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EMC CORP (EMC)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/29/2008
Filed Period 12/31/2007

Table of contents

  • Page 1
    EMC CORP (EMC) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/29/2008 Filed Period 12/31/2007

  • Page 2
    ...ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: December 31, 2007 Commission File Number 1-9853 EMC...

  • Page 3
    ... 31, 2008 was 2,100,569,673. DOCUMENTS INCORPORATED BY REFERENCE Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference to the specified portions of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held...

  • Page 4
    ... Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services PART IV ITEM 15. Signatures Exhibits and Financial Statement...

  • Page 5
    .... Our corporate headquarters are located at 176 South Street, Hopkinton, Massachusetts. Products and Offerings EMC's Information Infrastructure Business EMC's Information Infrastructure business consists of three segments - Information Storage, Content Management and Archiving, and RSA Information...

  • Page 6
    ... EMC Centera provides fast, secure online access to archived fixed content - data that cannot be modified or will not change over time, such as digital xray images, movies, check images, medical records, e-mail correspondence and other similar types of digital objects. Centera also helps customers...

  • Page 7
    ..., helps customers optimize business processes and create, manage, deliver and archive information, ranging from documents and discussions to e-mail, Web pages, images, XML, reports, records, rich media and application data. This suite of enterprise content management (ECM) products include software...

  • Page 8
    ... data; secure access to the data, both inside and outside the network, at all times; and prove compliance with security policies and regulations. In 2007, RSA broadened its information-centric product portfolio through the acquisitions of new technologies from Valyd Software Private Limited (a file...

  • Page 9
    ..., Iomega Corporation also plans to utilize EMC LifeLine OEM Software with its multi-drive network storage products. Markets and Distribution Channels Markets EMC provides information storage, content management and archiving, security and virtualization technologies to support customers' information...

  • Page 10
    ...is to work closely with these and other companies to provide added value to our customers by integrating our solutions with software and networking applications that customers rely on to manage their day-to-day business operations. In 2007, EMC expanded its partner ecosystem in international markets...

  • Page 11
    ...or price. Some of these companies also compete by offering information storage, content 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...

  • Page 12
    ... to EMC Investor Relations, 176 South Street, Hopkinton, MA 01748. None of the information posted on our website is incorporated by reference into this Annual Report. CEO Certification An annual CEO Certification was submitted by our CEO to the New York Stock Exchange (the "NYSE") on May 24, 2007 in...

  • Page 13
    ... for virtualization solutions; fluctuations in demand, adoption, sales cycles and pricing levels for VMware's products and services; changes in customers' budgets for information technology purchases and in the timing of their purchasing decisions; VMware's ability to compete with existing or new...

  • Page 14
    ... ship in a timely manner new products and product enhancements that meet customer demand, certification requirements and technical requirements; the amount of equity-based compensation expense as a result of VMware equity grants; VMware's ability to effectively manage future growth and acquisitions...

  • Page 15
    ... 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 and greater opportunity to address...

  • Page 16
    ...reduce the number of shares and type of equity awards granted to employees. Additionally, the value of our equity awards may be adversely affected by the volatility of our stock price. Changes to regulatory or stock exchange rules and regulations and in institutional shareholder voting guidelines on...

  • Page 17
    ... 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. We may, from time to time, derive a significant...

  • Page 18
    ... entered prohibiting us from marketing or selling certain of our products or a successful claim of infringement against us requiring us to pay royalties to a third party, and we fail to develop or license a substitute technology, our business, results of operations or financial condition could be...

  • Page 19
    ...proceedings, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management's attention and resources and cause us to...

  • Page 20
    ... Alto, CA owned: leased: 462,000 410,000 executive and administrative offices, R&D and sales VMware Virtual Infrastructure Other North American locations owned: 1,061,600 leased: 3,949,761 executive and administrative offices, sales, customer service and R&D ** Asia Pacific leased: 1,146...

  • Page 21
    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of our shareholders during the fourth quarter of 2007. 16

  • Page 22
    ..., RSA Security Executive Vice President and General Counsel Executive Vice President and President, EMC Storage Division Executive Vice President and President, EMC Global Services and Resource Management Software Group David I. Goulden 48 Executive Vice President and Chief Financial Officer Frank...

  • Page 23
    ...President, Enterprise Product Marketing, Vice President, Global Account Sales & Global Enterprise Program, and Vice President, Industry Solution Sales. Prior to joining Dell, Ms. O'Brien served as Partner at Bain & Company, a global business consulting firm, where she led the firm's Customer Loyalty...

  • Page 24
    ...II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 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 of...

  • Page 25
    ..., EMC acquired all of the outstanding shares of System Management Arts Incorporated ("Smarts") and Captiva Software Corporation ("Captiva") (see Note C to the Consolidated Financial Statements). In 2004, EMC acquired all of the outstanding shares of VMware, Inc. ("VMware"). In 2003, EMC acquired all...

