EMC 2011 Annual Report Download - page 29

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Table of Contents
Costs and Expenses
The following table presents our costs and expenses, other income and net income attributable to EMC Corporation.
Percentage Change
2011 2010 2009 2011 vs 2010 2010 vs 2009
Cost of revenue:
Information Storage $ 6,414.3 $ 5,836.4 $ 5,256.7 9.9% 11.0%
Information Intelligence Group 251.0 258.2 274.8 (2.8) (6.0)
RSA Information Security 357.7 221.6 186.5 61.4 18.8
VMware Virtual Infrastructure 533.3 425.3 316.3 25.4 34.5
Corporate reconciling items 282.3 242.7 246.8 16.3 (1.7)
Total cost of revenue 7,838.6 6,984.1 6,281.0 12.2 11.2
Gross margins:
Information Storage 8,299.9 6,862.7 5,402.7 20.9 27.0
Information Intelligence Group 451.4 477.7 464.8 (5.5) 2.8
RSA Information Security 470.5 507.8 419.5 (7.3) 21.0
VMware Virtual Infrastructure 3,229.5 2,425.5 1,704.7 33.1 42.3
Corporate reconciling items (282.3) (242.7) (246.8) 16.3 (1.7)
Total gross margin 12,168.9 10,031.0 7,744.9 21.3 29.5
Operating expenses:
Research and development(1) 2,149.8 1,888.0 1,627.5 13.9 16.0
Selling, general and administrative(2) 6,479.4 5,375.3 4,595.6 20.5 17.0
Restructuring and acquisition-related charges 97.3 84.4 107.5 15.3 (21.5)
Total operating expenses 8,726.5 7,347.7 6,330.6 18.8 16.1
Operating income 3,442.4 2,683.3 1,414.3 28.3 89.7
Investment income, interest expense and other expenses, net (193.2) (75.3) (39.7) 156.6 89.7
Income before income taxes 3,249.3 2,608.0 1,374.6 24.6 89.7
Income tax provision 640.4 638.3 252.8 0.3 152.5
Net income 2,608.9 1,969.7 1,121.8 32.5 75.6
Less: Net income attributable to the non-controlling interest in VMware, Inc. (147.5) (69.7) (33.7) 111.6 106.8
Net income attributable to EMC Corporation $ 2,461.3 $ 1,900.0 $ 1,088.1 29.5% 74.6%
(1) Amount includes corporate reconciling items of $322.6, $287.4 and $235.8 for the years ended December 31, 2011, 2010 and 2009, respectively.
(2) Amount includes corporate reconciling items of $606.4, $477.5 and $495.5 for the years ended December 31, 2011, 2010 and 2009, respectively.
Gross Margins
Our gross margin percentages were 60.8%, 59.0% and 55.2% in 2011, 2010 and 2009, respectively. The increase in the gross margin percentage in
2011 compared to 2010 was attributable to the VMware Virtual Infrastructure segment, which increased overall gross margins by 140 basis points, and the
Information Storage segment, which increased overall gross margins by 124 basis points, partially offset by the RSA Information Security segment, which
decreased overall gross margins by 53 basis points, and the Information Intelligence Group segment, which decreased overall gross margins by 3 basis points.
The increase in corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization, restructuring charges
and transition costs, decreased the consolidated gross margin percentage by 22 basis points. Transition costs represent the incremental costs incurred to
streamline our current cost structure. The increase in the gross margin percentage in 2010 compared to 2009 was attributable to the Information Storage
segment, which increased overall gross margins by 189 basis points, the VMware Virtual Infrastructure segment, which increased overall gross margins by
161 basis points, the RSA Information Security segment, which increased overall gross margins by 11 basis points and the Information Intelligence Group
segment, which increased overall gross margins by 10 basis points. Also contributing to the increased overall gross margin percentage was the decrease of
corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization, restructuring charges and transition
costs, which increased the consolidated gross margin percentage by 3 basis points.
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