EMC 2009 Annual Report Download - page 24

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Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations should be read in conjunction with our
consolidated financial statements and notes thereto which appear elsewhere in this Annual Report on Form 10-K. The following discussion contains
forward-looking statements and should also be read in conjunction with the risk factors set forth in Item 1A. The forward-looking statements do not
include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after
the date hereof.
All dollar amounts expressed numerically in this MD&A are in millions.
Certain tables may not add due to rounding.
INTRODUCTION
We manage our business in two broad categories: EMC Information Infrastructure and VMware Virtual Infrastructure.
EMC Information Infrastructure
Our EMC Information Infrastructure business consists of three of our segments: Information Storage, Content Management and Archiving and RSA
Information Security.
Our objective for our EMC Information Infrastructure business is to grow faster than the markets we serve by investing in the business for sustainable
advantage. Through a continued focus on enhancing and expanding our portfolio of systems, software, services and solutions to meet our customers' needs,
we believe we will be able to profitably increase revenues. We intend to enhance and expand our portfolio by accelerating our internal research and
development ("R&D") efforts and through acquisitions.
Concurrent with these efforts, we will continue to focus on our cost structure. In the fourth quarter of 2008, we implemented a restructuring program to
further streamline the costs related to our Information Infrastructure business. The program's focus is to consolidate back office functions, field and campus
offices, rebalance investments towards higher-growth products and markets, reduce management layers, and further reduce indirect spending on contractors,
third-party services and travel. Additionally, in 2009 we restructured the ownership of some of our subsidiaries to streamline our operations. In 2009, we
reduced our costs in excess of $450 compared to our 2008 cost structure. These programs have favorably impacted our cost of sales, selling, general &
administrative ("SG&A") and R&D expenses. For 2009, approximately one-third of these reductions related to our cost of sales and the remaining two-thirds
related to our other operating expenses.
The program's savings are from both cost reductions and the transformation of several areas of our operational cost structure. As part of these efforts,
we are undertaking several initiatives to transform the structural efficiency of our worldwide operations. These initiatives, which began in 2009, include the
consolidation and movement of various facilities and processes. As part of these transformation efforts, we have incurred transition costs of $55 in 2009 and
expect to incur an additional $50 in 2010. These investments are necessary to implement the new, more efficient capabilities ahead of transitioning from the
existing cost structure.
Through a combined focus on revenue growth, accelerated investment in R&D and continued cost containment efforts, we believe we will be able to
increase 2010 earnings at a faster rate than the rate at which we will grow our revenues.
Since mid-2008 and through most of 2009, we have observed that customers have responded to the economic downturn with reductions in their IT
spending. As a result, we have experienced a decline in year-over-year product revenues. While the overall macroeconomic environment appears to be
improving and customers appear to be moving cautiously with their IT spending, we remain conservative in planning and assume a slow economic recovery
in which IT spending will continue to be tempered into 2010 and perhaps longer.
VMware Virtual Infrastructure
VMware's current financial focus is on long-term revenue growth to generate cash flows to fund its expansion of industry segment share and
development of virtualization-based products for data centers, desktop computers and cloud computing through a combination of internal development and
acquisitions. VMware expects to grow its business by broadening virtualization infrastructure software solutions technology and product portfolio, increasing
product awareness, promoting the adoption of
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