  • Page 26
    ... software maintenance contracts. VMware has achieved significant revenue growth to date and is focused on extending growth by broadening their product portfolio, enabling choice for customers and driving standards, expanding their network of technology and distribution partners, increasing market...

  • Page 27
    ... in hardware, networking and software tools to increase the efficiency of research and development efforts. VMware's current financial focus is on sustaining growth in revenue to generate cash flow to expand their market segment share and virtualization solutions. Although VMware is currently the...

  • Page 28
    ...500 and 1,000 new indirect channel partners were added during 2006 and 2005, respectively. These indirect channel partners obtain software licenses and services from distributors and x86 system vendors and market and sell them to end-user customers. In addition, VMware has a direct sales force that...

  • Page 29
    ... in Europe, the Middle East and Africa market. The impact of the exchange in rates in 2006 was most significant in the Asia Pacific market, primarily Japan. Costs and expenses The 2007 and 2006 results include the effect of accounting for stock-based compensation under Financial Accounting Standards...

  • Page 30
    ... Information Storage Content Management and Archiving RSA Information Security VMware Virtual Infrastructure Corporate reconciling items Total gross margin Operating expenses: Research and development(1) Selling, general and administrative(2) In-process research and development Restructuring charges...

  • Page 31
    ... of stock-based compensation, acquisition-related intangible asset amortization and amortization of capitalized software development costs also decreased the consolidated gross margin by 36 basis points. The improvement in the gross margin percentage in 2006 from 2005 was attributable to the VMware...

  • Page 32
    ...primarily due to increased salaries, benefits, and consulting resulting from the deployment of additional resources to support new product development and other costs, including travel, facilities, expensed equipment and depreciation. Salaries, benefits and consulting expenses increased by $98.2 and...

  • Page 33
    ...to increase in sales, marketing and administrative personnel costs to support the growth of the business resulting from increased sales volume. Salaries and benefit costs increased $155.4 and $60.8 in 2007 and 2006, respectively. Administrative costs, including travel, expensed equipment, facilities...

  • Page 34
    ...acquired over the prior three years. These actions impacted the Information Storage and Content Management and Archiving segments across all major geographic regions. The adjustment to the provision in 2007 includes changes for finalizing severance agreements, particularly in international locations...

  • Page 35
    ... in 2007 and 2006 for excess facilities were a result of lower than expected costs associated with vacating leased facilities. The prior year restructuring programs impacted the Information Storage and Content Management and Archiving segments. The remaining liability for the consolidation of...

  • Page 36
    Gain on Sale of VMware Stock to Cisco The gain on sale of VMware stock for the year ended December 31, 2007 consists of a $148.6 gain on the sale of 6.0 million shares of Class A common stock of VMware held by EMC sold to Cisco for proceeds of approximately $150.0. Investment Income Investment ...

  • Page 37
    ... $2,216.3 in 2005. Cash received from customers was $13,333.5, $11,167.2 and $9,732.8 in 2007, 2006 and 2005, respectively. The annual increases were attributable to higher sales volume and greater cash proceeds from the sale of maintenance contracts. Cash paid to suppliers and employees was $10,182...

  • Page 38
    ... corporate developments, public filings or other events. Subject to certain limitations, we will be required to pay the holders of the Notes special interest on the Notes if we fail to keep such registration statement effective during specified time periods. The Notes pay interest in cash at a rate...

  • Page 39
    ... close future auctions and its credit rating deteriorates or adverse developments occur in the bond insurance market, we may be required to adjust the carrying value of our auction rate securities through a future impairment charge. Based on our ability to access our cash and other short-term...

  • Page 40
    ...claims relating to property damage, personal injury or the acts or omissions of EMC, its employees, agents or representatives. In addition, from time to time, we have made certain guarantees regarding the performance of our systems to our customers. We have agreements with certain vendors, financial...

  • Page 41
    ... and life insurance benefits for retired former Data General employees. The plan's assets are invested in common stocks, bonds and cash. 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...

  • Page 42
    In December 2007, we settled the liability associated with the retiree life insurance plan by transferring the liability to a third-party. The impact of this settlement on our results of operations was not material. Critical Accounting Policies Our consolidated financial statements are based on the ...

  • Page 43
    ...' estimated grant date fair value. Previously, we elected to account for these share-based payment awards under APB No. 25 and elected to only disclose the impact of expensing the fair value of stock options in the notes to the Consolidated Financial Statements. FAS No. 123R requires management to...

  • Page 44
    ... on our financial position and results of operations. ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk We are exposed to market risk, primarily from changes in foreign exchange rates, interest rates and credit risk. To manage the volatility relating to these exposures...

  • Page 45
    ... is generally cash, U.S. government-backed securities or letters of credit. At December 31, 2007, there were no outstanding securities lending transactions. The counterparties to our foreign currency exchange contracts consist of a number of major financial institutions. In addition to limiting the...

