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EMC CORP (EMC)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/04/2005
Filed Period 12/31/2004

Table of contents

  • Page 1
    EMC CORP (EMC) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/04/2005 Filed Period 12/31/2004

  • Page 2
    ... Employer Identification Number) Common Stock, par value $.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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...

  • Page 3
    ... About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors and Executive Officers of the Registrant Executive Compensation Security Ownership...

  • Page 4
    ... government agencies. Our customers use our products and services in conjunction with a variety of computing platforms, storage systems and software applications that support key business processes including transaction processing, enterprise resource planning, customer relationship management, data...

  • Page 5
    ...offer customers higher performance at the same price as previous CLARiiON models and new, cost-effective replication options. We also introduced the EMC CLARiiON Disk Library, which combines the power and reliability of CLARiiON technology with cost-efficient ATA disk drives and 100% compatible tape...

  • Page 6
    ... and manage huge numbers of objects. In 2004, we introduced several enhancements to Centera, including mainframe connectivity, improved performance, active archiving and data replication capabilities. We also introduced new Centera features to address key information management and storage-related...

  • Page 7
    ... generally controls and enables functions that take place within the EMC networked storage system, such as replication, optimization and data movement. We are the leading supplier of platform-based software for local and remote replication, which customers use to protect and share data. In 2004...

  • Page 8
    ..., storage management, strategy, data migration, business continuity and project management. Our consultants, technology experts and Authorized Services Network (ASN) partners deliver to customers operational, financial and business impact analyses and they design, integrate and implement information...

  • Page 9
    ...manufacturing and test facilities in Massachusetts, North Carolina and Ireland are certified to ISO 14001, the International Standard for environmental management systems. We also maintain Support Center Practices (SCP) certification for our customer support centers. These internationally recognized...

  • Page 10
    ..., connectivity, time to market enhancements and total value of ownership. We believe our advantages in distribution include the world's largest information management and storage-focused direct sales force and a broad network of channel partners. We believe our advantages in service include...

  • Page 11
    ... Business Conduct Guidelines (code of business conduct and ethics) are available at www.emc.com/about/governance. Copies also will be provided to any shareholder upon written request to EMC Corporation, Investor Relations, 176 South Street, Hopkinton, MA 01748 or by contacting EMC Investor Relations...

  • Page 12
    ... products ** ** ** information storage products ** VMware products and services EMC Software Group products and services EMC Software Group products and services EMC Software Group products and services Milford, MA Southborough, MA Westborough, MA Apex, NC Research Triangle Park, NC Palo Alto, CA...

  • Page 13
    ... heard. The court's ruling on such motions is currently pending. On October 27, 2004, a second complaint was filed by HP against us in the same court based on six of the seven patents asserted in the First HP Lawsuit (the "Second HP Lawsuit"). The Second HP Lawsuit was filed shortly after the court...

  • Page 14
    ...Director Executive Vice President, EMC Software Group and President of Documentum and Legato Executive Vice President, Storage Platforms Operations Executive Vice President, Corporate Marketing, Office of Technology and New Business Development Executive Vice President, Customer Operations Executive...

  • Page 15
    ..., Open Software Operations, from July 2003 to July 2004 and as Executive Vice President, New Ventures and Chief Technology Officer from July 2002 to July 2003. Prior to joining EMC, Mr. Lewis served as Vice President of Worldwide Marketing and Solutions in the Network Storage Solutions Group at...

  • Page 16
    ... and as General Counsel of EMC from March 1990 to February 1993. AutoSwap, EMC, CLARiiON, Celerra, Centera, Connectrix, DatabaseXtender, Direct Matrix Architecture, DMX, Documentum, EMC ControlCenter, EMC Proven, EDM, EmailXtender, LEGATO, NetWin, Open Replicator, SRDF, Symmetrix, VMware are either...

  • Page 17
    ... II MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ITEM 5. Our common stock, par value $.01 per share, trades on the New York Stock Exchange under the symbol EMC. The following table sets forth the range of high and low sales prices...

