036 151,686 — 11,155,090
Cost of sales 4,710,755 225,819 107,025 37,671 160,621 5,241,891
Gross profit $ 4,897,823 $ 459,971 $ 602,011 $ 114,015 $ (160,621) $ 5,913,199
Gross profit percentage 51.0% 67.1% 84.9% 75.2% — 53.0%
2005
Systems revenues $ 4,486,867 $ — $ — $ — $ — $ 4,486,867
Software revenues 2,005,885 228,728 287,546 — — 2,522,159
Services revenues 2,299,441 255,548 99,940 — — 2,654,929
Total revenues 8,792,193 484,276 387,486 — — 9,663,955
Cost of sales 4,198,642 149,488 45,335 — 77,671 4,471,136
Gross profit $ 4,593,551 $ 334,788 $ 342,151 $ — $ (77,671) $ 5,192,819
Gross profit percentage 52.2% 69.1% 88.3% — — 53.7%
2004
Systems revenues $ 3,871,006 $ — $ — $ — $ — $ 3,871,006
Software revenues 1,813,117 192,689 178,309 — — 2,184,115
Services revenues 1,930,921 203,578 39,868 — — 2,174,367
Total revenues 7,615,044 396,267 218,177 — — 8,229,488
Cost of sales 3,807,145 108,986 18,144 — 80,606 4,014,881
Gross profit $ 3,807,899 $ 287,281 $ 200,033 $ — $ (80,606) $ 4,214,607