  • Page 46
    ... for the years ended December 31, 2007, 2006 and 2005 Notes to Consolidated Financial Statements Schedule: 42 43 44 45 46 47 48 49 S-1 Schedule II-Valuation and Qualifying Accounts Note: All other financial statement schedules are omitted because they are not applicable or the required information...

  • Page 47
    ...the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies...

  • Page 48
    ...in which it accounts for uncertain tax positions in 2007. As discussed in Note A to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in 2006 and the manner in which it accounts for defined benefit pension and other postretirement...

  • Page 49
    EMC CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, ASSETS 2007 2006 Current assets: Cash and cash equivalents Short-term investments Accounts and notes receivable, less allowance for doubtful accounts of $34,389 and $39,509 Inventories Deferred income...

  • Page 50
    ... CORPORATION CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts) For the Year Ended December 31, 2007 2006 2005 Revenues: Product sales Services $ 9,411,976 3,818,229 13,230,205 Costs and expenses: Cost of product sales Cost of services Research and development Selling, general...

  • Page 51
    ...cash restructuring and other special charges Stock-based compensation expense Increase in provision for doubtful accounts Deferred income taxes, net Excess tax benefits from stock-based compensation Tax benefit from stock options exercised Other Changes in assets and liabilities, net of acquisitions...

  • Page 52
    Accounts payable Accrued expenses Income taxes payable Deferred revenue Other liabilities Net cash provided by operating activities Non-cash activity: Issuance of common stock and stock options exchanged in...,645 The accompanying notes are an integral part of the consolidated financial statements. 46

  • Page 53
    ... of deferred compensation to additional paidin capital Stock options issued in purchase acquisitions Stock-based compensation Purchase of call options Tax benefit from purchase of call options Sale of warrants Impact of adoption of new accounting standard for pension and other post-retirement plans...

  • Page 54
    47

  • Page 55
    EMC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the Year Ended December 31, 2007 2006 2005 Net income Other comprehensive income (loss), net of taxes (benefit): Recognition of actuarial net loss from pension and other postretirement plans, net of taxes of $10,500 ...

  • Page 56
    ...TO CONSOLIDATED FINANCIAL STATEMENTS A. Summary of Significant Accounting Policies Company EMC Corporation ("EMC") and its subsidiaries develop, deliver and support the Information Technology ("IT") industry's broadest range of information infrastructure technologies and solutions. EMC's Information...

  • Page 57
    ... sale of software application programs. Our software products provide customers with resource management, backup and archiving, content management, information security and server virtualization capabilities. Revenue for software is generally recognized upon shipment or electronic delivery. License...

  • Page 58
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Shipping and Handling Costs Shipping and handling costs are classified in cost of product sales. Sale of Stock by a Subsidiary EMC accounts for the sale of stock by a subsidiary in accordance with the Securities and Exchange ...

  • Page 59
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with a maturity of ninety days or less at the time of purchase. Cash equivalents consist primarily of money market securities, U.S. treasury ...

  • Page 60
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment Property, plant and equipment are recorded at cost. Buildings under development are included in building construction in progress. Depreciation commences upon placing the asset in service and is ...

  • Page 61
    ... the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the tax basis of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which the differences are expected to reverse. Tax credits...

  • Page 62
    ... compensation costs for all share-based payment awards made to employees and directors based upon the awards' estimated grant date fair value. The standard covers employee stock options, restricted stock, restricted stock units and employee stock purchases related to our employee stock purchase plan...

  • Page 63
    ... tax-related amounts within the statement of cash flows. The gross amount of windfall tax benefits resulting from stock-based compensation will be reported as financing inflows. For stock options, we have selected the Black-Scholes option-pricing model to determine the fair value of our stock option...

  • Page 64
    ... interest in VMware. C. Business Acquisitions, Goodwill and Intangible Assets 2007 Acquisitions In February 2007, we acquired all of the outstanding capital stock of Valyd Software Private Limited, a provider of solutions for entity-wide data protection for a variety of database management systems...

  • Page 65
    ... our Content Management software. The acquisition fully expands our distribution and service delivery capabilities in Russia and Eastern Europe. In April 2007, VMware acquired all of the outstanding capital stock of Propero Limited, a provider of solutions for the discovery and management of virtual...

  • Page 66
    ... Expected life (in years) 2.6 Expected volatility 29.8% Risk-free interest rate 4.4% The consolidated financial statements include the results of the aforementioned companies from their respective dates of acquisition. The purchase price for each company has been allocated to the assets acquired and...

  • Page 67
    ... dividends and the following weightedaverage assumptions: Expected life (in years) 1.6 Expected volatility 31.0% Risk-free interest rate 5.0% The consolidated financial statements include the results of RSA from the date of acquisition. The purchase price has been allocated to the assets acquired...