  • Page 18
    ... $ In 2003, EMC acquired all of the outstanding shares of LEGATO and Documentum (see Note B to the financial statements). In 2004, EMC acquired all of the outstanding shares of VMware (see Note B to the financial statements). Includes long-term convertible debt and capital leases, excluding current...

  • Page 19
    ... table presents certain consolidated statement of operations information stated as a percentage of total revenues. Certain columns may not add due to rounding. 2004 2003 2002 Total revenue Cost and expenses Cost of sales Gross margin Research and development Selling, general and administrative...

  • Page 20
    ...maintenance contracts associated with increases in sales of information storage products. Additionally, increased demand for professional services, largely to support and implement information lifecycle management-based solutions, contributed to the increases in 2004 and 2003. The EMC Software Group...

  • Page 21
    ...customer orders received in 2002. Changes in exchange rates favorably impacted revenue growth by 3.7% in each of 2004 and 2003. The impact of the change in rates in 2004 and 2003 was most significant in the European market, primarily Germany, the United Kingdom, Italy and France. At the time of sale...

  • Page 22
    ... Gross margins: Information storage products Information storage and management services EMC Software Group products and services VMware products and services Other businesses Total gross margin Operating expenses: Research and development Selling, general and administrative Restructuring and other...

  • Page 23
    ... software development, which costs were capitalized. R&D spending includes enhancements to our software and information storage systems. The increase in R&D expenses in 2004 compared to 2003 was primarily attributable to the increased salaries and related costs from the LEGATO, Documentum and VMware...

  • Page 24
    ... R&D ("IPR&D") charges associated with acquisitions ($15.2 related to VMware) and $38.7 of restructuring charges. The 2004 restructuring programs consisted of $24.5 of employee termination benefits associated with reductions in force and $2.1 of costs associated with vacating excess facilities. The...

  • Page 25
    ...amount exceeded its fair value, measured as the present value of its estimated discounted cash flows. The impaired asset is classified within our EMC Software Group products and services segment. The workforce reduction impacted approximately 200 employees across our major business functions and all...

  • Page 26
    ... discounted cash flows. The impairment charge relating to the assets used within our Data General's services business were determined by comparing the expected sales proceeds to the assets' carrying value. The impaired assets were classified within the information storage and management services...

  • Page 27
    .... We invest our excess cash in U.S. government and agency obligations, U.S. corporate debt securities, asset and mortgage-backed securities, bank loans, auction rate securities and foreign debt securities. At December 31, 2004, the fair value of our short and long-term investments was $5,964...

  • Page 28
    ..., respectively. The acquisitions of LEGATO and Documentum in 2003, VMware in 2004 and general growth of the business accounted for the headcount increases. Additionally, greater levels of component purchases to meet customer demand for information storage systems in 2004 and 2003 contributed to the...

  • Page 29
    ....8 of post-retirement benefit obligations and $30.9 of long term lease obligations for excess facilities. The purchase orders are for manufacturing and non-manufacturing related goods and services. While the purchase orders are generally cancelable without penalty, certain vendor agreements provide...

  • Page 30
    ... of EMC, its employees, agents or representatives. We have procurement or license agreements with respect to technology that is used in our products and agreements in which we obtain rights to a product from an OEM. Under some of these agreements, we have agreed to indemnify the supplier for...

  • Page 31
    ... insurance benefits for retired former Data General employees. The plan's assets are invested in common stocks and bonds. The market related value of the plan's assets is equal to the assets' fair value. The expected long-term rate of return on the plan's assets for the year ended December 31, 2004...

  • Page 32
    ... and Certain Production-Type Contracts," among others. The application of the appropriate accounting principle to our revenue is dependent upon the specific transaction and whether the sale or lease includes systems, software and services or a combination of these items. As our business evolves, the...

  • Page 33
    ... impact on the underlying value of the stock options, which could have a material impact on our financial statements. New Accounting Pronouncements In March 2004, the Financial Accounting Standards Board ("FASB") approved the consensus reached on the Emerging Issues Task Force Issue ("EITF") No. 03...

