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1© Copyright 2006 EMC Corporation. All rights reserved.
EMC Q4 2005 Financial Results
Tony TakazawaVice President, Global Investor Relations
January 24, 2006
2© Copyright 2006 EMC Corporation. All rights reserved.
Forward-Looking Statements
This presentation contains “forward-looking statements” as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) risks associated with acquisitions and investments, including the challenges and costs of integration, restructuring and achieving anticipated synergies; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (vi) component and product quality and availability; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) insufficient, excess or obsolete inventory; (ix) war or acts of terrorism; (x) the ability to attract and retain highly qualified employees; (xi) fluctuating currency exchange rates; and (xii) other one-time events and other important factors disclosed previously and from time to time in EMC’s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this presentation. This presentation contains non-GAAP financial measures. A reconciliation to GAAP is included in the Current Report on Form 8-K filed by EMC today.
3© Copyright 2006 EMC Corporation. All rights reserved.
CFO Commentary
Bill TeuberExecutive Vice President & CFO
4© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Financial Results Detail
Strong diversified revenue growth
Operating margins improvement
Balance sheet highlights and other items
Stock option expense
Outlook
5© Copyright 2006 EMC Corporation. All rights reserved.
$ 2,710
19%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 050.0%
4.0%
8.0%
12.0%
16.0%
20.0%Revenue
Operating Margin
Q4 2005 Revenue and Operating Margin • Revenue +15% Y/Y
• Op Income +42% Y/Y,
19% of total revenues
• Net Income +27% Y/Y
Q405 GAAP Operating Margin was 15.5%, including a restructuring charge of $81M and an IPR&D charge of $14M. Excluding these charges, Operating Margin was 19.0%. Q405 GAAP Net Income was $148M or $0.06 per diluted share. Excluding the aforementioned charges and their related income tax impact and a $180M tax expense associated with repatriation under the 2004 American Jobs Creation Act, Net Income was $409M or $0.17 per diluted share.
($ in Millions)
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Q4 and 2005 EPS Analysis*GAAP EPS
Q1 $.11
Q2 $.12
Q3 $.17
Q4 $.06
‘05 $.47
* May not foot due to rounding.
7© Copyright 2006 EMC Corporation. All rights reserved.
Q4 and 2005 EPS Analysis*GAAP EPS Special Items Adjusted EPS
Q1 $.11 $.11
Q2 $.12 $.12
Q3 $.17 ($.04) $.13
Q4 $.06 $.11 $.17
‘05 $.47 $.06 $.53
* May not foot due to rounding.
8© Copyright 2006 EMC Corporation. All rights reserved.
Q4 and 2005 EPS Analysis*GAAP EPS Special Items Adjusted EPS Deferred
Comp. & Amortization
Adjusted EPS
Q1 $.11 $.11 $.01+ $.12
Q2 $.12 $.12 $.01+ $.13
Q3 $.17 ($.04) $.13 $.01+ $.14
Q4 $.06 $.11 $.17 $.01+ $.18
‘05 $.47 $.06 $.53 $.05 $.59
* May not foot due to rounding.
9© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Corporate Revenue Mix
Systems+19% Y/Y
Software+16% Y/Y
Services+4% Y/Y
• Diversified businessmodel delivered strongresults
$1,300M48%
$1,000M37%
$403M15%
10© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Systems-Related Product Revenue
Symmetrix ProductFlat Y/Y
CLARiiON Product+32% Y/Y
Connectivity+27% Y/Y
• DMX3- SOLD OUT!!!• Mid tier growth 32% • NAS systems up nearly 50%
$754M $519M
$243M
11© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Platform Software Revenue• $450M, up 9% Y/Y • License up 5% Y/Y• Maintenance up 25% Y/Y
$116
$333
$0
$100
$200
$300
$400
$500
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
Maintenance
License$450
($ in Millions)
* May not foot due to rounding.
12© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Multi-Platform Software Revenue
$292
$149
$0
$100
$200
$300
$400
$500
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
Maintenance
License
• $441M, up 15% Y/Y • License up 11% Y/Y• Maintenance up 22% Y/Y
$441
($ in Millions)
13© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Multi-Platform Software License Revenue
Resource Management+7% Y/Y
B/U, Recovery,Archive+13% Y/Y
Content Management+25% Y/Y
• SMARTS a growth driver• Networker gaining share• Strong Q4 and year forContent Management
$167M $60M
$64M
14© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 VMware Revenue • $115M, up 62% Y/Y• License up 55% Y/Y• Maintenance & Servicesup 91% Y/Y
$28
$87
$0
$20
$40
$60
$80
$100
$120
$140
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
Maintenance and ServicesLicense
$115
($ in Millions)
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Q4 2005 Services RevenueProfessional, Systems Maintenance and Other Services
• $403M, up 4% Y/Y • Continued opportunity for Professional Services
$0
$100
$200
$300
$400
$500
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
$403
($ in Millions)
16© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Geography Revenue Mix
North America EMEA
APJ
LA$85M
• North America up 14% Y/Y• EMEA up 15% Y/Y• APJ up 16% Y/Y• Latin America up 28% Y/Y
$1534M $801M
$290M
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Q4 2005 Gross Margin Analysis
Q3 ’05Margin 54.0%
Volume 140 bpsMix (25) bpsPrice/Cost/Other (35) bps
Total 80 bps
Q4 ’05Margin 54.8%
54.8%
50.1%50.6%
51.4%
52.4% 52.3%
53.6%54.0%
47.0%
48.0%
49.0%
50.0%
51.0%
52.0%
53.0%
54.0%
55.0%
56.0%
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
18© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Operating Expenses• SG&A 26.1% of revenues• R&D 9.7% of revenues
0.0%
10.0%
20.0%
30.0%
40.0%
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
35.8%
R&D9.7%
SG&A 26.1%
19© Copyright 2006 EMC Corporation. All rights reserved.
EMC’s Q4 Cash Position• Total Cash and Investments: $7.4B• Buyback: $400M for 29M shares in Q4, 2005 total $1B for 74M shares• Acquisitions: Captiva, Internosis and Acartus
Since Q1 04, EMC has redeployed 86% of cash
generated towards acquisitions and
buybacks
Cash Deployment Q1'04-Q4'05
Acquisitions 39%
Stock Buyback
47%
Balance Sheet 14%
$448M
$1,274M $1,550M
20© Copyright 2006 EMC Corporation. All rights reserved.
Q4 2005 Balance Sheet Highlights and Other Items
Days Sales Outstanding (DSOs): 48 days
Inventory: $725M, Turns were 6.7– Consistent with product transition and Q4 ramp up– Focused on returning to 7 turns
Capital Expenditures: $182M
Depreciation & Amortization: $190M
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Stock OptionsFocus on decreasing expense over time
2006 impact approximately $.09 per diluted share,down about 30% from $.13 per diluted share in 2005
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Q1 2006 Outlook2005 performance momentum
Systems portfolio strength– Great customer reception for new Symmetrix– Mid tier strength– Adding products in 2006
Software portfolio strength – Excellent opportunity for all of our software solutions– Adding products in 2006
The best salesforce in the world is excited and ready to go
Overall business model is thriving
24© Copyright 2006 EMC Corporation. All rights reserved.
2006 and Q1 Outlook2006:
– Revenues: $11.1B to $11.3B– EPS: $.63 to $.66 per diluted share– Excluding stock option expense of approx. $.09 per diluted share
Q1:– Revenues: $2.57B to $2.59B– EPS: $0.14 per diluted share– Excluding stock option expense of approx. $.03 per diluted share
25© Copyright 2006 EMC Corporation. All rights reserved.
CEO Commentary
Joe TucciChairman, President & CEO
26© Copyright 2006 EMC Corporation. All rights reserved.