  • Page 68
    ... processes. This acquisition further expands the EMC Documentum product suite's process modeling, process execution and process integration capabilities. In June 2006, our VMware subsidiary acquired all of the outstanding capital stock of Akimbi Systems, Inc., a developer of software that builds...

  • Page 69
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following represents the aggregate allocation of the purchase price for the aforementioned companies to intangible assets (table in thousands): Developed technology (weighted-average useful life of 5.6 years) Customer ...

  • Page 70
    ... outstanding capital stock of System Management Arts, Inc. ("Smarts"). Smarts' software products automatically locate root-cause problems, calculate their impact across technology domains and present the logical action plan required to keep business services up and running. The acquisition enables...

  • Page 71
    ... reclassified all deferred compensation balances to additional paid-in capital. The consolidated financial statements include the results of Smarts from the date of acquisition. The purchase price has been allocated based on estimated fair values as of the acquisition date. The following represents...

  • Page 72
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In connection with the Smarts acquisition, we commenced integration activities which resulted in recognizing $1.9 million in liabilities for employee termination benefits and $0.8 million for lease and contract terminations, of...

  • Page 73
    ...): Year Ended December 31, 2007 Information Storage Content Management and Archiving RSA Information Security VMware Virtual Infrastructure Total Balance, beginning of the year Goodwill acquired Tax deduction from exercise of stock options Finalization of purchase price allocations Balance, end of...

  • Page 74
    ... Storage, Content Management and Archiving and RSA Information Security segments. Approximately 72% of the affected employees are or were based in North America, excluding Mexico and 28% are or were based in Europe, Latin America, Mexico and the Asia Pacific region. 2006 Restructuring Programs The...

  • Page 75
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) $10.7 million of non-cash stock-based compensation expense. The asset impairment charge of $29.7 million consists primarily of internal infrastructure projects that management decided to no longer pursue. The impairment charge...

  • Page 76
    ... in 2007 and 2006 for excess facilities were a result of lower than expected costs associated with vacating leased facilities. The prior year restructuring programs impacted the Information Storage and Content Management and Archiving segments. The remaining liability for the consolidation of...

  • Page 77
    ... corporate developments, public filings or other events. Subject to certain limitations, we will be required to pay the holders of the Notes special interest on the Notes if we fail to keep such registration statement effective during specified time periods. The Notes pay interest in cash at a rate...

  • Page 78
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) conversion value that we would pay to the holders of the Notes upon conversion. The Purchased Options will cover, subject to customary anti-dilution adjustments, approximately 215 million shares of our common stock. Half of ...

  • Page 79
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Investments The following tables summarize the composition of our available for sale, short and long-term investments, at December 31, 2007 and 2006 (tables in thousands). Fair value was determined based upon quoted market prices...

  • Page 80
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The contractual maturities of investments held at December 31, 2007 and 2006 are as follows (tables in thousands): December 31, 2007 Amortized Cost Basis Aggregate Fair Value Due within one year Due after 1 year through 5 ...

  • Page 81
    ... thousands): December 31, 2007 December 31, 2006 Purchased parts Work-in-process Finished goods $ 70,981 484,929 321,333 877,243 $ 75,206 451,045 308,549 834,800 $ I. Notes Receivable $ Notes receivable are primarily from sales-type leases of our products. The payment schedule for such notes...

  • Page 82
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Building construction in progress and land owned at December 31, 2007 include $62.5 million and $4.0 million, respectively, of facilities not yet placed in service that we are holding for future use. Depreciation expense was $...

  • Page 83
    ...received deduction for certain dividends from controlled foreign corporations. In October 2005, our Chief Executive Officer and Board of Directors approved a domestic reinvestment plan to repatriate approximately $3.0 billion in foreign earnings; such repatriation resulted in a current tax provision...

  • Page 84
    ... TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of the current and noncurrent deferred tax assets are as follows (table in thousands): December 31, 2007 Deferred Tax Asset Deferred Tax Liability December 31, 2006 Deferred Tax Asset Deferred Tax Liability Current: Accounts and...

  • Page 85
    ... at January 1, 2007 and December 31, 2007 were $32.0 million and $35.1 million, respectively. M. Retirement Plans and Retiree Medical Benefits 401(k) Plan We have established a deferred compensation program for certain employees that is qualified under Section 401(k) of the Code. EMC will match pre...

  • Page 86
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Employees may elect to invest their contributions in a variety of funds, including an EMC stock fund. The deferred compensation program limits an employee's maximum investment allocation in the EMC stock fund to 30% of their ...

  • Page 87
    ...benefit cost for the years ended December 31 are as follows: December 31, 2007 December 31, 2006 December 31, 2005 Discount rate 5.90% 5.7% 5.7% Expected long-term rate of return on plan assets 8.25% 8.25% 8.25% Rate of compensation increase N/A N/A N/A The expected long-term rate of return on plan...

  • Page 88
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) on the target asset allocation to develop the expected long-term rate of return on assets. The weighted average asset allocations are as follows: December 31, 2007 December 31, 2006 Equity securities Debt securities Cash ...