  • Page 34
    ... equity accounts. Additionally, common stock purchased pursuant to stock options granted under our employee stock purchase plan will be expensed based upon the fair market value of the stock option. The statement also allows for a modified version of retrospective application to periods before...

  • Page 35
    ... with international trade protocols by the European Union. In December 2004, the FASB issued FASB Staff Position ("FSP") No. 109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities by the American Jobs Creation Act of 2004...

  • Page 36
    ... 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...

  • Page 37
    ... 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...

  • Page 38
    ...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...

  • Page 39
    ... number of qualified employees managing, protecting and enhancing, as appropriate, our infrastructure, including but not limited to, our information systems accurately forecasting revenues training our sales force to sell more software and services successfully integrating new acquisitions managing...

  • Page 40
    ...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...

  • Page 41
    ... 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...

  • Page 42
    ..., 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 speculation in the press or investment community In addition, our stock price is affected by general...

  • Page 43
    ... loss in fair value that could arise from changes in market conditions, using a 95% confidence level and assuming a one-day holding period. The value-at-risk on the combined foreign exchange position was $0.7 million as of December 31, 2004 and $0.5 million as of December 31, 2003. The average, high...

  • Page 44
    ...the fair market value of the loaned securities. The collateral is generally cash, U.S. government-backed securities or letters of credit. At December 31, 2004, there were no outstanding securities lending transactions. The counterparties to our foreign currency exchange contracts consist of a number...

  • Page 45
    Table of Contents The credit risk associated with accounts and notes receivables is low due to the large number of customers and their broad dispersion over many different industries and geographic areas. We establish an allowance for the estimated uncollectible portion of our accounts and notes ...

  • Page 46
    Table of Contents ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA EMC CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated ...

  • Page 47
    ... financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management...

  • Page 48
    ... and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all...

  • Page 49
    ... are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide...

  • Page 50
    Table of Contents EMC CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, 2004 2003 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts and notes receivable, less allowance for doubtful accounts of $39,901 and $39,482 ...

  • Page 51
    Table of Contents EMC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) For the Year Ended December 31, 2003 2004 2002 Revenues: Product sales Services Costs and expenses: Cost of product sales Cost of services Research and development Selling, general ...

  • Page 52
    Table of Contents EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2004 2003 2002 Cash flows from operating activities: Cash received from customers Cash paid to suppliers and employees Dividends and interest received Interest paid Income taxes (...

  • Page 53
    Table of Contents EMC CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Common Stock Shares Par Value Additional Paid-in Capital Deferred Compensation Retained Earnings Other Comprehensive Income (Loss) Treasury Stock Shares Cost Stockholders' Equity Balance, January 1, ...

  • Page 54
    Table of Contents EMC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) For the Year Ended December 31, 2004 2003 2002 Net income (loss) Other comprehensive income (loss), net of taxes (benefit): Foreign currency translation adjustments, net of taxes of $4,979, $7,...

  • Page 55
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Summary of Significant Accounting Policies Company EMC Corporation and its subsidiaries offer a wide range of systems, software, services and solutions that help organizations get more value from their information and ...

  • Page 56
    ... sales consist of the sale of software application programs. Our software products provide customers with information management, content management, sharing, protection and server virtualization capabilities. Revenue for software is generally recognized upon shipment or electronic delivery. License...

  • Page 57
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS determined based upon the price charged when the element is sold separately. Fair value of software support services may also be measured by the renewal rate offered to the customer. In the absence of fair value for a ...

  • Page 58
    ... offsetting changes in fair value attributed to the hedged risk during the period that the hedge is designated. Further, an assessment of effectiveness is required whenever financial statements or earnings are reported. Absent meeting these criteria, changes in fair value are recognized currently...

  • Page 59
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Investments Our investments are comprised primarily of debt securities that are classified as available-for-sale and recorded at their fair market value. Investments with remaining maturities of less than twelve months ...

