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Table of Contents
ITEM 7. 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 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 "FACTORS THAT MAY AFFECT FUTURE RESULTS" beginning on page 29.
All dollar amounts in this MD&A are in millions, except per share amounts.
The following table presents certain consolidated statement of operations information stated as a percentage of total revenues. Certain columns may not
add due to rounding.
Year Ended December 31,
2002 2001 2000
Revenues
Information storage systems 54.9% 60.7% 70.4%
Information storage software 22.7 22.0 16.2
Information storage services 19.8 13.7 6.9
Total information storage revenue 97.4 96.5 93.5
Other businesses 2.6 3.5 6.5
Total revenue 100.0 100.0 100.0
Cost and expenses
Cost of sales 61.0 59.9 42.1
Research and development 14.4 13.1 8.8
Selling, general and administrative 30.9 31.2 23.7
Restructuring and other special charges 2.8 5.6 —
Operating income (loss) (9.1) (9.8) 25.4
Investment income, interest expense and other expense, net 3.6 1.7 2.1
Income (loss) before income taxes (5.5) (8.1) 27.5
Provision for (benefit from) income taxes (3.3) (0.9) 7.4
Net income (loss) (2.2)% (7.2)% 20.1%
Revenues
Total revenues were $5,438.4, $7,090.6 and $8,872.8 in 2002, 2001 and 2000, respectively, representing decreases of $1,652.2, or 23%, from 2001 to
2002, and $1,782.2, or 20%, from 2000 to 2001.
Information storage systems revenues were $2,985.3, $4,307.2 and $6,245.8 in 2002, 2001 and 2000, respectively, representing decreases of $1,321.9,
or 31%, from 2001 to 2002, and $1,938.6, or 31%, from 2000 to 2001. Both annual decreases were primarily due to declining sales volume and increased
levels of competition. The global economic slowdown, which commenced in 2001 and continued throughout 2002, led to a reduction in information
technology spending. Competitive pricing pressures also had an adverse effect on revenues. Information storage software revenues were $1,233.1, $1,560.0
and $1,435.1 in 2002, 2001 and 2000, respectively, representing a decrease of $326.9, or 21%, from 2001 to 2002, and an increase of $124.9, or 9%, from
2000 to 2001. The decrease in 2002 compared to 2001 was primarily due to declining sales volume caused
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