  • Page 89
    ... TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The reconciliation of the beginning and ending balances of the fair value of plan assets is as follows (table in thousands): December 31, 2007 December 31, 2006 Fair value of plan assets, at beginning of year Actual return on plan assets Employer...

  • Page 90
    ...the plan to determine net benefit cost for the years ended December 31 are as follows: December 31, 2007 December 31, 2006 5.7% N/A December 31, 2005 Discount rate Expected long-term rate of return on plan assets Rate of compensation increase The assumed health care cost trend rate for the plan is...

  • Page 91
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The benefit payments are expected to be paid in the following years (table in thousands): 2008 2009 2010 2011 2012 2013-2017 N. Commitments and Contingencies Operating Lease Commitments We lease office and warehouse facilities ...

  • Page 92
    ...the United States. As of December 31, 2007, we had no borrowings outstanding on the line of credit. The credit line bears interest at the bank's base rate and requires us, upon utilization of the credit line, to meet certain financial covenants with respect to limitations on losses. In the event the...

  • Page 93
    ...outstanding stock awards to their grant date fair values and multiplying the result by the applicable statutory tax rate. A positive result creates a windfall, which increases the assumed proceeds and a negative result creates a shortfall, which reduces the assumed proceeds. Share Repurchase Program...

  • Page 94
    ... rights, restricted stock and restricted stock units. The exercise price for a stock option shall not be less than 100% of the fair market value of our common stock on the date of grant. Options generally become exercisable in annual installments over a period of three to five years after the date...

  • Page 95
    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) not less than par value (which is $0.01 per share), and in the case of employees subject to Section 16, not less than 50% of the fair market value on the date of grant. In the event that non-qualified stock options were ...

  • Page 96
    ... (shares in thousands): Number of Shares Weighted Average Grant Date Fair Value Restricted stock and restricted stock units at January 1, 2005 Granted Vested Forfeited Outstanding, December 31, 2005 Granted Vested Forfeited Outstanding, December 31, 2006 Granted Vested Forfeited Exchanged to VMware...

  • Page 97
    ... under the 2007 Plan is 80 million. The exercise price for a stock option awarded under the 2007 Plan shall not be less than 100% of the fair market value of VMware Class A common stock on the date of grant. Most options granted under the 2007 Plan vest 25% after the first year and then monthly...

  • Page 98
    ...at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase shares were first granted under the 2007 Employee Stock Purchase Plan on August 13, 2007, the date on which VMware's Form S-1 Registration Statement was declared effective by the Securities and Exchange...

  • Page 99
    ... time as the respective options vest. The following table summarizes restricted stock activity since January 1, 2007 for VMware restricted stock (shares in thousands): Number of Shares Weighted Average Grant Date Fair Value Restricted stock at January 1, 2007 Granted Exchanged from EMC restricted...

  • Page 100
    ...of total stock-based compensation expense included in our consolidated income statement in 2007 and in 2006 (in thousands): Year Ended December 31, 2007 Stock Options Restricted Stock Total Stock-Based Compensation Cost of product sales Cost of services Research and development Selling, general and...

  • Page 101
    ... awards granted to an employee who meets the age and/or length of service requirements for "retirement" set forth in the plan generally will continue to vest after such employee's retirement without additional service, subject to the terms and conditions of the grant document. In connection with...

  • Page 102
    ... each option to acquire VMware Class A common stock granted during the year ended December 31, 2007 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: VMware Stock Options VMware Employee Stock Purchase Plan Dividend yield...

  • Page 103
    ... 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. In 2007, our subsidiary, VMware, entered into an agreement with a company for the licensing, implementation and maintenance of such company's software. The approximate value of the...

  • Page 104
    ...CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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...

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    ... Information Storage Content Management and Archiving RSA Information Security EMC Information Infrastructure VMware Virtual Infrastructure within EMC Corp. Reconciling Items Consolidated 2007: Revenues: Systems revenues Software revenues Services revenues Total revenues Cost of sales Gross...

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    ...Information Storage Content Management and Archiving RSA EMC Information Information Security Infrastructure VMware Virtual Infrastructure within EMC Corp. Reconciling Consolidated Items 2005: Revenues: Systems revenues Software revenues Services revenues Total revenues Cost of sales Gross profit...

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    EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) T. Selected Quarterly Financial Data (unaudited) Quarterly financial data for 2007 and 2006 is as follows (tables in thousands, except per share amounts): 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Revenues Gross profit Net income ...

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    ... (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls...

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    PART III STOCK PRICE PERFORMANCE GRAPH 2002 2003 2004 2005 2006 2007 EMC S&P 500 Index S&P 500 Information Technology Sector Index Source: Returns were generated from Thomson ONE Banker $100.00 $100.00 $100.00 $210.42 $126.38 $146.55 $242.18 $137.75 $149.68 $221.82 $141.88 $150.25 $214....