  • Page 60
    ... (loss) 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 and convertible debt. Retirement/ Post Employment Benefits Pension cost for our...

  • Page 61
    ...% of the fair market value of the loaned securities. The collateral is generally cash, U.S. government-backed securities or letters of credit. At December 31, 2004, there were no outstanding securities lending transactions. We provide credit to customers in the normal course of business. Credit is...

  • Page 62
    ...44 3.69 The weighted average fair value of stock options granted below fair market value were as follows: 2004 2003 2002 New Accounting Pronouncements In March 2004, the Financial Accounting Standards Board ("FASB") approved the consensus reached on the Emerging Issues Task Force Issue ("EITF") No...

  • Page 63
    ... equity accounts. Additionally, common stock purchased pursuant to stock options granted under our employee stock purchase plan will be expensed based upon the fair market value of the stock option. The statement also allows for a modified version of retrospective application to periods before...

  • Page 64
    ... operations of our customers and supports our overall information lifecycle management strategy. The aggregate purchase price, net of cash received, was approximately $613.1 million, which consisted of $539.4 million of cash, $72.0 million in fair value of our stock options and $1.7 million of...

  • Page 65
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS estimated using a Black-Scholes option-pricing model. The fair value of the stock options was estimated assuming no expected dividends and the following weighted-average assumptions: Expected life (in years) Expected ...

  • Page 66
    ... 2004. The liability will be paid over the remaining lease periods through 2007. Acquisition of LEGATO Systems, Inc. In October 2003, we acquired all of the shares of outstanding common stock of LEGATO Systems, Inc. ("LEGATO"). LEGATO developed, marketed and supported software products and services...

  • Page 67
    ...products and services. The fair value of intangible assets was primarily based upon the income approach. The rate used to discount the net cash flows to their present values was based upon a weighted average cost of capital of 16%. The discount rate was determined after consideration of market rates...

  • Page 68
    ...our stock options issued to employees was estimated using a Black-Scholes option pricing model. The fair value of the stock-options was estimated assuming no expected dividends and the following weighted-average assumptions: Expected life (in years) Expected volatility Risk free interest rate 4.0 60...

  • Page 69
    ...future demand of Documentum's products and services. The fair value of intangible assets was primarily based upon the income approach. The rate used to discount the net cash flows to their present values was based upon a weighted average cost of capital of 15%. The discount rate was determined after...

  • Page 70
    ...STATEMENTS to pay the remaining balance for involuntary termination benefits through 2006. The liability for leases will be paid over the remaining lease terms through 2008. The following summarizes the obligations recognized in connection with the Documentum acquisition and activity to date (tables...

  • Page 71
    ...TO CONSOLIDATED FINANCIAL STATEMENTS Intangible Assets Intangible assets, excluding goodwill as of December 31, 2004 and 2003, consist of (tables in thousands): 2004 Category Gross Carrying Amount Accumulated Amortization Net Book Value Purchased technology Patents Software licenses Trademarks and...

  • Page 72
    ... 2004 EMC Information Software VMware Storage Group Products and Management Products and and Services Services Services Information Storage Products Other Businesses Total Balance, beginning of the year Goodwill acquired Tax deduction from exercise of stock options Finalization of purchase price...

  • Page 73
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The 2003 charge consisted of $29.1 million of IPR&D charges associated with the LEGATO and Documentum acquisitions, $18.6 million of employee termination benefits associated with reductions in force, $2.8 million ...

  • Page 74
    ...amount exceeded its fair value, measured as the present value of its estimated discounted cash flows. The impaired asset is classified within our EMC Software Group products and services segment. The workforce reduction impacted approximately 200 employees across our major business functions and all...

  • Page 75
    ... discounted cash flows. The impairment charge relating to the assets used within our Data General's services business was determined by comparing the expected sales proceeds to the assets' carrying value. The impaired assets were classified within the information storage and management services...