2006 Technology Spending Priorities - CIO Survey
1. Security (Software) 11. Wireless LAN (clients)
2. Security (Network Equipment) 12. New Custom Development
3. Storage Area Networks 13. Routing
4. Wireless LAN (access points & routers) 14. Systems Management Software
5. Storage Software 15. Application Integration Software
6. Portal Software 16. Notebook PC’s
7. VOIP Infrastructure 17. Document Management Software
8. IT Education and Training 18. Automated Testing Tool
9. Storage Hardware 19. Microsoft Office Upgrade
10. Business Intelligence Software 20. Application Software Server
Source: Morgan Stanley November CIO Survey, Jan. 3, 2006
27© Copyright 2006 EMC Corporation. All rights reserved.
EMC Performing Well in the Storage Market
Hi-end Storage– DMX 3 well received– More to come – tune in Thursday
Mid-tier Storage– Up 31% Y/Y in 2005– EMC is the biggest and fastest growing
28© Copyright 2006 EMC Corporation. All rights reserved.
Global Market Presence – HardwareQ3 2005 Worldwide Market Share
8.3%Dell 8.4%HDS
12.9%IBM19.1%HP20.3%EMC
WorldwideExternal Disk Storage
6.3%NetApp
9.0%Dell
13.3%IBM17.0%HP22.1%EMC
WorldwideExternal RAID
9.1%NTAP11.3%IBM21.5%HP27.2%EMC
WorldwideNetworked Storage(NAS, Open, & iSCSI SAN)
EMC/Dell* 26.6%
7.4%HDS
EMC/Dell* 29.0%7.3%HDS
EMC/Dell* 33.7%7.2%Dell
Source: IDC Q3’05 Disk Storage Systems Quarterly Tracker, December 2005*Combines EMC’s revenue with Dell’s Dell/EMC CLARiiON revenue
29© Copyright 2006 EMC Corporation. All rights reserved.
Leverage and Power of Software Strategy
Back-up/Recovery and Archive– Results grew 27% Y/Y – Records in Networker, Dantz Retrospect and the eXtender family
Content Management– Overall license, maintenance and services revenues up 21% Y/Y– Top share gainer in this market
30© Copyright 2006 EMC Corporation. All rights reserved.
Services and Partner Network are Key
Services– Services organization delivers value helping customers implement
our solutions
Partnership Ecosystem– Technology Partners– Systems Integrators and Outsourcers– Systems and Distribution Partners
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1st Game Changer: Virtualization
In the future, data center infrastructures will be virtualized!
VMware – VI of x86 platforms
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VMware Gaining Share in IT Spending . . .
05.11.05
07.21.05
09.30.05
11.18.05
. . . 4 Quartersin a Row!
34© Copyright 2006 EMC Corporation. All rights reserved.
1st Game Changer: Virtualization
In the future, data center infrastructures will be virtualized!
VMware – VI of x86 platforms
Invista – Networked based storage virtualization
Rainfinity – File virtualization
35© Copyright 2006 EMC Corporation. All rights reserved.
2nd Game Changer
Systems and Resource Managementwill advance from being
Framework Based Model Based
“Smarts”
36© Copyright 2006 EMC Corporation. All rights reserved.
EMC Brought Home the Most Awards of Any Vendor
BestWorkstationVirtualization
VMware Workstation 5.5An indispensable
companion to software developers and testers
BestServer Virtualization
VMware ESX Serverand VirtualCenter
Dynamic duo points tonew possibilities in
datacenter management
BestEnterprise CMS
Documentum 5,Collaborative Edition
Impressive unified approach to managing content
creation, reuse, archiving, and disposal
Best Storage Virtualization
InvistaPreserves investments in existing hardware without
sacrificing manageability or performance
38© Copyright 2006 EMC Corporation. All rights reserved.
Excited about 2006
Positive economic environmentIT spending up around the world in 2006
– EMC focused on many of the hottest IT priorities
ILM focused strategy paying dividendsEMC has two game changing technologies
– Virtualization and Model-based Management
Strong EMC product cycleEMC will gain share in 2006
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