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    ... by EMC in connection with various acquisitions. The option plans relating to such outstanding options were approved by the respective security holders of the acquired companies. Includes 20,668,866 shares of common stock available for future issuance under our employee stock purchase plan. In...

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    ... IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Financial Statements The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this report. 2. Schedule The Schedule on page S-1 is filed as part of this report. 3. Exhibits See Index to...

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    ...the undersigned, thereunto duly authorized on February 29, 2008. EMC CORPORATION By: /s/ JOSEPH M. TUCCI Joseph M. Tucci Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

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    Windle B. Priem /s/ PAUL SAGAN Paul Sagan /s/ DAVID N. STROHM David N. Strohm 105 Director Director

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    ...) EMC Corporation Executive Deferred Compensation Retirement Plan, as amended. (4) EMC Corporation Executive Incentive Bonus Plan. (5) Form of Change in Control Severance Agreement for Executive Officers. (6) Form of EMC Corporation Amended and Restated 2003 Stock Plan Stock Option Agreement. (filed...

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    ... Sales Returns Accounted for as a Reduction (Increase) in Revenue $ 66,359 35,767 9,225 (14,505) $ (8,707) (11,525) Description Year ended December 31, 2007 allowance for sales returns Year ended December 31, 2006 allowance for sales returns Year ended December 31, 2005 allowance for sales returns...

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    ...176 South Street, Hopkinton, MA 01748 (number, street, city or town, state, zip code) FORM MUST BE TYPED (3) Date adopted: October 23, 2007 (month, day, year) (4) Approved by: (check appropriate box) ý OR o the directors without shareholder approval and shareholder approval was not required...

  • Page 118
    ... PAR VALUE TYPE NUMBER OF SHARES TYPE WITH PAR VALUE NUMBER OF SHARES PAR VALUE Common Preferred ARTICLE IV 6,000,000,000 25,000,000 $ $ 0.01 0.01 Prior to the issuance of shares of any class or series, the articles of organization must set forth the preferences, limitations and relative rights...

  • Page 119
    ..."), and 25,000,000 shares of preferred stock, $.01 par value per share (the "Series Preferred Stock"). Common Stock The holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters requiring action by the shareholders or submitted to the...

  • Page 120
    ... corporate purpose, including the payment of dividends. (h) The purchase or other acquisition or retention by the corporation of shares of its own capital stock shall not be deemed a reduction of its capital stock. Upon any reduction of capital or capital stock, no shareholder shall have any right...

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    ... which is not a subsidiary or affiliate of this corporation, or in which any directors or officers are so interested as holders, collectively, of a majority of shares of capital stock or other beneficial interest at the time outstanding in any concern which is not a subsidiary or affiliate of this...

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    ...the directors or officers of this corporation. To the extent permitted by law, the authorizing or ratifying vote of the holders of a majority of the shares of each class of the capital stock of this corporation outstanding and entitled to vote for directors at any annual meeting or a special meeting...

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    ...to the extent, required by Section 13(b) (11/2) or any successor provision of the Massachusetts Business Corporation Law, this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts...

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    ... corporation is the date and time the articles were received for filing if the articles are not rejected within the time prescribed by law. If a later effective date is desired, specify such date, which may not be later than the 90th day after the articles are received for filing: Specify the number...

  • Page 125
    ...plus $100 for each additional 100,000 shares or any fraction thereof. Examiner Name approval C M TO BE FILLED IN BY CORPORATION Contact Information C T Corporation System 155 Federal Street, Suite 700 Boston, Massachusetts 02110 Telephone: Email: (617) 757-6400 [email protected] Upon filing...

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    QuickLinks The Commonwealth of Massachusetts William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512

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    Exhibit 4.1

  • Page 128

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    ... for purposes of granting or approving the payment of any Awards. 1.7 1.8 "Common Stock" means the common stock, par value $.01 per share, of the Company. "Company" means EMC Corporation, a corporation established under the laws of The Commonwealth of Massachusetts. 1.9 "Eligible Directors" means...

  • Page 130
    ... ratios or credit rating; market share; capital expenditures; cash flow; stock price; shareholder return; sales of products or services; customer acquisition or retentions; acquisitions or divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split ups and the...

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    ...for future grant: (i) shares tendered in payment of the exercise price of an Option and (ii) shares withheld by the Company or otherwise received by the Company to satisfy tax withholding obligations. In addition, the Authorized Shares shall not be increased by any shares of Common Stock repurchased...

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    ... such Awards. Eligibility for Incentive Stock Options is limited to employees of the Company or of a "parent corporation" or "subsidiary corporation" of the Company as those terms are defined in Section 424 of the Code. 6. Awards. 6.1 General. The Plan provides for the grant of Awards, which may be...