  • Page 76
    ... EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The activity for the 2001 restructuring program for the years ended December 31, 2004, 2003 and 2002 is presented below (tables in thousands): 2004 Category Beginning Balance Adjustment to the Provision During 2004 Utilization During 2004...

  • Page 77
    ... to appropriate market conditions. The expected cash impact of the charges is $439.5 million, of which $347.6 million was paid in 2001 through 2004. The remaining accrual balances primarily relate to the consolidation of facilities that will be paid over the respective lease terms through 2012...

  • Page 78
    ... (107) $ 19,158 14,607 33,765 The balances as of December 31, 2004 relates to executive severance and a remaining lease obligation that will be paid through 2015. D. Convertible Debt In April 2002, Documentum sold $125.0 million in senior convertible notes that mature on April 1, 2007 (the "Notes...

  • Page 79
    ...tables in thousands). Fair value was determined based upon quoted market prices for the security. December 31, 2004 Amortized Cost Basis Aggregate Fair Value U.S. government and agency obligations U.S. corporate debt securities Asset and mortgage-backed securities Bank loans Auction rate securities...

  • Page 80
    ...follows (table in thousands): Less Than 12 Months Gross Unrealized Fair Value Losses 12 Months or Greater Gross Unrealized Fair Value Losses Total Fair Value Gross Unrealized Losses U.S. government and agency obligations U.S. corporate debt securities Asset and mortgage-backed securities Bank loans...

  • Page 81
    ... from sales-type leases of our products. The payment schedule for such notes at December 31, 2004 is as follows (table in thousands): 2005 2006 2007 2008 2009 Face value Less amounts representing interest Present value Current portion (included in accounts and notes receivable) Long-term portion...

  • Page 82
    ... 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): 2004 Year...

  • Page 83
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The current year accrual includes amounts accrued for systems at the time of shipment, adjustments within the year for changes in estimated costs for warranties on systems shipped in the year and changes in estimated costs...

  • Page 84
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS our income tax rate in the United States. Partially offsetting this benefit for 2004 were non-deductible IPR&D charges of $17.4 million incurred in connection with acquisitions. We did not derive a tax benefit from these ...

  • Page 85
    ... benefits under the plan. The measurement date for the plans is December 31. Our investment policy provides that no security, except issues of the U.S. Government, shall comprise more than 5% of total plan assets, measured at market. At December 31, 2004, the Data General U.S. pension plan held...

  • Page 86
    ... Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Data General U.S. pension plan and certain foreign retirement plans (the "Pension Plans") are summarized in the following tables. The components of the change in benefit obligation of the Pension Plans are as follows (table in...

  • Page 87
    ...: December 31, 2004 December 31, 2003 December 31, 2002 Discount rate Expected long-term rate of return on plan assets Rate of compensation increase 5.7% 8.2% N/A 6.1% 8.2% N/A 6.4% 8.4% N/A The weighted-average assumptions used in the Pension Plans to determine periodic benefit cost for the...

  • Page 88
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The benefit payments are expected to be paid in the following years (table in thousands): 2005 2006 2007 2008 2009 Years 2010-2014 Post Retirement Medical and Life Insurance Plan Our post-retirement benefit plan, which was assumed in connection...

  • Page 89
    ... post-retirement medical and life insurance plan will be immaterial. The weighted-average assumptions used in the plan to determine benefit obligations at December 31 are as follows: December 31, 2004 December 31, 2003 December 31, 2002 Discount rate Expected long-term rate of return on plan assets...

  • Page 90
    ... EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The effects of a one percent change in the assumed health care cost trend rates are as follows (table in thousands): 1% increase 1% decrease Effect on total service and interest cost components for 2004 Effect on year-end post retirement...

  • Page 91
    ... of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our future lease commitments are as follows (table in thousands): 2005 2006 2007 2008 2009 Thereafter Total minimum lease payments We have sublet certain of our office facilities. Non-cancelable sublease proceeds are as follows...

  • Page 92
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We have procurement or license agreements with respect to technology that is used in our products and agreements in which we obtain rights to a product from an OEM. Under some of these agreements, we have agreed to ...

