EMC 2008 Annual Report Download - page 26

Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations should be read in conjunction with our
consolidated financial statements and notes thereto which appear elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-
looking statements and should also be read in conjunction with the risk factors set forth in Item 1A. 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.
All dollar amounts expressed numerically in this 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.
EMC Information 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 grow faster than the markets we serve by investing in the business
for sustainable advantage.
To further improve the competitiveness and efficiency of our global business in response to a challenging global economy, in the fourth quarter of 2008,
we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. We expect the program to reduce
costs from our 2008 rate by approximately $350 in 2009, increasing to approximately $500 in 2010. The program's focus is to consolidate back office
functions, field and campus offices, rebalance investments towards higher-growth products and markets, reduce management layers, and further reduce
indirect spend on contractors, third-party services and travel. The restructuring program will reduce our global Information Infrastructure workforce by
approximately 2,400 positions. The program is expected to favorably impact our cost of sales, selling, general & administrative ("SG&A") and research &
development ("R&D") expenses. For 2009, we estimate that approximately a third of these reductions will be to our cost of sales and the remaining two thirds
will be to our other operating expenses.
The program's expected savings will come from both cost reductions and the transformation of several areas of our operational cost structure. As part of
the program, we are undertaking several initiatives to transform the structural efficiency of our operations worldwide. These initiatives will include the
consolidation and movement of various facilities and processes beginning in 2009 and to be completed by the end of 2010. As part of these transformation
efforts, we expect to incur additional non-recurring costs of approximately $75 to $100 over this period. These investments are necessary to implement the
new, more efficient capabilities ahead of transitioning from the existing cost structure.
As a result of the program, we recognized a restructuring charge of $247.9 in the fourth quarter of 2008. We expect to record additional restructuring
charges of approximately $100 to $125 across 2009 and 2010.
We expect the global economic situation to have a negative impact on IT spending in 2009. Our best estimate is that 2009 global IT spending will decline
as a percentage in the mid to high single digits compared with 2008. We expect the markets that we address will perform slightly better than the overall IT
market. We also expect that a higher than usual percentage of the full-year IT spending will take place in the second half of the year.
VMware Virtual Infrastructure
Our VMware Virtual Infrastructure business has achieved significant revenue growth to date by focusing on delivering new virtual infrastructure
software solutions technology and products, expanding its network of technology and distribution partners, increasing product awareness, promoting the
adoption of virtualization and building long-term relationships with its customers through the adoption of enterprise license agreements.
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