EMC 2005 Annual Report Download - page 10

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Table of Contents
service operations worldwide. We have also implemented Six Sigma, Lean Manufacturing and other quality methodologies to ensure that the quality of our
designs, manufacturing, test processes and supplier relationships are continually improved. Our manufacturing and test facilities in Massachusetts, North
Carolina and Ireland are certified to the ISO 14001 International Standard for environmental management systems. We also maintain Support Center Practices
(SCP) certification for our customer support centers. These internationally recognized endorsements of ongoing quality and environmental management are
among the highest levels of certifications available.
Raw Materials
We purchase many sophisticated components and products from one or a limited number of qualified suppliers, including some of our competitors. Our
products utilize industry-standard and semi-custom components and subsystems. Among the most important components that we use are disk drives, high
density memory components and power supplies. While such components are generally available, we have experienced delivery delays from time to time
because of high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements.
Research and Development
We continually enhance our existing products and develop new products to meet changing customer requirements. In 2005, 2004 and 2003, our
research and development ("R&D") expenses totaled $1,004.8 million, $847.9 million and $718.5 million, respectively. We support our R&D efforts through
state-of-the art development labs worldwide, including in Massachusetts, California, Maryland, North Carolina, Belgium, China, India, Ireland and Russia.
Backlog
We produce our systems and software on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders
from customers. We configure to customer specifications and generally deliver systems and software shortly after receipt of the order. Service engagements
are also included in certain orders. Customers may reschedule or cancel orders with little or no penalty. We believe that our backlog at any particular time is
not meaningful because it is not necessarily indicative of future sales levels.
Competition
We compete with many companies in the markets we serve, including companies that offer a broad spectrum of IT products and services and others that
offer specific information storage, management or server virtualization products or services. We believe that most of these companies compete based on their
market presence, products, service or price. Some of these companies also compete by offering information storage, management or virtualization-related
products or services, together with other IT products or services, at minimal or no additional cost in order to preserve or gain market share.
We believe that we have a number of competitive advantages over these companies, including product, distribution and service. We believe the
advantages in our products include quality, breadth of offerings, performance, functionality, scalability, availability, interoperability, 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 our ability to provide our customers
with a full range of expertise before, during and after their purchase of solutions from us or other vendors.
Seasonality
Although we do not consider our business to be highly seasonal, we generally experience the greatest demand for our products and services in the last
quarter of the year.
Intellectual Property
We generally rely on patent, copyright, trademark and trade secret laws and contract rights to establish and maintain our proprietary rights in our
technology and products. While our intellectual property rights are important to our success, we believe that our business as a whole is not materially
dependent on any particular patent, trademark, license or other intellectual property right.
We have been granted or own by assignment approximately 1,200 patents issued by, and have more than approximately 1,100 patent applications
pending with, the U.S. Patent and Trademark Office, as well as a corresponding number of international patents and patent applications. While the duration of
our patents varies, we believe that the duration of our patents is adequate relative to the expected lives of our products.
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