  • Page 93
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS employee stock purchase plans. As of December 31, 2004, we had reacquired a total of 108.6 million shares at a cost of $1,054.9 million. On July 1, 2004, the Massachusetts Business Corporation Act (the "MBCA") became ...

  • Page 94
    ...-qualified stock options are granted under the 1985 Plan, the exercise price may be less than the fair market value at the time of grant, but in the case of employees not subject to Section 16 of the Securities Exchange Act of 1934 ("Section 16"), not less than par value which is $.01 per share, and...

  • Page 95
    ...-related criteria are met, the vesting accelerates. As of December 31, 2004, 25,000 shares have vested. In 2002, performance-related options to purchase 2,063,000 shares of common stock were granted at $7.70 per share, the fair market value on the date of grant, to certain employees. The options...

  • Page 96
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Activity under all stock option plans for the three years ended December 31, 2004 is as follows (shares in thousands): Number of Shares Wtd. Avg. Exercise Price Outstanding, January 1, 2002 Granted Canceled Exercised ...

  • Page 97
    ... develop software, hardware and other technologies or provide services supporting our technologies. We may purchase from or make sales to these organizations. 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...

  • Page 98
    ..., EMC Software Group products and services, VMware products and services and other businesses. 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...

  • Page 99
    ... following tables (tables in thousands, except percentages): Information Storage Products Information Storage and Management Services EMC Software Group Products and Services VMware Products and Services Other Businesses Consolidated 2004 Systems revenues Software revenues Services revenues Total...

  • Page 100
    ... share. S. Subsequent Event In February 2005, we acquired all of the outstanding capital stock of System Management Arts Incorporated ("Smarts") for approximately $260 million in cash, subject to certain post-closing adjustments. Smarts' software products automatically locate root cause problems...

  • Page 101
    ...31, 2004. Certain information required by this item is incorporated herein by reference to the Proxy Statement. Also see "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K. We have a code of ethics that applies to all of our employees and non-employee directors. This...

  • Page 102
    Table of Contents PART IV ITEM 15. (a) 1. 2. 3. Financial Statements Schedule Exhibits The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this report. The Schedule on page S-1 is filed as part of this report. See Index to Exhibits on page 101 of ...

  • Page 103
    ... of the Board of Directors President, Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer) Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) Director Director Director...

  • Page 104
    ... Agreement for directors and executive officers. (2) EMC Corporation Business Conduct Guidelines (Code of Ethics) (filed herewith). Subsidiaries of Registrant (filed herewith). Consent of Independent Accountants (filed herewith). Certification of Principal Executive Officer required by Rule...

  • Page 105
    Table of Contents EMC CORPORATION AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in thousands) Allowance for Bad Debts Charged to Selling, General and Administrative Expenses Description Balance at Beginning of Period Charged to Other Accounts Bad Debts Write-Offs Balance at ...

  • Page 106
    Table of Contents 3337-AR-05

  • Page 107
    ... of base salary, (ii) continued participation in EMC's benefit programs, and (iii) subject to the terms of the applicable equity plans and agreements, continued vesting of stock options and restricted stock. Mr. Wright would also be entitled to continued participation in EMC's group health plan for...

  • Page 108
    Exhibit 14.1 EMC Corporation Business Conduct Guidelines January 27, 2005 Office of the General Counsel

  • Page 109
    ... come forward to your manager or the Office of the General Counsel with any ethical or legal problems you may encounter. Integrity and compliance with laws are essential to our continued success. Besides its intrinsic value, integrity is essential to EMC's long-term relationships with our most vital...

  • Page 110
    ... will, involve a standard higher than what exists under the law. You should direct any questions you have about these Guidelines or a legal compliance matter to your manager and/or the Office of the General Counsel. You are also expected to act in accordance with EMC's policies, which are available...