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    ... Stock Option granted to a Ten Percent Shareholder) of the Fair Market Value per share on the date the Option or Stock Appreciation Right is granted. 6.5.2 Additional Conditions. The Committee or the Board of Directors may at the time of grant condition the exercise of an Award upon agreement...

  • Page 134
    ...time as the Committee may specify, but not after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder) from the date the Option is granted. 6.6 Termination of Awards. Unless the Award by its terms or the Committee or Board of Directors...

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    ... to the terms thereof, and (ii) no Incentive Stock Option granted under the Plan may be exercised after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder) from the date the Incentive Stock Option was granted. 6.7 Cancellation and...

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    ...) pay to the Company an amount equal to the market price (as of the exercise, lapse or delivery date) of the Common Stock acquired upon such exercise, lapse or delivery minus the respective price paid upon exercise, lapse or delivery, if applicable. The Company shall be entitled to set-off any such...

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    ...to purchase more than $100,000 in Fair Market Value (determined at the time the Incentive Stock Options were granted) of Common Stock in that year. Any Options granted to an employee in excess of such amount will be granted as non-qualified Options. 6.10 Stock Awards. 6.10.1 Rights as a Shareholder...

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    ... laws and regulations which the Company may deem applicable have been complied with, nor, in the event the outstanding Common Stock is at the time listed upon any stock exchange, until the stock to be delivered has been listed or authorized to be added to the list upon official notice of issuance to...

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    ... the approval of the shareholders of the Company (a) materially amend the Plan, (b) increase the Authorized Shares available under the Plan, (c) change the group of persons eligible to receive Awards under the Plan, (d) reprice any outstanding Options or Stock Appreciation Rights or reduce the price...

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    ... of the Plan and any Award agreement related thereto. Neither the Company nor any of its Subsidiaries, nor any of their respective directors, officers, employees or agents shall be liable to any Participant or any other person (a) if it is determined for any reason by the Internal Revenue Service or...

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    QuickLinks Exhibit 10.5 EMC CORPORATION AMENDED AND RESTATED 2003 STOCK PLAN, as amended and restated as of December 19, 2007

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    ... 10.9 Grant Date Grant Number Grant Type Grant Price Shares Granted Days Left to Accept Participant: Employee ID Number: [FORM OF] EMC CORPORATION Amended and Restated 2003 Stock Plan Stock Option Agreement (Version [ ]) 1. Grant of Option EMC Corporation, a Massachusetts corporation (the "Company...

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    ...Reason of Retirement) shall only apply if the Participant has attained at least two and a half years of continuous service from the Grant Date. 6. Agreement to Provide Security If, at the time the Option is exercised, the Committee determines that under applicable law and regulations the Company or...

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    ... Plan and the related Plan Description and any other Plan documents that the Company is required to deliver; acknowledge that a copy of the Plan and the related Plan Description is posted in the "Library & Forms" section of the "Stock Options" section of the Company's UBS Financial Services website...

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    QuickLinks Exhibit 10.9

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    ... 10.11 Grant Date Grant Number Grant Type Grant Price Shares Granted Days Left to Accept Participant: Employee ID Number: [FORM OF] EMC CORPORATION Amended and Restated 2003 Stock Plan Performance Stock Option Agreement 1. Grant of Option EMC Corporation, a Massachusetts corporation (the "Company...

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    ... least two and a half years of continuous service from the Grant Date. 6. Application of Stock Transfer Agreement If, at the time the Option is exercised, the Company is a party to any agreement restricting the transfer of any outstanding shares of its Common Stock, the Option may be exercised only...

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    ... Plan and the related Plan Description and any other Plan documents that the Company is required to deliver; acknowledge that a copy of the Plan and the related Plan Description is posted in the "Library & Forms" section of the "Stock Options" section of the Company's UBS Financial Services website...

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    QuickLinks Exhibit 10.11 EMC CORPORATION Amended and Restated 2003 Stock Plan Performance Stock Option Agreement

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    ... 10.12 Grant Date Grant Number Units Granted Participant: Employee ID Number: [FORM OF] EMC CORPORATION Amended and Restated 2003 Stock Plan Performance Restricted Stock Unit Agreement 1. Grant of Restricted Stock Units EMC Corporation, a Massachusetts corporation (the "Company"), hereby grants to...

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    ... end of the Company's [ ] fiscal year. Except as set forth...Agreement by and between the Participant and the Company; provided, however, that the termination of the Participant's Service Relationship must constitute a "separation from service" for purposes of Section 409A of the Internal Revenue Code...

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    ...the 50 most highly compensated officers) with respect to the Company and then paid within five (5) days following the end of such period. 6. Dividends The Participant shall be eligible to receive any and all dividends or other distributions paid with respect to a number of Shares that correspond to...

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    ... Grant Date, which has been issued to me under the terms and conditions of the Plan; acknowledge and confirm my consent to the collection, use and transfer, in electronic or other form, of personal information about me, including, without limitation, my name, home address and telephone number, date...

