EMC 2010 Annual Report Download - page 91

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
R. Segment Information
We manage our business in two broad categories: EMC Information Infrastructure and VMware Virtual Infrastructure. EMC Information Infrastructure
operates in three segments: Information Storage, Information Intelligence Group and RSA Information Security, while VMware Virtual Infrastructure
operates in a single segment. Our management measures are designed to assess performance of these operating segments excluding certain items. As a result,
the corporate reconciling items are used to capture the items excluded from the segment operating performance measures, including stock-based
compensation expense and acquisition-related intangible asset amortization expense. Additionally, in certain instances, IPR&D charges, restructuring and
acquisition-related charges, transition costs and infrequently occurring gains or losses are also excluded from the measures used by management in assessing
segment performance. The VMware Virtual Infrastructure amounts represent the revenues and expenses of VMware as reflected within EMC's consolidated
financial statements. Research and development expenses, SG&A, and other income associated with the EMC Information Infrastructure business are not
allocated to the segments within the EMC Information Infrastructure business, as they are managed centrally at the business unit level. For the three segments
within the EMC Information Infrastructure business, gross profit is the segment operating performance measure.
During 2010, VMware acquired certain software product technology and related capabilities from the EMC Information Infrastructure segment's Ionix
information technology management business for cash consideration of $175.0 million. The acquisition of the Ionix net assets and related capabilities was
accounted for as a business combination between entities under common control. In the fourth quarter of 2010, VMware paid $10.6 million of contingent
amounts to EMC in accordance with the asset purchase agreement. We did not revise our segment presentation for prior periods, as the historical impact of the
acquired business was not material to the VMware Virtual Infrastructure segment.
Our segment information for the years ended 2010, 2009 and 2008 are as follows (tables in thousands, except percentages):
EMC Information Infrastructure
2010:
Information
Storage
Information
Intelligence
Group
RSA
Information
Security
EMC
Information
Infrastructure
VMware
Virtual
Infrastructure
within EMC
Corp
Reconciling
Items Consolidated
Revenues:
Product revenues $ 8,824,287 $ 269,138 $ 400,151 $ 9,493,576 $ 1,399,281 $ — $10,892,857
Services revenues 3,874,825 466,759 329,233 4,670,817 1,451,452 — 6,122,269
Total consolidated revenues 12,699,112 735,897 729,384 14,164,393 2,850,733 — 17,015,126
Cost of sales 5,836,382 258,239 221,579 6,316,200 425,257 242,688 6,984,145
Gross profit $ 6,862,730 $ 477,658 $ 507,805 7,848,193 2,425,476 (242,688) 10,030,981
Gross profit percentage 54.0% 64.9% 69.6% 55.4% 85.1% — 59.0%
Research and development 1,122,835 477,799 287,381 1,888,015
Selling, general and administrative 3,737,081 1,160,768 477,456 5,375,305
Restructuring and acquisition-related charges — — 84,375 84,375
Total costs and expenses 4,859,916 1,638,567 849,212 7,347,695
Operating income 2,988,277 786,909 (1,091,900) 2,683,286
Other income (expense), net 48,214 (16,458) (107,059) (75,303)
Income before tax 3,036,491 770,451 (1,198,959) 2,607,983
Income tax provision 742,736 128,233 (232,672) 638,297
Net income 2,293,755 642,218 (966,287) 1,969,686
Net income attributable to the non-controlling
interest in VMware, Inc. — (124,728) 55,037 (69,691)
Net income attributable to EMC Corporation $ 2,293,755 $ 517,490 $ (911,250) $ 1,899,995
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