EMC 2005 Annual Report Download - page 93

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
O. Related Party Transactions
In 2003, we retained a company owned by an individual who is the brother and uncle of certain members of our Board of Directors as a broker to
provide various forms of corporate insurance. We paid such company approximately $8,000 in 2003.
In 2005, 2004 and 2003, we leased certain real estate from a company owned by a member of our Board of Directors and such Director's siblings, for
which payments aggregated approximately $3.8 million, $2.9 million and $2.5 million, respectively. Such leases were initially assumed by us as a result of
our acquisition of Data General in 1999, and one lease was renewed for a ten-year term in 2003.
We purchased upgrades and licenses to software products from two companies, for which payments aggregated approximately $3.5 million, $0.3
million and $0.3 million in 2005, 2004 and 2003, respectively. We sublet facilities to one of these companies, for which we were paid $30,000 in 2004. A
member of our Board of Directors is Chairman of the Board of Directors of one of these companies and is managing partner and general partner in a limited
partnership which is currently a stockholder of both such companies.
From time to time during 2005, EMC paid for the use by a number of EMC employees and Directors of an aircraft beneficially owned by a current
employee and former executive officer and Director of EMC for EMC business trips. EMC payments for use of the aircraft aggregated approximately
$590,000 in 2005.
In February 2006, we acquired all of the outstanding shares of a privately-held company. A member of our Board of Directors is a general partner in a
limited partnership that was a stockholder of such company. Proceeds to the limited partnership as a result of this acquisition were approximately $2.7
million.
EMC is a large global organization which engages in thousands of purchase, sales and other transactions annually. We enter into purchase and sales
transactions with other publicly and privately held companies, universities, hospitals and not-for-profit organizations in which members of our Board of
Directors or executive officers are executive officers or members of boards of these entities. We enter into these arrangements in the ordinary course of our
business.
From time to time, we make strategic investments in privately-held companies that 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 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 product and service offerings. We operate in the following segments: EMC information storage
products, EMC multi-platform software, EMC services, VMware 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 and development
expenses or assets to each segment, as management does not use this information to measure the performance of the operating segments.
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