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    QuickLinks Exhibit 10.12

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    ...Exhibit 10.13 Grant Date Grant Number Units Granted Participant: Employee ID Number: [FORM OF] EMC CORPORATION Amended and Restated 2003 Stock Plan Restricted Stock Unit Agreement 1. Grant of Restricted Stock Units EMC Corporation, a Massachusetts corporation (the "Company"), hereby grants to you...

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    ...the 50 most highly compensated officers) with respect to the Company and then paid within five (5) days following the end of such period. 6. Dividends The Participant shall be eligible to receive any and all dividends or other distributions paid with respect to a number of Shares that correspond to...

  • Page 157
    ... Grant Date, which has been issued to me under the terms and conditions of the Plan; acknowledge and confirm my consent to the collection, use and transfer, in electronic or other form, of personal information about me, including, without limitation, my name, home address and telephone number, date...

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    QuickLinks Exhibit 10.13

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    ... RESTATED INDEMNIFICATION AGREEMENT AGREEMENT effective as of January 1, 2008 (the "Effective Date"), between EMC Corporation, a Massachusetts corporation (the "Company"), and [NAME] (the "Indemnitee"). WHEREAS, it is essential to the Company to retain and attract as directors and officers the most...

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    ... who, on the date hereof, constitute the Board of Directors of the Company and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of...

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    ... voting power of the Company's then outstanding securities. (d) "Disinterested Director" shall mean a director of the Company who, at the time of a vote referred to in this Section 2 is not (i) a party to the Proceeding, or (ii) an individual having a familial, financial, professional, or employment...

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    ... hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 7. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, the Indemnitee shall be covered by such...

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    ... by hand or sent by registered or certified mail, return receipt requested, or by overnight prepaid courier, or by facsimile (receipt confirmed) to: if to the Company: EMC Corporation 176 South Street Hopkinton, MA 01748 Attention: Office of the General Counsel Facsimile: (508) 497-6915 [NAME...

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    IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. EMC CORPORATION By Name: Title: [NAME]

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    QuickLinks Exhibit 10.14 FORM OF AMENDED AND RESTATED INDEMNIFICATION AGREEMENT

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    ... combined voting power of all classes of stock unless the Board of Directors of the Company (the "Board of Directors") determines that employees of a particular subsidiary shall not be eligible. Section 2. Options to Purchase Stock Under the Plan as now amended, no more than 123,000,000 shares are...

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    ... be added to the list upon official notice of issuance) upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel. Section 9. Interest No interest will be payable on withholding accounts. Section...

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    ... shall have the rights of a shareholder only as to stock actually acquired by him or her under the Plan. Section 16. Change in Capitalization In the event of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation or other...

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    ... extent explicitly required or permitted herein) no such amendment will, without the approval of the shareholders of the Company, (a) increase the maximum number of shares available under the Plan, (b) reduce the option price of outstanding options or reduce the price at which options may be granted...

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    ... shares of stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any parent or subsidiary company to accrue at a rate which exceeds $25,000 in fair market value of such stock (determined at the time the option is granted) for each calendar year...

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    QuickLinks Exhibit 10.15

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    QuickLinks -- Click here to rapidly navigate through this document Exhibit 12.1 EMC CORPORATION STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended December 31, 2007 2006 2005 2004 2003 Computation of Earnings: Pre-tax income (loss) Fixed charges Total earnings ...

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    QuickLinks Exhibit 12.1

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    QuickLinks -- Click here to rapidly navigate through this document Exhibit 21.1 Significant Subsidiaries State of Jurisdiction of Organization Name EMC (Benelux) B.V., S.a.r.l. EMC Global Holdings Company RSA Security Inc. VMware, Inc. Luxembourg Massachusetts Delaware Delaware

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    QuickLinks Exhibit 21.1

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    ...-143855) of EMC Corporation of our report dated February 28, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 28...

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    QuickLinks Exhibit 23.1

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    ... this document Exhibit 31.1 PRINCIPAL EXECUTIVE OFFICER CERTIFICATION I, Joseph M. Tucci, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of EMC Corporation ("the Registrant"); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit...

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    QuickLinks Exhibit 31.1

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    ... this document Exhibit 31.2 PRINCIPAL FINANCIAL OFFICER CERTIFICATION I, David I. Goulden, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of EMC Corporation ("the Registrant"); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit...

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    QuickLinks Exhibit 31.2 PRINCIPAL FINANCIAL OFFICER CERTIFICATION

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    ...-Oxley Act of 2002, that, to my knowledge: (1) The Annual Report on Form 10-K of EMC Corporation for the fiscal year ended December 31, 2007, 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...

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    QuickLinks Exhibit 32.1

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    ...-Oxley Act of 2002, that, to my knowledge: (1) The Annual Report on Form 10-K of EMC Corporation for the fiscal year ended December 31, 2007, 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...

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    QuickLinks Exhibit 32.2