  • Page 111
    ...come into contact with such individuals, even where the interaction seems innocent, be cautious about what you say. Do not discuss anything relating to confidential information with any of these people. Inform management or the Office of the General Counsel of any attempts by outsiders to obtain EMC...

  • Page 112
    ...nature Requests for personnel references or employment verifications, salary verifications or other requests about current or former EMC employees. DO NOT GIVE OR ACCEPT QUESTIONABLE GIFTS Office of the General Counsel 508-293-7267 Human Resources 900-733-3000 (EMC code 0073) or www.jonjay.com With...

  • Page 113
    ...or guarantees of personal obligations by EMC. Do not participate individually in any business or investment opportunity of which you learned through your position at EMC. You should direct any such opportunities to EMC by informing your manager. Do not associate EMC with, or indicate EMC support for...

  • Page 114
    ...employer(s). These obligations may include restrictions on the use and disclosure of confidential information or solicitation of former colleagues to work at EMC, or non-competition agreements. If you have any questions regarding these obligations you should contact the Office of the General Counsel...

  • Page 115
    ...permissible and may result in penalties to EMC and you. ENSURE FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE AND FINANCIAL REPORTING As a public company, EMC is required to file periodic and other reports and documents with the Securities and Exchange Commission and to make other public...

  • Page 116
    ... the EMC Board of Directors by e-mail ([email protected]) or by mail (Alertline, PMB 3767, 13950 Ballantyne Corporate Place, Charlotte, NC 28277). Any reported violation will be kept anonymous and confidential to the maximum extent possible. Such reports may be made anonymously by using...

  • Page 117
    ... by the EMC Board of Directors or a committee thereof. Any waiver of these Guidelines for EMC directors or executive officers, and any waiver of or change to these Guidelines that applies to EMC's principal executive officer, principal financial officer, principal accounting officer or controller...

  • Page 118
    ... S.A. Data General BVI, Ltd. Data General do Brasil Ltda. Data General Gesellschaft m.b.H. Data General Hong Kong Limited Data General International, Inc. Data General Singapore Pte. Ltd. Dantz Development (UK) Limited EMC Dantz Development Europe Documentum Canada Company Documentum Canada Holdings...

  • Page 119
    EMC (Benelux) B.V., S.a.r.l. EMC Chile S.A. EMC Computer Storage Systems (Sales and Services) Ltd. EMC Computer Systems AG Luxembourg Chile Israel Switzerland

  • Page 120
    ...) Limited EMC Global Holdings Company EMC Hungary Trading and Servicing Ltd. EMC Information Systems N.V. EMC Information Systems Sweden AB EMC Information Systems (Thailand) Limited Argentina Norway Austria Netherlands China Turkey Brazil Denmark Hong Kong France Ireland Italy Malaysia Mexico...

  • Page 121
    EMC Investment Corporation EMC Japan K.K. * EMC Puerto Rico, Inc. Delaware Japan Delaware

  • Page 122
    ... Technology Australia Pty, Ltd. FilePool S.a.r.l. Flanders Road Holdings LLC General Risk Insurance Company Ltd. Hankook EMC Computer Systems Chusik Hoesa Information Systems EMC Greece S.A. Legato Global, Inc. Legato Software Systems Pte Ltd Legato Systems (Canada) Company Legato Systems de Mexico...

  • Page 123
    ... do Brasil Ltda. Tenth Mounpro Pty Limited VMware Global, Inc. VMware, Inc. VMware International VMware K.K. VMware Singapore Pte. Ltd. Woodland Street Partners, Inc. * 95% owned by EMC Corporation Australia Singapore Brazil Australia Delaware Delaware Cayman Islands Japan Singapore Delaware

  • Page 124
    ...122631) of EMC Corporation of our report dated March 2, 2005 relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears...

  • Page 125
    ... financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer and...

  • Page 126
    ... financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; The Registrant's other certifying officer and...

  • Page 127
    ... of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joseph M. Tucci Joseph M. Tucci President and Chief Executive Officer March 4, 2005 This certification...

  • Page 128
    ..., 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial...