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EMC CORP (EMC)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/02/2009
Filed Period 12/31/2008

Table of contents

  • Page 1
    EMC CORP (EMC) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/02/2009 Filed Period 12/31/2008

  • Page 2
    ... File Number 1-9853 EMC CORPORATION (Exact name of registrant as specified in its charter) Massachusetts (State or other jurisdiction of incorporation or organization) 04-2680009 (I.R.S. Employer Identification Number) 176 South Street Hopkinton, Massachusetts 01748 (Address of principal executive...

  • Page 3
    ... based upon the closing price on the New York Stock Exchange on the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2008). The number of shares of the registrant's Common Stock, par value $.01 per share, outstanding as of January 31, 2009 was 2,011,875...

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

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

  • Page 6
    ... can simultaneously connect to multiple types of storage networks, while offering leading price/performance and a high level of reliability. EMC Centera Content Addressed Storage Systems EMC Centera provides fast, secure online access to archived fixed content data that cannot be modified or will...

  • Page 7
    ... external hard drives and began to offer a new downloadable software bundle that integrates EMC Retrospect Express backup and recovery software with Mozy online backup service, improving the convenience of securely storing, protecting and accessing important files. Resource Management and Backup...

  • Page 8
    ...Captiva and EMC Document Sciences xPression families, helps customers optimize business processes and create, manage, deliver and archive information, ranging from documents and discussions to email, Web pages, images, XML, reports, records, rich media and application data. In 2008, EMC unveiled its...

  • Page 9
    ... in Financial Services, Life Sciences, Communications/ Media/Entertainment, and Retail, EMC Consulting delivers the transformational thinking and execution required to turn the potential of information into actionable strategies and business results. VMware Virtual Infrastructure Segment VMware is...

  • 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 2008, EMC expanded its partner ecosystem in international markets...

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

  • 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 June 3, 2008 in...

  • Page 13
    ... in fixed income, credit and equity markets. Possible consequences from the financial crisis on our business, including insolvency of key suppliers resulting in product delays, inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies, increased risk...

  • Page 14
    ... virtualization solutions; fluctuations in demand, adoption, sales cycles and pricing levels for VMware's products and services; fluctuations in foreign currency exchange rates; changes in customers' budgets for information technology purchases and in the timing of their purchasing decisions; VMware...

  • Page 15
    ... information storage, content management, security 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...

  • Page 16
    ... accurately forecasting revenues; training our sales force to sell more software and services; successfully integrating new acquisitions; managing inventory levels, including minimizing excess and obsolete inventory, while maintaining sufficient inventory to meet customer demands; controlling...

  • Page 17
    ... 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 percentage of our revenues...

  • Page 18
    ...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 19
    ..., in May 2008, the FASB voted to issue FASB Staff Position ("FSP") APB 14-1, which changes the accounting treatment for certain convertible securities which include our Notes. See Note A to our Consolidated Financial Statements. In addition, in 2007, the FASB issued Statement of Financial Accounting...

  • Page 20
    ... defined benefit pension plans and a post-retirement benefit plan assumed as part of our Data General acquisition. The plans' assets are invested in common stocks, bonds and cash. The expected long-term rate of return on the plans' assets is 8.0%. For the ten years ended December 31, 2007, the...

  • Page 21
    ...& Archiving Information Storage Franklin, MA Bedford, MA Apex, NC Palo Alto, CA RSA Information Security Information Storage VMware Virtual Infrastructure Other North American Locations owned: 854,000 executive and administrative offices, sales, customer leased: 3,941,000 service and R&D leased...

  • Page 22
    ... and General Counsel David A. Donatelli 43 Executive Vice President and President, EMC Storage Division Howard D. Elias 51 Executive Vice President and President, EMC Global Services and Resource Management Software Group David I. Goulden 49 Executive Vice President and Chief Financial Officer Frank...

  • Page 23
    ..., Global Sales and Services, Chief Information Officer, Executive Vice President, Products and Offerings, Senior Vice President, Business Integration, and Senior Vice President, Customer Service. Mark S. Lewis has been our President, EMC Content Management and Archiving Division since September 2007...

  • Page 24
    ...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 our common stock on the New York Stock Exchange for the past two years during the...

  • Page 25
    ... of the outstanding shares of RSA Security Inc. and seven other companies (see Note C to the Consolidated Financial Statements). In 2006, EMC adopted FAS No. 123R "Share-based Payment" which requires the expensing of stock options. As a result of adopting the new standard, Operating income decreased...

  • Page 26
    ... take place in the second half of the year. VMware Virtual Infrastructure Our VMware Virtual Infrastructure business has achieved significant revenue growth to date by focusing on delivering new virtual infrastructure software solutions technology and products, expanding its network of technology...

  • Page 27
    ... Information Storage revenue growth was also driven by higher sales volume from our channel partners. Our channel partners accounted for 27.2% and 57.8% of the revenue growth in 2008 and 2007, respectively. The Content Management and Archiving segment revenues primarily include software revenues...

  • Page 28
    ... generally purchased with licenses, the benefit from multi-year software maintenance contracts sold in previous periods and renewals of existing customer software maintenance contracts. Professional services revenue growth reflects increased demand for design and implementation services and training...

  • Page 29
    ...2008 2007 2006 2008 vs 2007 2007 vs 2006 Cost of revenue: Information Storage Content Management and Archiving RSA Information Security VMware Virtual Infrastructure Corporate reconciling items Total cost of revenue Gross margins: Information Storage Content Management and Archiving RSA Information...

  • Page 30
    ... Management and Archiving segment, which decreased overall gross margins by 19 basis points and the RSA Information Security segment, which decreased overall gross margins by 1 basis point. The increase in corporate reconciling items, consisting of stock-based compensation and acquisition-related...

  • Page 31
    ... $275.6 in 2007. In 2008, stock-based compensation increased $56.8 and intangible asset amortization increased $34.7. The increase in stock-based compensation consisted of a $31.3 increase within the VMware Virtual Infrastructure business and a $25.5 increase within EMC's Information Infrastructure...

  • Page 32
    ... of EMC's Information Infrastructure business revenues, were 26.8%, 26.0% and 25.9% in 2008, 2007 and 2006, respectively. SG&A expenses increased by $393.1 and $389.8 in 2008 and 2007, respectively, primarily due to higher personnel-related costs, depreciation and facilities costs to support the...

  • Page 33
    ... for employee termination benefits associated with a reduction in force of approximately 75 employees and $3.1 for the consolidation of excess facilities and other items within our Information Storage, Content Management and Archiving and RSA Information Security segments. As of December 31, 2008...

  • Page 34
    ... to be substantially paid by the end of 2010. The cash expenditures relating to the contractual obligations are expected to be paid out by the end of 2009. 2007 Restructuring Program The activity for the 2007 restructuring program for the years ended December 31, 2008 and 2007 is presented below...

  • Page 35
    ... a result of lower than expected costs associated with vacating leased facilities. These restructuring programs impacted the Information Storage and Content Management and Archiving segments. The remaining liability for the consolidation of excess facilities is expected to be paid through 2015. 31

  • Page 36
    ... 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 Systems, Inc. for proceeds of approximately $150.0. Investment Income Investment income was $247.0, $249.3 and $224.9 in 2008...

  • Page 37
    ...2008, $91.8 in 2007 and $20.0 in 2006. In 2008, we received $412.3 in proceeds from our securities lending program. The program enables us to receive an incremental return on our investment. We spent $13.3 to purchase 500,000 shares of VMware common stock previously sold to Intel Capital Corporation...

  • Page 38
    ...sale of VMware's Class A common stock in its IPO and to Intel of $1,253.5. Proceeds from short and long-term obligations were $33.7, $19.8 and $5,654.0 in 2008, 2007 and 2006, respectively. In September 2006, we borrowed $2,200.0 under a six-month unsecured credit facility to finance the acquisition...

  • Page 39
    ...on the closing price of $12.61 per share of our common stock on November 13, 2006. The cost of the Purchased Options and net proceeds from the sale of the Sold Warrants were recorded in stockholders' equity. Depreciation and amortization expense was $1,057.5, $917.3 and $764.2 in 2008, 2007 and 2006...

  • Page 40
    ... these securities, issuers repay principal over time from cash flows prior to final maturity, or final payments come due according to contractual maturities ranging from 15 to 40 years. We understand that issuers and financial markets are in the process of developing alternatives that may improve...

  • Page 41
    ... and CUSIP level. The average maturity is 1.14 years. To date, we have collected all interest payable on all the debt securities when due and expect to continue to do so in the future. We have analyzed the issuers' credit history, current financial standing and their ability to retire the debt...

  • Page 42
    ...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 43
    ... acquisition that provides certain medical 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...

  • Page 44
    ... and whether the sale or lease includes systems, software and services or a combination of these items. As our business evolves, the mix of products and services sold will impact the timing of when revenue and related costs are recognized. Additionally, revenue recognition involves judgments...

  • Page 45
    ..., our provision for income taxes could be materially impacted. Accounting for Stock-based Compensation For our share-based payment awards, we make estimates and assumptions to determine the underlying value of stock options, including volatility, expected life and forfeiture rates. Additionally...

  • Page 46
    ... Research Board ("ARB") No. 51" ("FAS No. 160"). The objective of this statement is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for...

  • Page 47
    ...January 1, 2009, we will revise prior period financial statements by reclassifying $669.1 of our Notes to additional paid-in capital. Our interest expense will increase by $11.5 for 2006 (the year the Notes were issued), $96.9 for 2007 and $102.6 in 2008. Our diluted earnings per share will decrease...

  • Page 48
    ... from our leasing activity. Generally, we do not retain any recourse on the sale of these notes. The counterparties to our foreign currency exchange contracts consist of a number of major financial institutions. In addition to limiting the amount of contracts we enter into with any one party, we...

  • Page 49
    ... 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 Balance Sheets at December 31, 2008 and 2007 46 47 48 Consolidated Income...

  • Page 50
    ...1.3% of consolidated revenue as of and for the year ended December 31, 2008. See Note C to the Consolidated Financial Statements for a discussion of the acquisition. Based on our assessment, EMC's management determined that, as of December 31, 2008, EMC's internal control over financial reporting is...

  • Page 51
    ... for uncertain tax positions in 2007. As discussed in Note F to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 157 in 2008. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding...

  • Page 52
    ...EMC CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, ASSETS 2008 2007 Current assets: Cash and cash equivalents Short-term investments Accounts and notes receivable, less allowance for doubtful accounts of $48,080 and $34,389 Inventories Deferred income...

  • Page 53
    ... CORPORATION CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts) For the Year Ended December 31, 2008 2007 2006 Revenues: Product sales Services Costs and expenses: 4,663,667 1,990,127 1,721,330 4,601,588 85,780 244,735 1,568,936 Operating income - Gain on sale of VMware stock...

  • Page 54
    ... EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2008 Cash flows from operating activities: Cash received from customers Cash paid to suppliers and employees Dividends and interest received Interest paid Income taxes paid Net cash provided...

  • Page 55
    ...and financing activity: Issuance of common stock and stock options exchanged in business acquisitions 394,067 (5,159) 670,820 (3,344) 234,164 (7,269) $ 3,565,088 $ 3,126,602 $ 2,140,424 $ 4,057 $ 4,607 $ 41,151 The accompanying notes are an integral part of the consolidated financial statements...

  • Page 56
    ... 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 (see Note A) Impact of adoption of new accounting standard for shared-based payment...

  • Page 57
    51

  • Page 58
    ...of Contents EMC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the Year Ended December 31, 2008 2007 2006 $1,345,567 $1,665,668 $1,227,601 Net income Other comprehensive income (loss), net of taxes (benefit): Recognition of actuarial net (loss) gain from pension and...

  • Page 59
    ... interest in VMware on EMC's consolidated balance sheets. Use of Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and...

  • Page 60
    ... of the 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...

  • Page 61
    ... EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) identification of probable returns. For our Iomega business we defer revenue and cost of sales for inventory sold through the channel that exceeds the channel's four-week requirement. Shipping and Handling Costs Shipping...

  • Page 62
    ...time of purchase. Cash equivalents consist primarily of money market securities, U.S. treasury bills, U.S. agency discount notes and short-term commercial paper. Cash equivalents are stated at fair value. Total cash equivalents were $4,507.5 million and $2,290.6 million at December 31, 2008 and 2007...

  • Page 63
    ... and fixtures 2-5 years Equipment 5-15 years Improvements 39-51 years Buildings Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the income statement. Repair and maintenance costs, including planned maintenance, are...

  • Page 64
    ... by the number of shares of VMware held by EMC. Retirement/Post Employment Benefits Pension cost for our domestic defined benefit pension plan is funded to the extent that current pension cost is deductible for U.S. Federal tax purposes and to comply with the Employee Retirement Income Security Act...

  • Page 65
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Post-retirement benefit cost for the domestic post-retirement benefits plan assumed as part of our acquisition of Data General Corporation is generally funded on a pay-as-you-go basis to the extent that ...

  • Page 66
    ...compensation costs for all shared-based payment awards made to employees and directors based upon the awards' estimated grant date fair value. FAS No. 123R covers employee stock options, restricted stock, restricted stock units and employee stock purchases related to our employee stock purchase plan...

  • Page 67
    ... Research Board ("ARB") No. 51" ("FAS No. 160"). The objective of this statement is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for...

  • Page 68
    ...as an increase to additional paid-in capital which reflects the amount of EMC's share of VMware's net assets (after minority interests) in excess of EMC's carrying value prior to the IPO. In connection with the IPO, EMC and VMware conducted a voluntary exchange offer enabling VMware employees in the...

  • Page 69
    ... consumers and home and small business customers to manage, preserve, use and share their digital content and data. Iomega serves as the core of our new consumer/small business products division within our Information Storage segment. During 2008, VMware acquired six companies. In connection with...

  • Page 70
    ..., enterprise architecture, application development and integration, server and desktop design and lifecycle management services. This acquisition further enhances and expands our Information Storage segment. In the second quarter of 2007, we acquired all of the outstanding capital stock of X-Hive...

  • Page 71
    ..., support and maintenance, consulting, training and localization services related to our Content Management software. The acquisition fully expands our distribution and service delivery capabilities in Russia and Eastern Europe. In the second quarter of 2007, VMware acquired all of the outstanding...

  • Page 72
    ... stock options was estimated assuming no expected dividends and the following weighted-average assumptions: Expected term (in years) 1.6 31.0% Expected volatility 5.0% Risk-free interest rate The consolidated financial statements include the results of RSA from the date of acquisition. The purchase...

  • Page 73
    ... being utilized, which in general reflects the cash flows generated from such assets. None of the goodwill is deductible for income tax purposes. Of the total goodwill acquired from the acquisition of RSA, $1,273.4 million was allocated to our RSA Information Security segment and $419.7 million was...

  • Page 74
    ... of transaction costs, which primarily consisted of fees incurred by us for financial advisory, legal and accounting services. The consolidated financial statements include the results of each of the aforementioned companies from their respective dates of acquisition. The purchase price for each...

  • Page 75
    ... pro forma results are not necessarily indicative of what actually would have occurred had the acquisitions been in effect for the periods presented (table in thousands, except per share data): (unaudited) Year Ended December 31, 2008 2007 2006 Revenue $15,074,509 $14,010,789 $11,655,856 Net income...

  • Page 76
    ..., net, on a consolidated basis and by segment for the years ended December 31, 2008 and 2007 consist of the following (tables in thousands): Year Ended December 31, 2008 Content RSA VMware Information Management Information Virtual Storage and Archiving Security Infrastructure Total Balance...

  • Page 77
    ... from the sale of the Sold Warrants. The Purchased Options and Sold Warrants will generally have the effect of increasing the conversion price of the Notes to approximately $19.55 per share of our common stock, representing an approximate 55 percent conversion premium based on the closing price of...

  • Page 78
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The cost of the Purchased Options and net proceeds from the sale of the Sold Warrants were recorded in stockholders' equity. In April 2006, we redeemed the Documentum Notes for $126.1 million, based on a ...

  • Page 79
    ... Effectiveness Testing) Designated as Other expense, net Statement Location of Gain or Portion Hedging 133 - (Loss) Reclassified and Amount Instruments Cash Flow from Accumulated Excluded under Hedging OCI into Income from Statement Relationships 2008 2007 2006 (Effective Portion) 2008 2007 2006...

  • Page 80
    ...and long-term investments, excluding auction rate securities, were recognized at fair value which was determined based upon observable inputs from our pricing service vendors for identical or similar assets. At December 31, 2008, auction rate securities were valued using a discounted cash flow model...

  • Page 81
    ... loans where EMC acts as a financier to these lenders. The liquidity discount margin represents an estimate of the additional return an investor would require for the lack of liquidity of these securities over an estimated two-year holding period. During the fourth quarter of 2008, we increased the...

  • Page 82
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Unrealized losses on investments at December 31, 2008 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in thousands): Less Than ...

  • Page 83
    ... and CUSIP level. The average maturity is 1.14 years. To date, we have collected all interest payable on all the debt securities when due and expect to continue to do so in the future. We have analyzed the issuers' credit history, current financial standing and their ability to retire the debt...

  • Page 84
    ... sales-type leases of our products. The payment schedule for such notes at December 31, 2008 is as follows (table in thousands): $ 90,452 2009 94,198 2010 83,816 2011 16 Thereafter 268,482 Total (22,308) Less amounts representing interest 246,174 Present value Current portion (included in accounts...

  • Page 85
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) J. Accrued Expenses Accrued expenses consist of (table in thousands): December 31, December 31, 2008 2007 Salaries and benefits $ 712,237 $ 672,715 Product warranties 269,218 263,561 Restructuring (See Note ...

  • Page 86
    ... Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) K. Income Taxes Our provision (benefit) for income taxes consists of (table in thousands): 2008 2007 2006 Federal: Current Deferred State: Current Deferred Foreign: Current Deferred Total provision for income taxes...

  • Page 87
    ...EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of the current and noncurrent deferred tax assets and liabilities are as follows (table in thousands): December 31, 2008 Deferred Deferred Tax Tax Asset Liability December 31, 2007 Deferred Deferred Tax Tax Asset...

  • Page 88
    ...interest at December 31, 2007 and December 31, 2008 were $35.1 million and $34.2 million, respectively. L. Retirement Plans and Retiree Medical Benefits 401(k) Plan EMC's Information Infrastructure business has established a deferred compensation program for certain employees that is qualified under...

  • Page 89
    ...an EMC stock fund. The deferred compensation program limits an employee's maximum investment allocation in the EMC stock fund to 30% of their total contribution. Our matching contribution mirrors the investment allocation of the employee's contribution. VMware 401(k) Plan Prior to March 2008, VMware...

  • Page 90
    ... Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of the change in benefit obligation of the Pension Plans are as follows (table in thousands): December 31, December 31, 2008 2007 Benefit obligation, at beginning of year $ 339,835 $ Interest cost 21...

  • Page 91
    ...in the Pension Plans to determine periodic benefit cost for the years ended December 31 are as follows: December 31, 2008 December 31, 2007 December 31, 2006 Discount rate 6.6% 5.9% 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...

  • Page 92
    ... EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The benefit payments are expected to be paid in the following years (table in thousands): $ 15,557 2009 14,694 2010 15,540 2011 16,947 2012 18,476 2013 2014 - 2018 115,832 Post Retirement Medical and Life Insurance Plan...

  • Page 93
    ... in the plan to determine net benefit cost for the years ended December 31 are as follows: December 31, 2008 December 31, 2007 December 31, 2006 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 as...

  • Page 94
    ... (table in thousands): 1% increase 1% decrease Effect on total service and interest cost components for 2008 $ 5 $ (5) Effect on year-end post retirement obligation 40 (36) The expected long-term rate of return on plan assets considers the current level of expected returns on risk-free investments...

  • Page 95
    ... of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Our future lease commitments as of December 31, 2008 are as follows (table in thousands): $171,057 2009 129,295 2010 100,628 2011 74,182 2012 56,220 2013 363,005 Thereafter Total minimum lease payments $894,387...

  • Page 96
    ...we have maintained the acquired company's directors' and officers' insurance, which should enable us to recover a portion of any future amounts paid. These indemnities vary in length of time. Based upon our historical experience and information known as of December 31, 2008, we believe our liability...

  • Page 97
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) N. Stockholders' Equity Net Income Per Share The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in thousands): 2008 2007 2006 Numerator:...

  • Page 98
    ... to time in one or more series, with such terms as our Board of Directors may determine, without further action by our shareholders. O. Stock-Based Compensation EMC Information Infrastructure Equity Plans The EMC Corporation 2003 Stock Plan (the "2003 Plan") provides for the grant of stock options...

  • Page 99
    ... the 1989 Plan. EMC Information Infrastructure Stock Options The following table summarizes our option activity under all equity plans in 2008, 2007 and 2006 (shares in thousands): Number of Shares Weighted Average Exercise Price (per share) Outstanding, January 1, 2006 Options granted relating to...

  • Page 100
    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) been received by the option holders had all in-the-money options been exercised as of that date. The total pre-tax intrinsic values of options exercised in 2008, 2007 and 2006 were $77.2 million, $587.4 ...

  • Page 101
    ... six-year option term. The 2008 VMware Exchange Offer resulted in incremental stock-based compensation expense of $18.0 million to be recognized over the four-year vesting term. VMware Employee Stock Purchase Plan In June 2007, VMware adopted its 2007 Employee Stock Purchase Plan (the "VMware ESPP...

  • Page 102
    ... value to the options exercised or related income tax benefits realized in 2007. In June 2007, options were granted to non-employee directors to purchase 120,000 shares of VMware's Class A common stock with an exercise price of $23.00 per share. The options were exercisable immediately, subjected...

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    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) VMware Restricted Stock VMware restricted stock includes restricted stock awards, restricted stock units, and other restricted stock. Other restricted stock includes options exercised by non-employee directors that were required...

  • Page 104
    ... in our consolidated income statement in 2008, 2007 and 2006 (in thousands): Year Ended December 31, 2008 Restricted Total Stock-Based Stock Options Stock Compensation Cost of product sales $ 23,092 $ 9,638 Cost of services 35,350 12,046 Research and development 102,865 59,512 Selling, general and...

  • Page 105
    ... Options 2008 2007 2006 Dividend yield None None None Expected volatility 34.4% 33.8% 35.2% Risk-free interest rate 2.8% 3.6% 4.8% Expected term (in years) 4.4 4.2 4.0 Weighted-average fair value at grant date $ 4.82 $ 6.29 $ 3.80 For the Year Ended December 31, EMC Employee Stock Purchase Plan...

  • Page 106
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Fair Value of VMware Options The fair value of each option to acquire VMware Class A common stock granted during the years ended December 31, 2008 and 2007 was estimated on the date of grant using the Black-Scholes option-pricing...

  • Page 107
    ... Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In addition to the aforementioned analysis, with respect to grants of options to purchase Class A common stock with a per share exercise price of $23.00, VMware believes that the fair value of its equity at that time...

  • Page 108
    ...employee termination benefits associated with a reduction in force of approximately 75 employees and $3.1 million for the consolidation of excess facilities and other items within our Information Storage, Content Management and Archiving and RSA Information Security segments. As of December 31, 2008...

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    ... of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2008 Restructuring Programs The activity for the 2008 restructuring programs is presented below (table in thousands): 2008 Category Non-Cash Initial Utilization Portion of the Provision During 2008 Ending Balance...

  • Page 110
    ... of 2009. The cash expenditures relating to consolidation of excess facilities are expected to be paid out through 2018. Prior Year Restructuring Programs Prior to 2006, we had instituted several restructuring programs. The activity for these programs for the years ended December 31, 2008, 2007 and...

  • Page 111
    ... of our acquisition of Data General in 1999, and renewed in 2003 for a ten-year term. In 2008 and 2007, we paid approximately $33,000 and $10,000, respectively, for renewal of software maintenance and licenses to a third party, and VMware amended an agreement with such third party for the licensing...

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    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 ...

  • Page 113
    ... Archiving Security EMC Information Infrastructure VMware Virtual Infrastructure within EMC Corp Reconciling Items Consolidated 2008: Revenues: Systems revenues Software revenues: Software license Software maintenance Total software revenues Other services revenues Total revenues Cost of sales...

  • Page 114
    ... Archiving Security EMC Information Infrastructure VMware Virtual Infrastructure within EMC Corp Reconciling Items Consolidated 2007: Revenues: Systems revenues Software revenues: Software license Software maintenance Total software revenues Other services revenues Total revenues Cost of sales...

  • Page 115
    ... Archiving Security EMC Information Infrastructure VMware Virtual Infrastructure within EMC Corp Reconciling Items Consolidated 2006: Revenues: Systems revenues Software revenues: Software license Software maintenance Total software revenues Other services revenues Total revenues Cost of sales...

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    Table of Contents EMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For 2008, 2007 and 2006, Dell Inc. accounted for 11.5%, 14.3% and 14.5%, respectively, of our total revenues. Dell Inc. also accounted for 10.2% of our accounts receivable at December 31, 2006. S. Selected ...

  • Page 117
    ... control over financial reporting as of December 31, 2008, our management excluded the evaluation of the disclosure controls and procedures of Iomega Corporation, which was acquired by EMC on June 9, 2008. See Note C to the Consolidated Financial Statements for a discussion of the acquisition. ITEM...

  • Page 118
    ... Information Technology Sector Index, including reinvestment of dividends, if any. Note: The stock price performance shown on the graph above is not necessarily indicative of future price performance. This graph shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange...

  • Page 119
    ... SEC a definitive Proxy Statement not later than 120 days after the close of the fiscal year ended December 31, 2008. 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...

  • Page 120
    ... on February 27, 2009. 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 behalf of EMC Corporation and in the...

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    Windle B. Priem /s/ PAUL SAGAN Paul Sagan /s/ DAVID N. STROHM David N. Strohm 114 Director Director

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    ... Corporation Amended and Restated 1989 Employee Stock Purchase Plan, as amended and restated as of January 1, 2008. (1) Employment Arrangement with Joseph M. Tucci dated November 28, 2007. (5) Amendment to Employment Arrangement with Joseph M. Tucci dated December 4, 2008. (filed herewith) Statement...

  • Page 123
    ... at Beginning a Reduction Other End of Description of Period Accounts Sales Returns Period in Revenue $ 73,856 $ - $ (33,640) $ 89,433 Year ended December 31, 2008 allowance for sales returns $ 49,217 39,378 66,359 - (56,520) 49,217 Year ended December 31, 2007 allowance for sales returns 24,826 35...

  • Page 124

  • Page 125
    ...EMC Corporation 176 South Street, Hopkinton, MA 01748 (number, street, city or town, state, zip code) (3) (4) Date adopted: Approved by: (check appropriate box) o ý May 21, 2008 (month, day, year) the directors without shareholder approval and shareholder approval was not required; OR the board...

  • Page 126
    ...any, of each class of stock that the corporation is authorized to issue. All corporations must authorize stock. If only one class or series is authorized, it is not necessary to specify any particular designation. WITHOUT PAR VALUE TYPE NUMBER OF SHARES TYPE WITH PAR VALUE NUMBER OF SHARES PAR VALUE...

  • Page 127
    ... obligations and for payment to the holders of shares of any class or series having preferential rights to receive distributions of the net assets of the Company. Preferred Stock The shares of Series Preferred Stock may be issued from time to time in one or more series. The directors may determine...

  • Page 128
    ... of directors of the corporation, acting pursuant to subsection (3) of Section 11.04 of the MBCA, approval by the shareholders of a plan of merger or share exchange in accordance with Section 11.04 of the MBCA shall require approval by at least a majority of all the shares entitled generally to vote...

  • Page 129
    ... to subsection (3) of Section 9.21 of the MBCA, approval of a plan of domestication of the corporation to a foreign jurisdiction in accordance with Section 9.21 of the MBCA shall require approval by at least a majority of all the shares entitled generally to vote on the matter by these articles of...

  • Page 130
    ... for any 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...

  • Page 131
    ... concern 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...

  • Page 132
    ... of 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...

  • Page 133
    ... meeting sent pursuant to the corporation's bylaws (the "Determination Date"); provided, however, that if in accordance with the corporation's bylaws, shareholders are entitled to nominate persons for election as director for a period of time that ends after the otherwise applicable Determination...

  • Page 134
    ... in the text of the amendment. Specify the number(s) of the article(s) being amended: Article IV, Article VI Signed by: /s/ SUSAN PERMUT (signature of authorized individual) o o ý o Chairman of the board of directors, President, Other officer, Court-appointed fiduciary, on this 25th day of...

  • Page 135
    ...000 shares or any fraction thereof. 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, a copy of this filing will be available at www.sec.state.ma...

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    QuickLinks Exhibit 3.1

  • Page 137
    ... effectively their voting rights. The chairman of the board or other presiding officer in such event shall announce the adjournment and date, time and place of reconvening. 2.4. Notice of Meetings. A written notice of each meeting of shareholders, stating the place, date and hour and the purposes...

  • Page 138
    ... or posting on an electronic network. Such notice shall be given by the secretary or an assistant secretary or by an officer designated by the directors. Whenever notice of a meeting is required to be given to a shareholder under any provision of Chapter 156D of the Massachusetts General Laws or of...

  • Page 139
    ..., directly or indirectly, beneficially owns an interest in such a general partner, and (h) all other information which would be required to be included in a proxy statement or other filings required to be filed with the Securities and Exchange Commission if, with respect to any such item of business...

  • Page 140
    ... occupation or employment of the person, (iii) the class and number of all shares of stock of the corporation, if any, which are beneficially owned by the person, (iv) any other information regarding the nominee as would be required to be included in a proxy statement or other filings required to be...

  • Page 141
    ... entire board of directors may be removed from office (a) only for Cause (as defined in Section 8.06(f)(2) of Chapter 156D of the Massachusetts General Laws) by the affirmative vote of a majority of the shares entitled to vote at an election of directors and (b) only at a shareholder meeting called...

  • Page 142
    ... after and at the same place as the annual meeting of the shareholders. 3.8. Special Meetings. Special meetings of the directors may be held at any time and at any place designated in the notice of the meeting, when called by the chairman of the board, the chief executive officer, or by two or more...

  • Page 143
    ...the board shall be a director of the corporation. Section 4. OFFICERS AND AGENTS 4.1. Enumeration; Qualification. The officers to the corporation shall be a president, a treasurer, a secretary, and such other officers, if any, as the incorporators at their initial meeting, or the directors from time...

  • Page 144
    ... and the class and the designation of the series, if any, of the shares held by such shareholder, in such form as shall, in conformity to law, be prescribed from time to time by the directors. Such certificate shall be signed by the president or a vice president and by the treasurer or an assistant...

  • Page 145
    ...of each shareholder to notify the corporation of such shareholder's address. 6.2. Record Date and Closing Transfer Books. The directors may fix in advance a time, which shall not be more than 70 days before the date of any meeting of shareholders or the date for the payment of any dividend or making...

  • Page 146
    ... was in the best interests of the corporation; or (c) by the holders of a majority of the outstanding stock at the time entitled to vote for directors, voting as a single class, exclusive of any stock owned by any interested director or officer. Expenses, including counsel fees, reasonably incurred...

  • Page 147
    ... office of the corporation or an office of a commercial bank specified by the corporation in the notice. The redemption date so fixed shall not be deferred by a request of the Holder for a redetermination of fair value. The Holder shall cause the certificate or certificates representing the shares...

  • Page 148
    ... 110D mean Chapter 110D of the Massachusetts General Laws as in effect from time to time. Section 13. MASSACHUSETTS BUSINESS COMBINATION ACT The provisions of Chapter 110F of the Massachusetts General Laws shall not apply to "business combinations" (as defined therein) involving the corporation. 12

  • Page 149
    QuickLinks Exhibit 3.2

  • Page 150
    QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.6 EMC CORPORATION DEFERRED COMPENSATION RETIREMENT PLAN, as amended and restated as of May 22, 2008 effective for amounts earned and vested after December 31, 2004

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    ...the EMC Corporation Executive Deferred Compensation Retirement Plan to the EMC Corporation Deferred Compensation Retirement Plan on May 22, 2008. 1.2. Purpose of Plan. The Company has adopted the Plan to provide a competitive level of retirement benefits to certain designated employees and directors...

  • Page 152
    ...cash commissions, restricted stock units ("RSUs"), and directors' fees payable from time to time by the Company or any of its Subsidiaries to a Participant. For each Participant, however, the Administrator in its sole discretion may: (1) determine which specific types of Compensation may be deferred...

  • Page 153
    ...his or her Account. Article 4. DEFERRALS AND CREDITS 4.1. Elective Deferrals. (a) Election to defer. (1) General. An Elective Deferral Eligible Employee or Eligible Director may elect to defer a designated portion of his or her Compensation to be earned during a Plan Year by filing an election with...

  • Page 154
    ... deferred for the applicable Plan Year is to be paid or, in the case of installments, is to commence being paid (e.g., upon Retirement, upon a fixed distribution date under Section 6.2, or upon a Change of Control) and the method of payment (e.g., in a single lump sum payment, in a number of annual...

  • Page 155
    ...termination of service as a director of the Company for any reason, as the case may be, the Company may require the Participant at any time until the later of (A) two (2) years after the Participant's termination of employment for any reason or termination of service as a director of the Company for...

  • Page 156
    ... date, payments will commence in January of the year following the Participant's Retirement. The amount of each installment payment is determined by dividing the Participant's applicable Account balance (adjusted through the day before the installment is paid) by the number of installments...

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    ... or installment distributions will generally be paid in cash, except that Compensation payable in Company Stock may be paid in Company Stock. (b) Payment Events Occurring Before Scheduled Commencement Date. If a Participant's Separation from Service or Disability occurs before the fixed distribution...

  • Page 158
    ...'s Account attributable to Compensation earned by the Participant for his or her service as an Eligible Director will be paid in accordance with the provisions of this Article 6 applicable to Participants who are Eligible Directors. 6.8. Payments to Specified Employees. Amounts payable under...

  • Page 159
    ... or changed, shall meet the minimum standards of Section 503 of ERISA. 7.3. Claims and Review Procedure for Disability Claims. (a) In general. If any person believes he or she has been denied any rights or benefits due on Disability under the Plan, such person may file a claim in writing with the...

  • Page 160
    ...in the Plan and appeal denials of such claims, as amended or changed, shall meet the minimum standards of Section 503 of ERISA. 7.4. Indemnification of Administrator. The Company shall indemnify and defend to the fullest extent permitted by law any director, officer or employee of the Company or its...

  • Page 161
    ... be paid from the general assets of the Company. 9.2. Nature of Claim for Payment. Each Participant and beneficiary will be an unsecured general creditor of the Company with respect to any distributions or payments to be made under the Plan. Nothing in the Plan will be construed to give any person...

  • Page 162
    ...Massachusetts without regard to the conflict of law provisions thereof. The Company, the Administrator, the Participants and their beneficiaries, and any persons having or claiming to have any interest under the Plan... of the Plan shall be paid by the Company from its general assets unless, in...

  • Page 163
    QuickLinks Exhibit 10.6

  • Page 164
    ... into as of November 28, 2007 between EMC Corporation ("EMC"), and Joseph M. Tucci (the "Executive"), is made as of December 4, 2008. WHEREAS, EMC and the Executive are parties to the Employment Letter and a Change in Control Severance Agreement dated as of November 28, 2007 (the "Change in Control...

  • Page 165
    ... as modified by this Amendment, the Employment Letter is hereby confirmed in all respects. IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date and the year first written above. EMC CORPORATION /s/ David N. Strohm David N. Strohm Lead Director EXECUTIVE /s/ Joseph...

  • Page 166
    QuickLinks Exhibit 10.17 AMENDMENT TO EMPLOYMENT LETTER

  • Page 167
    ...rapidly navigate through this document Exhibit 12.1 EMC CORPORATION STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Year Ended December 31, 2008 2007 2006 2005 2004 Computation of Earnings: Income before taxes, minority interest in VMware and cumulative effect of a change in...

  • Page 168
    QuickLinks Exhibit 12.1

  • Page 169
    ...here to rapidly navigate through this document Exhibit 21.1 Significant Subsidiaries Name State of Jurisdiction of Organization EMC (Benelux) B.V. EMC Global Holdings Company EMC Information Systems International RSA Security Inc. VMware, Inc. Netherlands Massachusetts Ireland Delaware Delaware

  • Page 170
    QuickLinks Exhibit 21.1

  • Page 171
    ...-149986) of EMC Corporation of our report dated February 27, 2009 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 27...

  • Page 172
    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...

  • Page 174
    QuickLinks Exhibit 31.1

  • Page 175
    ...; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. b) Date: February 27, 2009 /s/ DAVID I. GOULDEN David I. Goulden Executive Vice President and Chief Financial Officer

  • Page 176
    QuickLinks Exhibit 31.2

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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, 2008, 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...

  • Page 178
    QuickLinks Exhibit 32.1

  • Page 179
    ...-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, 2008, 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...

  • Page 180
    QuickLinks Exhibit 32.2