EMC 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the quarterly period ended June 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from            to            

Commission File Number 1-9853

EMC CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts	04-2680009
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
176 South Street Hopkinton, Massachusetts	01748
(Address of principal executive offices)	(Zip Code)

(508) 435-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of June 30, 2010 was 2,053,516,683.

EMC CORPORATION

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at June 30, 2010 and December 31, 2009	3
Consolidated Income Statements for the Three and Six Months Ended June 30, 2010 and 2009	4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009	5
Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2010 and 2009	6
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June  30, 2010 and 2009	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	35
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3. Defaults Upon Senior Securities	45
Item 4. Reserved	45
Item 5. Other Information	45
Item 6. Exhibits	45
SIGNATURES	46
EXHIBIT INDEX	47

FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Federal securities laws, about our business and prospects. 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. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “plans,” “intends,” “expects,” “goals” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Our future results may differ materially from our past results and from those projected in the forward-looking statements due to various uncertainties and risks, including those described in Item 1A of Part II (Risk Factors). The forward-looking statements speak only as of the date of this Quarterly Report and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Quarterly Report.

2

PART I

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EMC CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	June 30, 2010			December 31, 2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,784,812		$	6,302,499
Short-term investments		1,015,143			392,839
Accounts and notes receivable, less allowance for doubtful accounts of $45,668 and $47,414		1,976,311			2,108,575
Inventories		813,756			886,289
Deferred income taxes		583,425			564,174
Other current assets		372,856			283,926
Total current assets		10,546,303			10,538,302
Long-term investments		3,539,361			2,692,323
Property, plant and equipment, net		2,286,042			2,224,346
Intangible assets, net		1,144,649			1,185,632
Goodwill		9,434,792			9,210,376
Other assets, net		1,060,304			961,024
Total assets	$	28,011,451		$	26,812,003
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	824,579		$	899,298
Accrued expenses		1,959,340			1,944,210
Income taxes payable		85,550			41,691
Deferred revenue		2,541,030			2,262,968
Total current liabilities		5,410,499			5,148,167
Income taxes payable		246,469			235,976
Deferred revenue		1,551,084			1,373,798
Deferred income taxes		568,455			708,378
Long-term convertible debt		3,156,376			3,100,290
Other liabilities		176,342			184,920
Total liabilities		11,109,225			10,751,529
Commitments and contingencies (see Note 12)
Shareholders’ equity:
Preferred stock, par value $0.01; authorized 25,000 shares; none outstanding		—			—
Common stock, par value $0.01; authorized 6,000,000 shares; issued and outstanding 2,053,517 and 2,052,441 shares		20,535			20,524
Additional paid-in capital		3,829,433			3,875,791
Retained earnings		12,558,209			11,759,289
Accumulated other comprehensive loss, net		(144,859	)		(105,722	)
Total EMC Corporation’s shareholders’ equity		16,263,318			15,549,882
Non-controlling interest in VMware, Inc.		638,908			510,592
Total shareholders’ equity		16,902,226			16,060,474
Total liabilities and shareholders’ equity	$	28,011,451		$	26,812,003

The accompanying notes are an integral part of the consolidated financial statements.

3

EMC CORPORATION

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share amounts)

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Revenues:
Product sales	$	2,553,316		$	2,005,270		$	5,032,033		$	3,974,390
Services		1,470,181			1,252,082			2,882,156			2,433,724
		4,023,497			3,257,352			7,914,189			6,408,114
Costs and expenses:
Cost of product sales		1,157,742			1,057,205			2,319,664			2,070,535
Cost of services		506,556			456,369			1,016,807			910,546
Research and development		477,725			397,881			912,658			781,174
Selling, general and administrative		1,283,651			1,051,204			2,544,935			2,075,977
Restructuring and acquisition-related charges		9,839			33,234			28,341			48,806
Operating income		587,984			261,459			1,091,784			521,076
Non-operating income (expense):
Investment income		32,103			31,343			63,635			71,187
Interest expense		(44,744	)		(44,158	)		(87,712	)		(89,701	)
Other income (expense), net		2,130			17			(6,891	)		(10,741	)
Total non-operating expense		(10,511	)		(12,798	)		(30,968	)		(29,255	)
Income before provision for income taxes		577,473			248,661			1,060,816			491,821
Income tax provision		136,976			38,045			232,629			75,860
Net income		440,497			210,616			828,187			415,961
Less: Net income attributable to the non-controlling interest in VMware, Inc.		(14,281	)		(5,384	)		(29,267	)		(16,660	)
Net income attributable to EMC Corporation	$	426,216		$	205,232		$	798,920		$	399,301
Net income per weighted average share, basic attributable to EMC Corporation common shareholders	$	0.21		$	0.10		$	0.39		$	0.20
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders	$	0.20		$	0.10		$	0.37		$	0.20
Weighted average shares, basic		2,052,161			2,011,508			2,051,599			2,010,147
Weighted average shares, diluted		2,132,997			2,030,048			2,126,062			2,025,433

The accompanying notes are an integral part of the consolidated financial statements.

4

EMC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the Six Months Ended
	June 30, 2010			June 30, 2009
Cash flows from operating activities:
Cash received from customers	$	8,495,542		$	6,951,380
Cash paid to suppliers and employees		(6,291,713	)		(5,348,576	)
Dividends and interest received		54,219			73,448
Interest paid		(38,251	)		(35,900	)
Income taxes paid		(145,591	)		(202,273	)
Net cash provided by operating activities		2,074,206			1,438,079
Cash flows from investing activities:
Additions to property, plant and equipment		(301,192	)		(205,512	)
Capitalized software development costs		(185,634	)		(151,774	)
Purchases of short and long-term available-for-sale securities		(2,929,754	)		(3,315,606	)
Sales of short and long-term available-for-sale securities		1,244,979			2,730,097
Maturities of short and long-term available-for-sale securities		178,201			348,483
Purchase of Data Domain common stock		—			(65,000	)
Business acquisitions, net of cash acquired		(348,846	)		(98,860	)
Increase in strategic and other related investments		(5,812	)		(107,055	)
Net cash used in investing activities		(2,348,058	)		(865,227	)
Cash flows from financing activities:
Issuance of EMC’s common stock from the exercise of stock options		317,300			84,028
Issuance of VMware’s common stock from the exercise of stock options		215,907			81,606
EMC repurchase of EMC’s common stock		(517,370	)		—
EMC purchase of VMware’s common stock		(198,087	)		—
VMware repurchase of VMware’s common stock		(144,500	)		—
Repayments of proceeds from securities lending		—			(152,196	)
Excess tax benefits from stock-based compensation		111,807			6,715
Payment of long-term and short-term obligations		(3,515	)		(19,364	)
Proceeds from long-term and short-term obligations		1,116			1,116
Net cash (used in) provided by financing activities		(217,342	)		1,905
Effect of exchange rate changes on cash and cash equivalents		(26,493	)		4,318
Net (decrease) increase in cash and cash equivalents		(517,687	)		579,075
Cash and cash equivalents at beginning of period		6,302,499			5,843,685
Cash and cash equivalents at end of period	$	5,784,812		$	6,422,760
Reconciliation of net income to net cash provided by operating activities:
Net income	$	828,187		$	415,961
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		566,439			509,066
Non-cash interest expense on convertible debt		52,172			53,079
Non-cash restructuring		999			9,300
Stock-based compensation expense		319,397			234,531
Increase in provision for doubtful accounts		11,358			7,219
Deferred income taxes, net		(101,930	)		60,067
Excess tax benefits from stock-based compensation		(111,807	)		(6,715	)
Other		2,399			450
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable		163,646			391,899
Inventories		13,598			(9,910	)
Other assets		(104,326	)		(37,540	)
Accounts payable		(84,470	)		(27,915	)
Accrued expenses		(63,195	)		(134,894	)
Income taxes payable		188,968			(186,480	)
Deferred revenue		406,349			144,148
Other liabilities		(13,578	)		15,813
Net cash provided by operating activities	$	2,074,206		$	1,438,079

The accompanying notes are an integral part of the consolidated financial statements.

5

EMC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

For the six months ended June 30, 2010:

	Common Stock					Additional Paid-in Capital			Retained Earnings		Other Comprehensive Loss			Non-controlling Interest in VMware			Total Shareholders’ Equity
	Shares		Par Value
Balance, January 1, 2010	2,052,441		$	20,524		$	3,875,791		$	11,759,289	$	(105,722	)	$	510,592		$	16,060,474
Stock issued through stock option and stock purchase plans	27,336			274			317,026			—		—			—			317,300
Tax benefit from stock options exercised	—			—			134,675			—		—			—			134,675
Restricted stock grants, cancellations and withholdings, net	2,648			26			(42,504	)		—		—			—			(42,478	)
Repurchase of common stock	(28,908	)		(289	)		(517,081	)		—		—			—			(517,370	)
EMC purchase of VMware stock	—			—			(173,694	)		—		—			(24,393	)		(198,087	)
Stock options issued in business acquisitions	—			—			40			—		—			—			40
Stock-based compensation	—			—			329,111			—		—			—			329,111
Impact from equity transactions of VMware, Inc.	—			—			(93,931	)		—		—			122,928			28,997
Change in market value of investments	—			—			—			—		11,732			514			12,246
Change in market value of derivatives	—			—			—			—		(20,418	)		—			(20,418	)
Translation adjustment	—			—			—			—		(30,451	)		—			(30,451	)
Net income	—			—			—			798,920		—			29,267			828,187
Balance, June 30, 2010	2,053,517		$	20,535		$	3,829,433		$	12,558,209	$	(144,859	)	$	638,908		$	16,902,226

For the six months ended June 30, 2009:

	Common Stock					Additional Paid-in Capital			Retained Earnings		Other Comprehensive Loss			Non-controlling Interest in VMware		Total Shareholders’ Equity
	Shares		Par Value
Balance, January 1, 2009	2,012,938		$	20,129		$	2,817,054		$	10,671,212	$	(179,952	)	$	327,507	$	13,655,950
Stock issued through stock option and stock purchase plans	10,357			104			83,924			—		—			—		84,028
Tax shortfall from stock options exercised	—			—			(8,477	)		—		—			—		(8,477	)
Restricted stock grants, cancellations and withholdings, net	(1,247	)		(13	)		(35,866	)		—		—			—		(35,879	)
Stock options issued in business acquisitions	—			—			1,454			—		—			—		1,454
Stock-based compensation	—			—			242,828			—		—			—		242,828
Impact from equity transactions of VMware, Inc.	—			—			5,124			—		—			48,907		54,031
Change in market value of investments	—			—			—			—		30,287			324		30,611
Change in market value of derivatives	—			—			—			—		(323	)		—		(323	)
Non-credit other-than-temporary losses on investments	—			—			—			—		(2,571	)		—		(2,571	)
Translation adjustment	—			—			—			—		10,748			—		10,748
Net income	—			—			—			399,301		—			16,660		415,961
Balance, June 30, 2009	2,022,048		$	20,220		$	3,106,041		$	11,070,513	$	(141,811	)	$	393,398	$	14,448,361

The accompanying notes are an integral part of the consolidated financial statements.

6

EMC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Net income	$	440,497		$	210,616		$	828,187		$	415,961
Other comprehensive income (loss), net of taxes (benefits):
Foreign currency translation adjustments		(24,385	)		37,483			(30,451	)		10,748
Changes in market value of investments, including unrealized gains and losses and reclassification adjustment to net income, net of taxes of $4,188, $13,798, $7,304 and $19,701		6,611			23,614			12,246			28,040
Changes in market value of derivatives, net of tax benefits of $(10,546), $(1,121), $(12,177) and $(442)		(16,962	)		(2,125	)		(20,418	)		(323	)
Other comprehensive income (loss)		(34,736	)		58,972			(38,623	)		38,465
Comprehensive income		405,761			269,588			789,564			454,426
Less: Net income attributable to the non-controlling interest in VMware, Inc.		(14,281	)		(5,384	)		(29,267	)		(16,660	)
Less: Other comprehensive income attributable to the non-controlling interest in VMware, Inc.		(434	)		(324	)		(514	)		(324	)
Comprehensive income attributable to EMC Corporation	$	391,046		$	263,880		$	759,783		$	437,442

The accompanying notes are an integral part of the consolidated financial statements.

7

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation

Company

EMC Corporation (“EMC”) and its subsidiaries develop, deliver and support the Information Technology (“IT”) industry’s broadest range of information infrastructure and virtual infrastructure technologies and solutions.

EMC’s Information Infrastructure business provides a foundation for customers to manage and secure their vast and ever-increasing quantities of information, automate their data center operations, reduce power and cooling costs, and leverage critical information for business agility and competitive advantage. EMC’s Information Infrastructure business comprises three segments – Information Storage, Information Intelligence Group and RSA Information Security.

EMC’s VMware Virtual Infrastructure business, which is represented by EMC’s majority equity stake in VMware, Inc. (“VMware”), is the leading provider of virtualization infrastructure software solutions from the desktop to the data center and to the cloud. VMware’s virtualization infrastructure software solutions run on industry-standard desktop computers and servers and support a wide range of operating system and application environments, as well as networking and storage infrastructures.

General

The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These consolidated financial statements include the accounts of EMC, its wholly owned subsidiaries and VMware, a company majority-owned by EMC. All intercompany transactions have been eliminated.

Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2009 which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2010.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. The interim consolidated financial statements, in the opinion of management, reflect all adjustments necessary to fairly state the results as of and for the three- and six-month periods ended June 30, 2010 and 2009.

Net Income Per Share

Basic net income per weighted average share has been computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per weighted average share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of stock options, restricted stock and restricted stock units, our $1.725 billion 1.75% convertible senior notes due 2011 and our $1.725 billion 1.75% convertible senior notes due 2013 (the “Notes”) and associated warrants. Additionally, for purposes of calculating diluted net income per weighted average share, net income is adjusted for the difference between VMware’s reported diluted and basic net income per weighted average share, if any, multiplied by the number of shares of VMware held by EMC.

New Accounting Guidance Recently Adopted

In September 2009, the Financial Accounting Standards Board (“FASB”) amended the accounting standards for revenue recognition to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of industry specific software revenue recognition guidance. Additionally, the FASB also amended the accounting standards for multiple deliverable revenue arrangements to provide for how the deliverables in an arrangement should be separated and how the consideration should be allocated using the relative selling price method. This guidance requires an entity to allocate revenue in an arrangement using estimated selling prices (“ESP”) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (“VSOE”) or third-party evidence of selling price (“TPE”) and effectively eliminates use of the residual method in such cases.

8

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We elected to early adopt this accounting guidance at the beginning of our first quarter of 2010 on a prospective basis for applicable transactions originating or materially modified after January 1, 2010.

For the year ended December 31, 2009, pursuant to the previous guidance of revenue arrangements with multiple deliverables, we allocated revenue to each undelivered element based upon their fair values and then allocated the residual revenue to the delivered elements. Where the fair value for an undelivered element could not be determined, we deferred revenue for the delivered elements until the undelivered elements were delivered or the fair value was determinable for the remaining undelivered elements. We limited the amount of revenue recognition for delivered elements to the amount that was not contingent on the future delivery of products or services.

The new accounting guidance did not have a material impact on our financial position or results of operations for the six months ended June 30, 2010 and did not change the units of accounting for our revenue transactions. Specifically, for our product sales that contain software components and non-software components that function together to deliver the product’s essential functionality, the difference of applying the relative selling price method to such transactions under the new guidance, as compared to the residual method under the previous guidance, was insignificant. Our undelivered elements are typically software-related services which we account for utilizing VSOE to determine fair value. Our assessment considered that the amounts recorded as revenue for delivered elements are limited to the amounts not contingent on the future delivery of products or services.

The new accounting guidance for revenue recognition is not expected to have a significant effect on revenue when applied to our multiple element arrangements based on our current go-to-market strategies due to the existence of VSOE of fair value for the typical undelivered elements in most of our product and service offerings.

The new accounting standards, if applied to the year ended December 31, 2009, would not have had a material impact on our revenue for that year.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year’s presentation.

2.  Revenue Recognition

We derive revenue from sales of information systems, software and services. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. This policy is applicable to all sales, including sales to resellers and end users. Product is considered delivered to the customer once it has been shipped or electronically delivered and risk of loss has been transferred. For most of our product sales, these criteria are met at the time the product is shipped. The following summarizes the major terms of our contractual relationships with our customers and the manner in which we account for sales transactions.

• Systems sales

Systems sales consist of the sale of hardware storage and hardware-related devices. Revenue for hardware is generally recognized upon shipment.

• Software sales

Software sales consist of the sale of required storage operating systems and optional value-added software application programs. Our software application programs 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. License revenue from royalty payments is recognized upon either receipt of final royalty reports or payments from third parties.

• Services revenue

Services revenue consists of installation services, professional services, software maintenance, hardware maintenance and training.

9

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

EMC recognizes revenue from fixed-price support or maintenance contracts sold for both hardware and software, including extended warranty contracts, ratably over the contract period and recognizes the costs associated with these contracts as incurred. Generally, installation and professional services are not considered essential to the functionality of our products as these services do not alter the product capabilities and may be performed by our customers or other vendors. Installation services revenues are recognized as the services are being performed. Professional services revenues on engagements for which reasonably dependable estimates of progress toward completion are capable of being made are recognized as earned based upon the hours incurred. Where services are considered essential to the functionality of our products, revenue for the products and services is recorded over the service period. Professional services engagements that are on a time and materials basis are recognized based upon hours incurred. Revenues on all other professional services engagements are recognized upon completion.

• Multiple element arrangements

When more than one element, such as hardware, software and services are contained in a single arrangement, we first allocate revenue based upon the relative selling price into two categories: (1) non-software components, such as hardware and any hardware related items, such as required software that functions with the hardware to deliver the essential functionality of the hardware and related post-contract customer support and other services and (2) software components, such as optional software application programs and related items, such as post-contract customer support and other services. We then allocate revenue within the non-software category to each element based upon their relative selling price using ESP, if VSOE or TPE does not exist. We allocate revenue within the software category to the undelivered elements based upon their fair value using VSOE with the residual revenue allocated to the delivered elements. If we cannot objectively determine the fair value of any undelivered element, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services.

• Shipping terms

Our sales contracts generally provide for the customer to accept risk of loss when the product leaves our facilities. When shipping terms or local laws do not allow for passage of risk of loss at shipping point, we defer recognizing revenue until risk of loss transfers to the customer.

• Leases

Revenue from sales-type leases is recognized at the net present value of future lease payments. Revenue from operating leases is recognized over the lease period.

• Other

We accrue for the estimated costs of systems’ warranty at the time of sale. We reduce revenue for estimated sales returns at the time of sale. Systems’ warranty costs are estimated based upon our historical experience and specific identification of systems’ requirements. Sales returns are estimated based upon our historical experience and specific 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 requirements.

3.   Acquisitions

During the six months ended June 30, 2010, we acquired all of the outstanding capital stock of Archer Technologies, LLC, a provider of governance, risk and compliance software. This acquisition complements and expands our Information Security segment. Additionally, VMware acquired four businesses. The aggregate cash consideration for these five acquisitions was $348.8 million. The consideration paid was allocated to the fair value of the assets acquired and liabilities assumed. The allocation to goodwill, intangibles and net liabilities was approximately $259.0 million, $97.4 million and $7.6 million, respectively. The results of these acquisitions have been included in the consolidated financial statements from the date of purchase. Pro forma results of operations have not been presented as the results of the acquired companies were not material, individually or in the aggregate, to our consolidated results of operations for the three or six months ended June 30, 2010 or 2009.

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4.   Non-controlling Interest in VMware, Inc.

The effect of changes in our ownership interest in VMware on our equity was as follows (table in thousands):

	For the Six Months Ended
	June 30, 2010			June 30, 2009
Net income attributable to EMC Corporation	$	798,920		$	399,301
Transfers (to) from the non-controlling interest in VMware:
Increase in EMC Corporation’s additional paid-in-capital for VMware’s equity issuances		75,250			31,587
Decrease in EMC Corporation’s additional paid-in-capital for VMware’s other equity activity		(169,181	)		(26,463	)
Net transfers (to) from non-controlling interest		(93,931	)		5,124
Change from net income attributable to EMC Corporation and transfers from the non-controlling interest in VMware, Inc.	$	704,989		$	404,425

5.   Fair Value of Financial Assets and Liabilities

Our investments are comprised primarily of debt securities that are classified as available-for-sale and recorded at their fair market values. We determine fair value using the following hierarchy:

• Level 1 – Quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Most of our debt securities are classified as Level 2 securities, with the exception of some of our U.S. government and agency obligations, which are classified as Level 1 securities and all of our auction rate securities, which are classified as Level 3. At June 30, 2010, the vast majority of our Level 2 investments were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities. In the event observable inputs are not available, we assess other factors to determine the security’s market value, including broker quotes or model valuations. Each month, we perform independent price verifications of all of our holdings. In the event a price fails a pre-established tolerance check, it is researched so that we can assess the cause of the variance to determine what we believe is the appropriate fair market value.

In January 2010, the FASB issued authoritative guidance related to additional disclosures of fair value measurements. The guidance requires the gross presentation of activity within the Level 3 fair value measurement roll forward and details of transfers in and out of Level 1 and 2 fair value measurements. It also clarified two existing disclosure requirements on the level of disaggregation of fair value measurements and disclosures on inputs and valuation techniques. We adopted all of this guidance in the first quarter of 2010. Hierarchy of an investment from its current level could change in the period that the pricing methodology of that investment changes.

In general, investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments. As a result of the lack of liquidity for auction rate securities, we have classified these as long-term investments as of June 30, 2010. At June 30, 2010, all of our available-for-sale, short- and long-term investments, excluding auction rate securities, were recognized at fair value, which was determined based upon observable inputs from our pricing vendors for identical or similar assets. At June 30, 2010 and December 31, 2009, auction rate securities were valued using a discounted cash flow model.

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The following tables summarize the composition of our investments at June 30, 2010 and December 31, 2009 (tables in thousands):

	June 30, 2010
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value		Other-than- Temporary Impairments
U.S. government and agency obligations	$	1,594,414	$	16,728	$	(457	)	$	1,610,685	$	—
U.S. corporate debt securities		1,260,305		18,179		(4,925	)		1,273,559		—
Asset-backed securities		6,365		186		(1	)		6,550		—
Municipal obligations		1,099,604		7,621		(373	)		1,106,852		—
Auction rate securities		183,725		—		(19,094	)		164,631		—
Foreign debt securities		388,078		4,546		(397	)		392,227		—
Total	$	4,532,491	$	47,260	$	(25,247	)	$	4,554,504	$	—

	December 31, 2009
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value		Other-than- Temporary Impairments
U.S. government and agency obligations	$	1,086,773	$	8,021	$	(2,982	)	$	1,091,812	$	—
U.S. corporate debt securities		866,353		13,128		(1,236	)		878,245		—
Asset-backed securities		14,119		356		(1	)		14,474		—
Municipal obligations		583,690		6,902		(118	)		590,474		—
Auction rate securities		253,617		—		(19,165	)		234,452		—
Foreign debt securities		274,312		1,931		(538	)		275,705		—
Total	$	3,078,864	$	30,338	$	(24,040	)	$	3,085,162	$	—

The following table represents our fair value hierarchy for our financial assets and liabilities measured at fair value as of June 30, 2010 (table in thousands):

	Level 1		Level 2			Level 3		Total
Cash	$	1,248,348	$	—		$	—	$	1,248,348
Cash equivalents		4,258,591		277,873			—		4,536,464
U.S. government and agency obligations		938,467		672,218			—		1,610,685
U.S. corporate debt securities		—		1,273,559			—		1,273,559
Asset-backed securities		—		6,550			—		6,550
Municipal obligations		—		1,106,852			—		1,106,852
Auction rate securities		—		—			164,631		164,631
Foreign debt securities		—		392,227			—		392,227
Total cash and investments	$	6,445,406	$	3,729,279		$	164,631	$	10,339,316
Other items:
Foreign exchange derivative assets	$	—	$	37,869		$	—	$	37,869
Foreign exchange derivative liabilities		—		(49,685	)		—		(49,685	)
Commodity derivative liabilities		—		(1,467	)		—		(1,467	)
Interest rate swap contract		—		(29,642	)		—		(29,642	)

In May 2010, EMC entered into seven interest rate swap contracts with three counterparties, each with notional amounts of approximately $100 million. These swaps were designated as cash flow hedges of the forecasted issuance of debt in 2011 when our $1.725 billion 1.75% convertible senior notes become due. As such, the gain or loss on these hedges will be recognized in other

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comprehensive loss until the underlying exposure is realized. As of June 30, 2010, we recognized $29.6 million in unrealized losses on these swaps primarily due to the change in interest rates since the contracts’ inception.

The carrying amount reported in the consolidated balance sheets as of June 30, 2010 for our long-term convertible debt was $3,156.4 million. The fair value of the long-term convertible debt as of June 30, 2010 was $4,290.9 million based on active market prices for the debt.

Our auction rate securities are predominantly rated AAA and are primarily collateralized by student loans. The underlying loans of all but two of our auction rate securities, with a market value of $18.3 million, have partial guarantees by the U.S. government as part of the Federal Family Education Loan Program (“FFELP”) through the U.S. Department of Education. FFELP guarantees at least 95% of the loans which collateralize the auction rate securities. The two securities whose underlying loans are not guaranteed by the U.S. government have credit enhancements and are insured by third party agencies. We believe the quality of the collateral underlying all of our auction rate securities will enable us to recover our principal balance in full.

To determine the estimated fair value of our investment in auction rate securities, we used a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include an incremental discount rate for the lack of liquidity in the market (“liquidity discount margin”) for an estimated period of time. The discount rate we selected was based on AA-rated banks as the majority of our portfolio is invested in student 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 five-year holding period. The rate used for the discount margin was 1% at both June 30, 2010 and December 31, 2009 as credit spreads on AA-rated banks remained constant. During the second quarter of 2010, we sold or settled $68.0 million of auction rate securities at par value.

The following table provides a summary of changes in fair value of our Level 3 financial assets for the three and six months ended June 30, 2010 (table in thousands):

	Three Months Ended June 30, 2010			Six Months Ended June 30, 2010
Beginning balance	$	234,464		$	234,452
Transfers in from Level 1		—			—
Sales		(44,755	)		(44,755	)
Calls		(23,275	)		(25,137	)
(Increase) decrease in previously recognized unrealized losses included in other comprehensive loss		(1,803	)		71
Balance at June 30	$	164,631		$	164,631

Unrealized losses on investments at June 30, 2010 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 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	228,761	$	(457	)	$	—	$	—		$	228,761	$	(457	)
U.S. corporate debt securities		295,065		(4,925	)		—		—			295,065		(4,925	)
Asset-backed securities		—		—			5		(1	)		5		(1	)
Municipal obligations		195,343		(373	)		—		—			195,343		(373	)
Auction rate securities		—		—			164,631		(19,094	)		164,631		(19,094	)
Foreign debt securities		54,352		(397	)		—		—			54,352		(397	)
Total	$	773,521	$	(6,152	)	$	164,636	$	(19,095	)	$	938,157	$	(25,247	)

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Investment Losses

For all of our securities where the amortized cost basis was greater than the fair value at June 30, 2010, we have concluded that currently we neither plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated recovery. In making the determination as to whether the unrealized loss is other-than-temporary or credit-related, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating, the underlying value and performance of the collateral, third party guarantees and the time to maturity.

Contractual Maturities

The contractual maturities of investments held at June 30, 2010 are as follows (table in thousands):

	June 30, 2010
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	808,144	$	811,548
Due after 1 year through 5 years		2,857,658		2,893,496
Due after 5 years through 10 years		253,084		252,421
Due after 10 years		613,605		597,039
Total	$	4,532,491	$	4,554,504

6.  Inventories

Inventories consist of (table in thousands):

	June 30, 2010		December  31, 2009
Purchased parts	$	21,354	$	73,612
Work-in-process		512,442		469,901
Finished goods		279,960		342,776
	$	813,756	$	886,289

7.  Property, Plant and Equipment

Property, plant and equipment consist of (table in thousands):

	June 30, 2010			December 31, 2009
Furniture and fixtures	$	233,008		$	229,006
Equipment		3,630,481			3,447,209
Buildings and improvements		1,444,030			1,427,656
Land		121,713			122,260
Building construction in progress		117,884			91,501
		5,547,116			5,317,632
Accumulated depreciation and amortization		(3,261,074	)		(3,093,286	)
	$	2,286,042		$	2,224,346

Building construction in progress at June 30, 2010 includes $65.6 million for facilities not yet placed in service that we are holding for future use.

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8.  Accrued Expenses

Accrued expenses consist of (table in thousands):

	June 30, 2010		December  31, 2009
Salaries and benefits	$	759,912	$	742,748
Product warranties		249,090		271,594
Restructuring (see Note 11)		70,328		105,760
Other		880,010		824,108
	$	1,959,340	$	1,944,210

Product Warranties

Systems sales include a standard product warranty. At the time of the sale, we accrue for the systems’ warranty costs. The initial systems’ warranty accrual is based upon our historical experience, expected future costs and specific identification of the systems’ requirements. Upon expiration of the initial warranty, we may sell additional maintenance contracts to our customers. Revenue from these additional maintenance contracts is deferred and recognized ratably over the service period. The following represents the activity in our warranty accrual for our standard product warranty (table in thousands):

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Balance, beginning of the period	$	269,567		$	262,255		$	271,594		$	269,218
Current period accrual		21,782			39,307			58,742			64,742
Amounts charged to the accrual		(42,259	)		(34,316	)		(81,246	)		(66,714	)
Balance, end of the period	$	249,090		$	267,246		$	249,090		$	267,246	��

The provision includes amounts accrued for systems at the time of shipment, adjustments for changes in estimated costs for warranties on systems shipped in the period and changes in estimated costs for warranties on systems shipped in prior periods. It is not practicable to determine the amounts applicable to each of the components.

9.  Income Taxes

Our effective income tax rates were 23.7% and 21.9% for the three and six months ended June 30, 2010, respectively. Our effective income tax rates were 15.3% and 15.4% for the three and six months ended June 30, 2009, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. For the three and six months ended June 30, 2010 and 2009, the effective tax rate varied from the statutory tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

Our effective income tax rate increased from the three and six months ended June 30, 2009 to the three and six months ended June 30, 2010 due primarily to the expiration of the U.S. federal research and development tax credit for 2010. Additionally, in 2009, our tax rate was favorably impacted due to the recognition of discrete tax benefits during the second quarter of 2009, principally from the favorable resolution of uncertain tax positions related to transfer pricing and a U.S. federal income tax audit, which were partially offset by certain income charges relating to acquisitions.

We have substantially concluded all U.S. federal income tax matters for years through 2006 and are currently under audit for U.S. federal income taxes for 2007 and 2008. We also have income tax audits in process in numerous state, local and international jurisdictions. Based on the timing and outcome of examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related

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unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations, and the protocol of finalizing such audits, it is not possible to estimate the impact of the amount of such changes, if any, to our previously recorded uncertain tax positions.

10.  Shareholders’ Equity

The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in thousands):

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Numerator:
Net income, as reported, basic	$	426,216		$	205,232		$	798,920		$	399,301
Incremental dilution from VMware		(2,055	)		(273	)		(3,968	)		(507	)
Net income, diluted	$	424,161		$	204,959		$	794,952		$	398,794
Denominator:
Basic weighted average common shares outstanding		2,052,161			2,011,508			2,051,599			2,010,147
Weighted average common stock equivalents		49,429			18,540			48,596			15,286
Assumed conversion of the Notes		31,407			—			25,867			—
Diluted weighted average shares outstanding		2,132,997			2,030,048			2,126,062			2,025,433

Due to the cash settlement feature of the principal amount of the Notes, we only include the impact of the premium feature in our diluted earnings per share calculation when the stock price equals or exceeds the conversion price of the Notes. Conversion of the Notes may occur upon the occurrence of specified events at a conversion price of approximately $16.08 per share of our common stock. The conversion price is subject to adjustment in some events.

Options to acquire 60.2 million and 67.4 million shares of common stock for the three and six months ended June 30, 2010, respectively, and options to acquire 187.7 million and 201.3 million shares of our common stock for the three and six months ended June 30, 2009, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. The incremental dilution from VMware represents the impact of VMware’s dilutive securities on EMC’s consolidated diluted net income per share and is calculated by multiplying the difference between VMware’s basic and diluted earnings per weighted average share multiplied by the number of VMware shares owned by EMC.

Repurchases of Common Stock

We utilize authorized and unissued shares (including repurchased shares) for all issuances under our equity plans. In 2008, our Board of Directors authorized the repurchase of 250.0 million shares of our common stock. For the six months ended June 30, 2010, we spent $517.4 million to repurchase 28.9 million shares of our common stock. We plan to spend up to $1.0 billion in 2010 on common stock repurchases. Of the 250.0 million shares authorized for repurchase, we have repurchased 90.3 million shares at a cost of $1.2 billion, leaving a remaining balance of 159.7 million shares.

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Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, which is presented net of tax, consists of the following (table in thousands):

	June 30, 2010			December 31, 2009
Foreign currency translation adjustments	$	(32,800	)	$	(2,349	)
Unrealized losses on temporarily impaired investments, net of tax benefits of $(9,096) and $(8,679)		(16,151	)		(15,361	)
Unrealized gains on investments, net of taxes of $22,050 and $14,329		36,653			23,617
Unrealized gains (losses) on derivatives, net of taxes (benefits) of $(11,578) and $599		(18,207	)		2,211
Recognition of actuarial net loss from pension and other postretirement plans, net of tax benefits of $(68,996) and $(68,996)		(113,001	)		(113,001	)
		(143,506	)		(104,883	)
Less: Accumulated other comprehensive income attributable to the non-controlling interest in VMware, Inc.		(1,353	)		(839	)
	$	(144,859	)	$	(105,722	)

11.  Restructuring and Acquisition-Related Charges

For the three and six months ended June 30, 2010, we incurred restructuring and acquisition-related charges of $9.8 million and $28.3 million, respectively. For the three and six months ended June 30, 2009, we incurred restructuring and acquisition-related charges of $33.2 million and $48.8 million, respectively. For the three and six months ended June 30, 2010, we incurred $8.7 million and $25.7 million, respectively, of restructuring charges, primarily related to our 2008 restructuring program and $1.1 million and $2.6 million, respectively, of charges in connection with acquisitions for financial advisory, legal and accounting services. We did not incur any acquisition-related charges in the six months ended June 30, 2009.

In the fourth quarter of 2008, to further improve the competitiveness and efficiency of our global business in response to a challenging global economy, we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. The plan included the following components:

• A reduction in force resulting in the elimination of approximately 2,400 positions which was substantially completed by the end of 2009 and will be fully completed in 2010.

• The consolidation of facilities and the termination of contracts. These actions are expected to be completed by 2015.

• The write-off of certain assets for which EMC has determined it will no longer derive any benefit. These actions were completed in the fourth quarter of 2008.

The total charge resulting from these actions is expected to be approximately $400.0 million, with $247.9 million recognized in 2008, $87.0 million recognized in 2009, $35.0 million expected to be recognized in 2010 and the remainder expected to be recognized in 2011 through 2015.

The activity for the December 2008 restructuring program for the three and six months ended June 30, 2010 and 2009 is presented below (tables in thousands):

Three Months Ended June 30, 2010

Category	Balance as of March 31, 2010		2010 Charges Relating to the 2008 Plan		Utilization			Balance as of June 30, 2010
Workforce reductions	$	54,587	$	2,305	$	(20,781	)	$	36,111
Consolidation of excess facilities and other contractual obligations		18,981		3,678		(3,158	)		19,501
Total	$	73,568	$	5,983	$	(23,939	)	$	55,612

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Six Months Ended June 30, 2010

Category	Balance as of December 31, 2009		2010 Charges Relating to the 2008 Plan		Utilization			Balance as of June 30, 2010
Workforce reductions	$	82,852	$	2,297	$	(49,038	)	$	36,111
Consolidation of excess facilities and other contractual obligations		4,885		20,645		(6,029	)		19,501
Total	$	87,737	$	22,942	$	(55,067	)	$	55,612

For the three and six months ended June 30, 2010, we recognized $3.7 million and $20.7 million, respectively, of lease termination costs for facilities vacated in the respective period in accordance with our plan as part of our 2008 restructuring program. We expect to utilize the workforce reduction reserves by the end of 2011 and the contractual obligation reserves by the end of 2015.

In addition to the December 2008 restructuring program, we have remaining liabilities of $14.7 million pertaining to prior years’ restructuring programs.

Three Months Ended June 30, 2009

Category	Balance as of March  31, 2009		2009 Charges Relating to the 2008 Plan		Utilization			Balance as of June 30, 2009
Workforce reductions	$	139,325	$	16,063	$	(42,015	)	$	113,373
Consolidation of excess facilities and other contractual obligations		4,166		6,498		(1,765	)		8,899
Abandoned assets		—		6,105		(6,105	)		—
Total	$	143,491	$	28,666	$	(49,885	)	$	122,272

Six Months Ended June 30, 2009

Category	Balance as of December 31, 2008		2009 Charges Relating to the 2008 Plan		Utilization			Balance as of June 30, 2009
Workforce reductions	$	184,440	$	22,872	$	(93,939	)	$	113,373
Consolidation of excess facilities and other contractual obligations		2,376		15,587		(9,064	)		8,899
Abandoned assets		—		6,105		(6,105	)		—
Total	$	186,816	$	44,564	$	(109,108	)	$	122,272

12.  Commitments and Contingencies

Line of Credit

We have available for use a credit line of $50.0 million in the United States. As of June 30, 2010, we had no borrowings outstanding on the line of credit. The credit line bears interest at the bank’s base rate and requires us, upon utilization of the credit line, to meet certain financial covenants with respect to limitations on losses. In the event the covenants are not met, the lender may require us to provide collateral to secure the outstanding balance. At June 30, 2010, we were in compliance with the covenants.

Litigation

We are involved in a variety of claims, demands, suits, investigations, and proceedings, including those identified below, that arise from time to time relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, product liability, employment, benefits and securities matters. As required by authoritative

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guidance, we have estimated the amount of probable losses that may result from any such pending matters, and such amounts are reflected in our consolidated financial statements. These recorded amounts are not material to our consolidated financial position or results of operations. While it is not possible to predict the outcome of these matters with certainty, we do not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial condition. Because litigation is inherently unpredictable, however, the actual amounts of loss may prove to be larger or smaller than the amounts reflected in our consolidated financial statements, and we could incur judgments or enter into settlements of claims that could adversely affect our operating results or cash flows in a particular period.

United States ex rel. Rille and Roberts v. EMC Corporation. Effective as of May 4, 2010, EMC entered into a settlement agreement (the “Agreement”) with the United States of America, acting through the Civil Division of the Department of Justice (the “DoJ”). The Agreement relates to a previously disclosed “qui tam” action that followed an investigation conducted by the DoJ regarding (i) EMC’s fee arrangements with systems integrators and other partners in federal government transactions, and (ii) EMC’s compliance with the terms and conditions of certain agreements pursuant to which we sold products and services to the federal government, primarily a schedule agreement we entered into with the General Services Administration in November 1999. Pursuant to the Agreement, EMC paid the United States $87.5 million in the second quarter of 2010. In consideration of this payment, the United States released EMC with respect to the matters investigated and the claims alleged by the DoJ in the civil action. As set forth in the Agreement, EMC expressly denies any liability or wrongdoing in connection with such matters and claims, and the settlement represented a compromise to avoid the costs, distraction and uncertainty of continued litigation. As previously disclosed, EMC recorded an $87.5 million accrual for this contingency as of December 31, 2009.

Derivative Demand Letters. We have received three derivative demand letters sent on behalf of purported EMC shareholders. The letters contain allegations to the effect that the existence of the matter captionedUnited States ex rel. Rille and Roberts v. EMC Corporationconstitutes evidence that certain EMC officers and directors failed to exercise due care and/or failed to oversee compliance with certain federal laws. The matters relating to the demand letters were referred to a Special Committee of independent directors of the Board of Directors, which investigated and made a determination regarding the allegations. At the conclusion of their investigation, the Special Committee determined in good faith that commencing or maintaining derivative proceedings based on the allegations would not be in the best interests of EMC. In October 2009, one of the purported shareholders filed a complaint in the Superior Court for Middlesex County in Massachusetts alleging claims for breach of fiduciary duty against EMC directors and certain officers based on the same allegations set forth in the demand letter. In May 2010, another purported shareholder filed a complaint in the same court making virtually identical allegations. We are defending these matters vigorously.

13.  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, 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, selling, general and administrative 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 the three months ended June 30, 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 million. Additionally, contingent obligations totaling up to $25.0 million may be payable to us by the end of the second anniversary of the transfer. These obligations are subject to our revenue achievements as determined by the reseller agreement. The acquisition of the Ionix net assets and related capabilities was accounted for as a business combination between entities under common control. 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.

19

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our segment information for the three and six months ended June 30, 2010 and 2009 is as follows (tables in thousands, except percentages):

	EMC Information Infrastructure
	Information Storage			Information Intelligence Group			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Three Months Ended:
June 30, 2010
Revenues:
Product revenues	$	2,076,855		$	62,329		$	90,876		$	2,230,060		$	323,256		$	—		$	2,553,316
Services revenues		922,067			116,105			82,460			1,120,632			349,549			—			1,470,181
Total consolidated revenues		2,998,922			178,434			173,336			3,350,692			672,805			—			4,023,497
Cost of sales		1,386,601			61,998			53,524			1,502,123			102,515			59,660			1,664,298
Gross profit	$	1,612,321		$	116,436		$	119,812			1,848,569			570,290			(59,660	)		2,359,199
Gross profit percentage		53.8	%		65.3	%		69.1	%		55.2	%		84.8	%		—			58.6	%
Research and development											288,574			120,239			68,912			477,725
Selling, general and administrative											902,505			265,754			115,392			1,283,651
Restructuring and acquisition-related charges											—			—			9,839			9,839
Total costs and expenses											1,191,079			385,993			194,143			1,771,215
Operating income											657,490			184,297			(253,803	)		587,984
Other income (expense), net											20,969			(4,930	)		(26,550	)		(10,511	)
Income before tax											678,459			179,367			(280,353	)		577,473
Income tax provision											173,406			36,255			(72,685	)		136,976
Net income											505,053			143,112			(207,668	)		440,497
Net income attributable to the non-controlling interest in VMware, Inc.											—			(27,713	)		13,432			(14,281	)
Net income attributable to EMC Corporation										$	505,053		$	115,399		$	(194,236	)	$	426,216

20

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	EMC Information Infrastructure
	Information Storage			Information Intelligence Group			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Three Months Ended:
June 30, 2009
Revenues:
Product revenues	$	1,632,309		$	60,792		$	84,080		$	1,777,181		$	228,089		$	—		$	2,005,270
Services revenues		842,558			119,445			63,055			1,025,058			227,024			—			1,252,082
Total consolidated revenues		2,474,867			180,237			147,135			2,802,239			455,113			—			3,257,352
Cost of sales		1,274,341			68,461			45,417			1,388,219			71,221			54,134			1,513,574
Gross profit	$	1,200,526		$	111,776		$	101,718			1,414,020			383,892			(54,134	)		1,743,778
Gross profit percentage		48.5	%		62.0	%		69.1	%		50.5	%		84.4	%		—			53.5	%
Research and development											255,652			93,677			48,552			397,881
Selling, general and administrative											772,381			191,304			87,519			1,051,204
Restructuring and acquisition-related charges											—			—			33,234			33,234
Total costs and expenses											1,028,033			284,981			169,305			1,482,319
Operating income											385,987			98,911			(223,439	)		261,459
Other income (expense), net											13,962			20			(26,780	)		(12,798	)
Income before tax											399,949			98,931			(250,219	)		248,661
Income tax provision											83,587			18,388			(63,930	)		38,045
Net income											316,362			80,543			(186,289	)		210,616
Net income attributable to the non-controlling interest in VMware, Inc.											—			(13,058	)		7,674			(5,384	)
Net income attributable to EMC Corporation										$	316,362		$	67,485		$	(178,615	)	$	205,232

21

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	EMC Information Infrastructure
	Information Storage			Information Intelligence Group			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Six Months Ended:
June 30, 2010
Revenues:
Product revenues	$	4,094,169		$	125,991		$	176,690		$	4,396,850		$	635,183		$	—		$	5,032,033
Services revenues		1,823,848			230,607			158,114			2,212,569			669,587			—			2,882,156
Total consolidated revenues		5,918,017			356,598			334,804			6,609,419			1,304,770			—			7,914,189
Cost of sales		2,788,115			125,330			105,780			3,019,225			198,019			119,227			3,336,471
Gross profit	$	3,129,902		$	231,268		$	229,024			3,590,194			1,106,751			(119,227	)		4,577,718
Gross profit percentage		52.9	%		64.9	%		68.4	%		54.3	%		84.8	%		—			57.8	%
Research and development											555,450			222,214			134,994			912,658
Selling, general and administrative											1,781,662			522,869			240,404			2,544,935
Restructuring and acquisition-related charges											—			—			28,341			28,341
Total costs and expenses											2,337,112			745,083			403,739			3,485,934
Operating income											1,253,082			361,668			(522,966	)		1,091,784
Other income (expense), net											31,847			(10,143	)		(52,672	)		(30,968	)
Income before tax											1,284,929			351,525			(575,638	)		1,060,816
Income tax provision											314,206			70,695			(152,272	)		232,629
Net income											970,723			280,830			(423,366	)		828,187
Net income attributable to the non-controlling interest in VMware, Inc.											—			(53,897	)		24,630			(29,267	)
Net income attributable to EMC Corporation										$	970,723		$	226,933		$	(398,736	)	$	798,920

22

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	EMC Information Infrastructure
	Information Storage			Information Intelligence Group			RSA Information Security			EMC Information Infrastructure			VMware Virtual Infrastructure within EMC			Corp Reconciling Items			Consolidated
Six Months Ended:
June 30, 2009
Revenues:
Product revenues	$	3,204,717		$	119,502		$	164,751		$	3,488,970		$	485,420		$	—		$	3,974,390
Services revenues		1,633,490			235,050			125,090			1,993,630			440,094			—			2,433,724
Total consolidated revenues		4,838,207			354,552			289,841			5,482,600			925,514			—			6,408,114
Cost of sales		2,508,831			140,159			89,072			2,738,062			137,485			105,534			2,981,081
Gross profit	$	2,329,376		$	214,393		$	200,769			2,744,538			788,029			(105,534	)		3,427,033
Gross profit percentage		48.1	%		60.5	%		69.3	%		50.1	%		85.1	%		—			53.5	%
Research and development											513,236			174,541			93,397			781,174
Selling, general and administrative											1,533,044			370,169			172,764			2,075,977
Restructuring and acquisition-related charges											—			—			48,806			48,806
Total costs and expenses											2,046,280			544,710			314,967			2,905,957
Operating income											698,258			243,319			(420,501	)		521,076
Other income (expense), net											26,753			(2,929	)		(53,079	)		(29,255	)
Income before tax											725,011			240,390			(473,580	)		491,821
Income tax provision											156,546			45,600			(126,286	)		75,860
Net income											568,465			194,790			(347,294	)		415,961
Net income attributable to the non-controlling interest in VMware, Inc.											—			(31,351	)		14,691			(16,660	)
Net income attributable to EMC Corporation										$	568,465		$	163,439		$	(332,603	)	$	399,301

Our revenues are attributed to the geographic areas according to the location of the customers. Revenues by geographic area are included in the following table (table in thousands):

	For the Three Months Ended				For the Six Months Ended
	June 30, 2010		June 30, 2009		June 30, 2010		June 30, 2009
United States	$	2,146,873	$	1,680,583	$	4,265,603	$	3,319,494
Europe, Middle East and Africa		1,177,095		998,670		2,325,942		1,985,310
Asia Pacific		488,484		407,318		905,180		781,637
Latin America, Mexico and Canada		211,045		170,781		417,464		321,673
Total	$	4,023,497	$	3,257,352	$	7,914,189	$	6,408,114

No country other than the United States accounted for 10% or more of revenues during the three and six months ended June 30, 2010 or 2009.

Long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets, in the United States were $2,696.0 million at June 30, 2010 and $2,549.8 million at December 31, 2009. No country other than the United States accounted for 10% or more of these assets at June 30, 2010 or December 31, 2009. Internationally, long-lived assets, excluding financial instruments and deferred tax assets, were $650.4 million at June 30, 2010 and $635.6 million at December 31, 2009.

23

Item 2. 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 Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements and should also be read in conjunction with the risk factors set forth in Item 1A of Part II. 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, except per share amounts.

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, Information Intelligence Group 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. We intend to enhance and expand our portfolio of systems, software, services and solutions to meet our customers’ needs by accelerating our internal research and development (“R&D”) efforts and through acquisitions. Our expectations for economic growth and IT spending in the second half of 2010 remain consistent with our views earlier in the year. We believe our addressable market will grow approximately 6% to 8% in 2010 compared to 2009. However, as we look at our business, there are a few factors which we will have to monitor closely, including the relative weakness of the Euro and the British Pound and cautious government spending projected in the U.S. and Europe for the remainder of 2010.

Concurrent with these efforts to grow revenues and accelerate our R&D initiatives, 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. These programs have favorably impacted our cost of sales, selling, general & administrative (“SG&A”) and R&D expenses. We expect to incur $65 of costs related to these efforts in 2010 and beyond. The savings from these programs 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 expect to incur $50 of transition costs in 2010. These investments are necessary to implement the new, more efficient capabilities ahead of transitioning from the existing cost structure.

Through a combination of our business investments and 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.

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 evolve their 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 their virtualization infrastructure software solutions technology and product portfolio, increasing product awareness, promoting the adoption of virtualization and building long-term relationships with its customers through the adoption of enterprise license agreements (“ELAs”). Since the introduction in 2009 of VMware vSphere, the next generation of VMware infrastructure and VMware View 4, which is integrated with VMware vSphere, VMware has introduced more products, including the introduction of VMware vSphere

24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

4.1 in the third quarter of 2010 that build on the vSphere foundation. VMware plans to continue to introduce additional products through 2010 and beyond. Additionally, VMware has made, and expects to continue to make, acquisitions designed to strengthen its product offerings and/or extend its strategy to deliver solutions that can be hosted at customer data centers or at service providers.

From mid-2008 and through most of 2009, VMware observed that customers have responded to the economic downturn with reductions in budgets for IT spending. As a result, customers were subjecting larger orders, such as ELAs, to a longer review process and in certain cases were purchasing products to meet their immediate needs, foregoing larger discounts offered under ELAs. While the overall macroeconomic environment appears to be improving, they believe that they have benefited from previously pent-up demand and that it is unclear whether their recent improved sales results reflect a long-term improving trend. They are planning for the future assuming the economic recovery will be gradual and may include additional downturns or uncertainty. Therefore, VMware remains conservative in their planning and expects to continue to manage their resources prudently, while making key investments with the objective of maximizing long-term growth.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:

	For the Three Months Ended
	June 30, 2010		June 30, 2009		$ Change			% Change
Information Storage	$	2,998.9	$	2,474.9	$	524.0		21.2	%
Information Intelligence Group		178.4		180.2		(1.8	)	(0.1	)%
RSA Information Security		173.3		147.1		26.2		17.8	%
VMware Virtual Infrastructure		672.8		455.1		217.7		47.8	%
Total revenues	$	4,023.5	$	3,257.4	$	766.1		23.5	%

	For the Six Months Ended
	June 30, 2010		June 30, 2009		$ Change		% Change
Information Storage	$	5,918.0	$	4,838.2	$	1,079.8	22.3	%
Information Intelligence Group		356.6		354.6		2.0	0.6	%
RSA Information Security		334.8		289.8		45.0	15.5	%
VMware Virtual Infrastructure		1,304.8		925.5		379.3	41.0	%
Total revenues	$	7,914.2	$	6,408.1	$	1,506.1	23.5	%

Consolidated product revenues increased 27.3% and 26.6% to $2,553.3 and $5,032.0 for the three and six months ended June 30, 2010, respectively. The consolidated product revenues increases were primarily driven by the Information Storage and the VMware Virtual Infrastructure segments’ product revenues. Within the high-end of the Information Storage segment, our Symmetrix product revenues increased 31.6% and 29.6% for the three and six months ended June 30, 2010, respectively. Within the mid-tier platform products of the Information Storage segment, product revenues increased 33.0% and 32.7% for the three and six months ended June 30, 2010, respectively. Had we owned Data Domain for the prior comparable periods, product revenues would have increased 20.7% and 20.2% for the three and six months ended June 30, 2010, respectively. The overall growth in product revenues reflects a continued higher demand for our IT infrastructure offerings to address the storage needs for continued information growth, particularly as customers start to build out their private cloud infrastructures.

The VMware Virtual Infrastructure segment’s product revenues increased 41.7% and 30.9% to $323.3 and $635.2 for the three and six months ended June 30, 2010, respectively. VMware’s product revenues continue to benefit from the improvement of the overall macroeconomic environment, as well as from the effect of its international expansion. International revenues increased relative to domestic revenues for both the three and six months ended June 30, 2010 primarily due to strong demand across its international regions.

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

The Information Intelligence Group segment’s product revenues increased 2.5% and 5.4% to $62.3 and $126.0 for the three and six months ended June 30, 2010, respectively. The RSA Information Security segment’s product revenues increased 8.1% and 7.2% to $90.9 and $176.7 for the three and six months ended June 30, 2010, respectively. Increases in both segments were attributable to increased demand for software licenses.

Consolidated services revenues increased 17.4% and 18.4% to $1,470.2 and $2,882.2 for the three and six months ended June 30, 2010, respectively. The consolidated services revenues increases were driven by the Information Storage and the VMware Virtual Infrastructure segments’ services revenues.

The Information Storage segment’s services revenues increased 9.4% and 11.7% to $922.1 and $1,823.8 for the three and six months ended June 30, 2010, respectively. The increase in services revenues were primarily attributable to higher demand for systems maintenance-related services, which correlates to the increased sales in storage products. In addition, a growing demand for professional services also contributed to the increases in services revenues for both the three and six months ended June 30, 2010.

The VMware Virtual Infrastructure segment’s services revenues increased 54.0% and 52.1% to $349.5 and $669.6 for the three and six months ended June 30, 2010, respectively. The increases in services revenues during the three and six months ended June 30, 2010 were primarily attributable to growth in VMware’s software maintenance revenues. In the three and six months ended June 30, 2010, services revenues benefited from strong renewals, multi-year software maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with software licenses.

The Information Intelligence Group segment’s services revenues declined 2.8% and 1.9% to $116.1 and $230.6 for the three and six months ended June 30, 2010, respectively. The decline in services revenues was primarily attributable to lower demand for professional services. The RSA Information Security segment’s services revenue increased 30.8% and 26.4% to $82.5 and $158.1 for the three and six months ended June 30, 2010, respectively. Services revenues increased due to an increase in maintenance revenues resulting from continued demand for support from our installed base as well as increased demand for professional services.

Consolidated revenues by geography were as follows:

	For the Three Months Ended
	June 30, 2010		June 30, 2009		% Change
United States	$	2,146.9	$	1,680.6	27.7	%
Europe, Middle East and Africa		1,177.1		998.7	17.9
Asia Pacific		488.5		407.3	19.9
Latin America, Mexico and Canada		211.0		170.8	23.5

	For the Six Months Ended
	June 30, 2010		June 30, 2009		% Change
United States	$	4,265.6	$	3,319.5	28.5	%
Europe, Middle East and Africa		2,325.9		1,985.3	17.2
Asia Pacific		905.2		781.6	15.8
Latin America, Mexico and Canada		417.5		321.7	29.8

Revenues increased for the three and six months ended June 30, 2010 compared to the same periods in 2009 in all of our markets due to greater demand for our products and services offerings. Changes in exchange rates contributed 0.0% and 1.2% to the overall revenue increase for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009. The impact of the change in rates was most significant in the Euro zone for the three months ended June 30, 2010. The impact of the change in rates was most significant in the Asia Pacific markets, primarily Australia and Japan, as well as Canada and Brazil, for the six months ended June 30, 2010.

While exchange rates had a favorable impact to revenue for the six months ended June 30, 2010, there was weakness in the Euro relative to the dollar in the second quarter. Based upon the spot rates as of June 30, 2010, in all geographies in which we sell in local currencies, we expect that currency will negatively impact revenue growth for the full year 2010 by approximately 1%.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Costs and Expenses

The following tables present our costs and expenses, other expense and net income attributable to EMC Corporation.

	For the Three Months Ended
	June 30,     2010			June 30,     2009			$ Change			% Change
Cost of revenue:
Information Storage	$	1,386.6		$	1,274.3		$	112.3		8.8	%
Information Intelligence Group		62.0			68.5			(6.5	)	(9.5	)
RSA Information Security		53.5			45.4			8.1		17.8
VMware Virtual Infrastructure		102.5			71.2			31.3		44.0
Corporate reconciling items		59.7			54.1			5.6		10.4
Total cost of revenue		1,664.3			1,513.6			150.7		10.0
Gross margins:
Information Storage		1,612.3			1,200.5			411.8		34.3
Information Intelligence Group		116.4			111.8			4.6		4.1
RSA Information Security		119.8			101.7			18.1		17.8
VMware Virtual Infrastructure		570.3			383.9			186.4		48.6
Corporate reconciling items		(59.7	)		(54.1	)		(5.6	)	(10.4	)
Total gross margin		2,359.2			1,743.8			615.4		35.3
Operating expenses:
Research and development (1)		477.7			397.9			79.8		20.1
Selling, general and administrative (2)		1,283.7			1,051.2			232.5		22.1
Restructuring and acquisition-related charges		9.8			33.2			(23.4	)	(70.5	)
Total operating expenses		1,771.2			1,482.3			288.9		19.5
Operating income		588.0			261.5			326.5		124.9
Investment income, interest expense and other expense, net		(10.5	)		(12.8	)		2.3		18.0
Income before income taxes		577.5			248.7			328.8		132.2
Income tax provision		137.0			38.0			99.0		260.5
Net income		440.5			210.6			229.9		109.2
Less: Net income attributable to the non-controlling interest in VMware, Inc.		(14.3	)		(5.4	)		(8.9	)	(164.8	)
Net income attributable to EMC Corporation	$	426.2		$	205.2		$	221.0		107.7	%

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

	For the Six Months Ended
	June 30,     2010			June 30,     2009			$ Change			% Change
Cost of revenue:
Information Storage	$	2,788.1		$	2,508.8		$	279.3		11.1	%
Information Intelligence Group		125.3			140.2			(14.9	)	(10.6	)
RSA Information Security		105.8			89.1			16.7		18.7
VMware Virtual Infrastructure		198.0			137.5			60.5		44.0
Corporate reconciling items		119.2			105.5			13.7		13.0
Total cost of revenue		3,336.5			2,981.1			355.4		11.9
Gross margins:
Information Storage		3,129.9			2,329.4			800.5		34.4
Information Intelligence Group		231.3			214.4			16.9		7.9
RSA Information Security		229.0			200.8			28.2		14.0
VMware Virtual Infrastructure		1,106.8			788.0			318.8		40.5
Corporate reconciling items		(119.2	)		(105.5	)		(13.7	)	(13.0	)
Total gross margin		4,577.7			3,427.0			1,150.7		33.6
Operating expenses:
Research and development (3)		912.7			781.2			131.5		16.8
Selling, general and administrative (4)		2,544.9			2,076.0			468.9		22.6
Restructuring and acquisition-related charges		28.3			48.8			(20.5	)	(42.0	)
Total operating expenses		3,485.9			2,906.0			579.9		20.0
Operating income		1,091.8			521.1			570.7		109.5
Investment income, interest expense and other expense, net		(31.0	)		(29.3	)		(1.7	)	(5.8	)
Income before income taxes		1,060.8			491.8			569.0		115.7
Income tax provision		232.6			75.9			156.7		206.5
Net income		828.2			416.0			412.2		99.1
Less: Net income attributable to the non-controlling interest in VMware, Inc.		(29.3	)		(16.7	)		(12.6	)	(75.4	)
Net income attributable to EMC Corporation	$	798.9		$	399.3		$	399.6		100.1	%

(1) Amount includes corporate reconciling items of $68.9 and $48.6 for the three months ended June 30, 2010 and 2009, respectively.

(2) Amount includes corporate reconciling items of $115.4 and $87.5 for the three months ended June 30, 2010 and 2009, respectively.

(3) Amount includes corporate reconciling items of $135.0 and $93.4 for the six months ended June 30, 2010 and 2009, respectively.

(4) Amount includes corporate reconciling items of $240.4 and $172.8 for the six months ended June 30, 2010 and 2009, respectively.

Gross Margins

Overall our gross margin percentages were 58.6% and 53.5% for the three months ended June 30, 2010 and 2009, respectively. The increase in the gross margin percentage in the second quarter of 2010 compared to 2009 was attributable to the Information Storage segment, which increased overall gross margins by 323 basis points, the VMware Virtual Infrastructure segment, which increased overall gross margins by 178 basis points, the Information Intelligence Group segment, which increased overall gross margins by 16 basis points and the RSA Information Security segment, which increased overall gross margins by 9 basis points. These increases were partially offset by the impact of corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization and transition costs, which decreased the consolidated gross margin percentage by 16 basis points. The transition costs represent the incremental costs incurred to transform our current cost structure to a more streamlined cost structure.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Our gross margin percentages were 57.8% and 53.5% for the six months ended June 30, 2010 and 2009, respectively. The increase in the gross margin percentage for the six months ended June 30, 2010 compared to 2009 was attributable to the Information Storage segment, which increased overall gross margins by 275 basis points, the VMware Virtual Infrastructure segment, which increased overall gross margins by 151 basis points, the Information Intelligence Group segment, which increased overall gross margins by 20 basis points and the RSA Information Security segment, which increased overall gross margins by 4 basis points. These increases were partially offset by the increase in corporate reconciling items, which decreased the consolidated gross margin percentage by 20 basis points.

For segment reporting purposes, stock-based compensation, acquisition-related intangible asset amortization and transition costs are recognized as corporate expenses and are not allocated among our various operating segments. The increase of $5.6 in the corporate reconciling items for the three months ended June 30, 2010 was attributable to a $2.8 increase in stock-based compensation expense and a $3.5 increase in intangible asset amortization expense, partially offset by a $0.7 decrease in transition costs. The increase of $13.7 in the corporate reconciling items for the six months ended June 30, 2010 was attributable to a $9.7 increase in stock-based compensation expense and a $5.1 increase in intangible asset amortization expense, partially offset by a $1.1 decrease in transition costs.

The gross margin percentages for the Information Storage segment were 53.8% and 48.5% for the three months ended June 30, 2010 and 2009, respectively, and were 52.9% and 48.1% for the six months ended June 30, 2010 and 2009, respectively. The increase in gross margin percentage for both the three and six months ended June 30, 2010 compared to the same periods in 2009 were primarily attributable to improved product gross margins, driven by an improved product mix, higher sales volume and an improved cost structure.

The gross margin percentages for the Information Intelligence Group segment were 65.3% and 62.0% for three months ended June 30, 2010 and 2009, respectively, and were 64.9% and 60.5% for the six months ended June 30, 2010 and 2009, respectively. The increase in gross margin percentage for both the three and six months ended June 30, 2010 compared to the same periods in 2009 were primarily attributable to the increase in the mix of software license revenues as a percentage of total segment revenues, which typically have a higher gross margin.

The gross margin percentages for the RSA Information Security segment remained unchanged at 69.1% for the three months ended June 30, 2010 and 2009, and were 68.4% and 69.3% for the six months ended June 30, 2010 and 2009, respectively. The decrease in gross margin percentage for the six months ended June 30, 2010 compared to the same period in 2009 was attributable to a reduction in our product gross margins.

The gross margin percentages for the VMware Virtual Infrastructure segment were 84.8% and 84.4% for the three months ended June 30, 2010 and 2009, respectively, and were 84.8% and 85.1% for the six months ended June 30, 2010 and 2009, respectively. The decrease in gross margin percentage for the six months ended June 30, 2010 compared to the same period in 2009 was primarily attributable to a greater mix of services revenue in 2010 compared to 2009. Services revenues have a lower gross margin than license revenues.

Research and Development

As a percentage of revenues, R&D expenses were 11.9% and 12.2% for the three months ended June 30, 2010 and 2009, respectively, and were 11.5% and 12.2% for the six months ended June 30, 2010 and 2009, respectively. R&D expenses increased $79.8 and $131.5 for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009 primarily due to an increase in personnel-related costs, including stock-based compensation, depreciation expense, cost of facilities and travel costs, partially offset by greater levels of software capitalization. Personnel-related costs increased by $79.4 and $133.4, depreciation expense increased by $9.3 and $12.7, cost of facilities increased by $8.0 and $8.7 and travel costs increased $2.3 and $4.8 for the three and six months ended June 30, 2010, respectively. Capitalized software development costs, which reduce R&D expense, increased by $28.3 and $33.9 for the three and six months ended June 30, 2010, respectively.

Corporate reconciling items within R&D, which consist of stock-based compensation, intangible asset amortization and transition costs, increased $20.3 and $41.6 for the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009. Stock-based compensation expense increased $17.6 and $36.2, intangible asset amortization increased $3.0 and $4.4 and transition costs decreased $0.3 and increased $1.0 for the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009. Stock-based compensation expense and intangible asset amortization increased primarily due to VMware and to the Data Domain acquisition, which was consummated in the third quarter of 2009. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

R&D expenses within EMC’s Information Infrastructure business, as a percentage of EMC’s Information Infrastructure business revenues, were 8.6% and 9.1% for the three months ended June 30, 2010 and 2009, respectively, and were 8.4% and 9.4% for the six months ended June 30, 2010 and 2009, respectively. R&D expenses increased $32.9 and $42.2 for the three and six months ended June 30, 2010, respectively, primarily due to increases in personnel-related costs, depreciation expense, cost of facilities and travel costs. Personnel-related costs increased by $37.3 and $58.0, depreciation expense increased by $6.0 and $11.2, the cost of facilities increased by $7.5 and $6.9 and travel costs increased $1.1 and $3.0 for the three and six months ended June 30, 2010, respectively. Partially offsetting these increased costs was an increase in capitalized software development costs of $27.1 and $40.8, which reduce R&D expense, for the three and six months ended June 30, 2010, respectively.

R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware’s revenues, were 17.9% and 20.6% for the three months ended June 30, 2010 and 2009, respectively, and were 17.0% and 18.9% for the six months ended June 30, 2010 and 2009, respectively. R&D expenses increased $26.6 and $47.7 for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009 largely due to increases in personnel-related costs of $24.7 and $38.2 for the three and six months ended June 30, 2010, respectively, primarily due to increased salaries and benefits expenses resulting from incremental headcount from strategic hiring and acquisitions. Additionally, although capitalized software development costs increased $1.2 for the three months ended June 30, 2010 when compared with the same period in 2009, these costs decreased by $6.9 for the six months ended June 30, 2010 when compared to the same period in 2009. The decrease in capitalized software development costs in the first six months of 2010 was primarily the result of lower costs capitalized on products that build on the VMware vSphere foundation.

Selling, General and Administrative

As a percentage of revenues, SG&A expenses were 31.9% and 32.3% for the three months ended June 30, 2010 and 2009, respectively, and were 32.2% and 32.4% for the six months ended June 30, 2010 and 2009, respectively. SG&A expenses increased by $232.5 and $468.9 for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009 primarily due to increases in personnel-related costs, including stock-based compensation, commissions, travel costs, cost of facilities, depreciation expense, business development costs and professional services related costs. Personnel-related costs increased by $120.0 and $238.9, commissions increased by $42.1 and $85.6, travel costs increased by $14.3 and $31.9, cost of facilities increased by $11.1 and $25.7, depreciation expense increased by $15.4 and $28.9, business development costs increased by $10.7 and $21.4 and professional services related costs increased by $1.3 and $13.2 for the three and six months ended June 30, 2010, respectively.

Corporate reconciling items within SG&A, which consist of stock-based compensation, intangible asset amortization and transition costs, increased $27.9 and $67.6 for the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009. Stock-based compensation expense increased $19.1 and $47.4, intangible asset amortization increased $6.0 and $13.4 and transition costs increased $2.8 and $6.8 for the three and six months ended June 30, 2010, respectively. Stock-based compensation expense and intangible asset amortization increased primarily due to the Data Domain acquisition, which was consummated in the third quarter of 2009. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

SG&A expenses within EMC’s Information Infrastructure business, as a percentage of EMC’s Information Infrastructure business revenues, were 26.9% and 27.6% for the three months ended June 30, 2010 and 2009, respectively, and were 27.0% and 28.0% for the six months ended June 30, 2010 and 2009, respectively. SG&A expenses increased $130.1 and $248.6 for the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009 primarily due to increases in personnel-related costs, commissions, travel costs, cost of facilities, depreciation expense, business development costs and professional services related costs. Personnel-related costs increased by $52.9 and $104.1, commissions increased by $25.9 and $48.6, travel costs increased by $10.6 and $23.7, cost of facilities increased by $7.6 and $18.0, depreciation expense increased by $5.4 and $8.4, business development costs increased by $7.7 and $18.7 and professional services related costs remained the same and increased by $6.8 for the three and six months ended June 30, 2010, respectively.

SG&A expenses within the VMware Virtual Infrastructure business, as a percentage of VMware’s revenues, were 39.5% and 42.0% for the three months ended June 30, 2010 and 2009, respectively, and were 40.1% and 40.0% for the six months ended June 30, 2010 and 2009, respectively. SG&A expenses increased $74.5 and $152.7 for the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009. The increase in SG&A expenses in 2010 was primarily the result

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

of higher salaries and benefits costs resulting from incremental headcount from strategic hiring and acquisitions as well as commission expense on higher sales volumes. Also contributing to the change was increased spending on sales and marketing systems infrastructure and marketing programs.

Restructuring and Acquisition-Related Charges

For the three and six months ended June 30, 2010, we incurred restructuring and acquisition-related charges of $9.8 and $28.3, respectively. For the three and six months ended June 30, 2009, we incurred restructuring and acquisition-related charges of $33.2 and $48.8, respectively. For the three and six months ended June 30, 2010, we incurred $8.7 and $25.7, respectively, of restructuring charges, primarily related to our 2008 restructuring program and $1.1 and $2.6, respectively, of charges in connection with acquisitions for financial advisory, legal and accounting services. We did not incur any acquisition-related charges in the six months ended June 30, 2009.

Investment Income

Investment income was $32.1 and $63.6 for the three and six months ended June 30, 2010, respectively, and $31.3 and $71.2 for the three and six months ended June 30, 2009, respectively. Investment income increased slightly for the three months ended June 30, 2010 when compared to the same period in 2009 primarily due to increased income on our sales-type leases. Investment income decreased for the six months ended June 30, 2010 when compared to the same period in 2009 primarily due to lower weighted-average returns on investments. The weighted-average return on investments, excluding realized losses and gains, was 1.2% for both the three and six months ended June 30, 2010 and 1.3% and 1.4% for the three and six months ended June 30, 2009, respectively. Net realized gains were $0.7 and $2.7 for the three and six months ended June 30, 2010, respectively, and $0.6 and $7.1 for the three and six months ended June 30, 2009, respectively.

Interest Expense

Interest expense was $44.7 and $44.2 for the three months ended June 30, 2010 and 2009, respectively, and was $87.7 and $89.7 for the six months ended June 30, 2010 and 2009, respectively. Interest expense consists primarily of interest on the Notes. Included in interest expense are non-cash interest charges of $26.3 and $26.8 for the three months ended June 30, 2010 and 2009, respectively, and $52.2 and $53.1 for the six months ended June 30, 2010 and 2009, respectively, as we are accreting our Notes to their stated values over their term.

Other Income (Expense), Net

Other income (expense), net was $2.1 and $0.0 for the three months ended June 30, 2010 and 2009, respectively, and was $(6.9) and $(10.7) for the six months ended June 30, 2010 and 2009, respectively. Lower foreign currency transaction losses for the six months ended June 30, 2010 compared to the same period in 2009 accounted for the decrease in other expense.

Provision for Income Taxes

Our effective income tax rates were 23.7% and 21.9% for the three and six months ended June 30, 2010, respectively. Our effective income tax rates were 15.3% and 15.4% for the three and six months ended June 30, 2009, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. For the three and six months ended June 30, 2010 and 2009, the effective tax rate varied from the statutory tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

Our effective income tax rate increased from the three and six months ended June 30, 2009 to the three and six months ended June 30, 2010 due primarily to the expiration of the U.S. federal research and development tax credit for 2010. Additionally, in 2009, our tax rate was favorably impacted due to the recognition of discrete tax benefits during the second quarter of 2009, principally from the favorable resolution of uncertain tax positions related to transfer pricing and a U.S. federal income tax audit, which were partially offset by certain income charges relating to acquisitions.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

We have substantially concluded all U.S. federal income tax matters for years through 2006 and are currently under audit for U.S. federal income taxes for 2007 and 2008. We also have income tax audits in process in numerous state, local and international jurisdictions. Based on the timing and outcome of examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations, and the protocol of finalizing such audits, it is not possible to estimate the impact of the amount of such changes, if any, to our previously recorded uncertain tax positions.

Non-controlling Interest in VMware, Inc.

The net income attributable to the non-controlling interest in VMware was $14.3 and $5.4 for the three months ended June 30, 2010 and 2009, respectively, and was $29.3 and $16.7 for the six months ended June 30, 2010 and 2009, respectively. VMware’s net income was $74.5 and $32.5 for the three months ended June 30, 2010 and 2009, respectively, and was $153.0 and $102.5 for the six months ended June 30, 2010 and 2009, respectively. The weighted average non-controlling interest in VMware was approximately 19% and 17% for the three months ended June 30, 2010 and 2009, respectively, and was approximately 19% and 16% for the six months ended June 30, 2010 and 2009, respectively. In the first quarter of 2010, we announced a stock purchase program of VMware’s Class A common stock to maintain an approximately 80% majority ownership in VMware over the long term. We have purchased approximately 3.5 million shares as of June 30, 2010 for approximately $198.1.

Financial Condition

Cash provided by operating activities was $2,074.2 and $1,438.1 for the six months ended June 30, 2010 and 2009, respectively. Cash received from customers was $8,495.5 and $6,951.4 for the six months ended June 30, 2010 and 2009, respectively. The increase in cash received from customers was attributable to an increase in sales volume and higher cash proceeds from the sale of maintenance contracts, which are typically billed and paid in advance of services being rendered. Cash paid to suppliers and employees was $6,291.7 and $5,348.6 for the six months ended June 30, 2010 and 2009, respectively. The increase was primarily attributable to an increase in headcount and related employee expenses, material costs correlated to higher sales volume and other operating expenses. Cash received from dividends and interest declined to $54.2 for the six months ended June 30, 2010 compared with $73.4 for the six months ended June 30, 2009, due to lower yields on our investments. For the six months ended June 30, 2010 and 2009, we paid $145.6 and $202.3, respectively, in income taxes. These payments are comprised of estimated taxes for the current year, extension payments for the prior year and refunds or payments associated with income tax filings and tax audits.

Cash used in investing activities was $2,348.1 and $865.2 for the six months ended June 30, 2010 and 2009, respectively. Cash paid for acquisitions, strategic investments and other related investments increased $148.7 for the six months ended June 30, 2010 when compared to the same period in 2009. Capital additions were $301.2 and $205.5 for the six months ended June 30, 2010 and 2009, respectively. The higher level of capital additions was primarily due to an increase in spending on facility expansion and information technology infrastructure for the current period. Capitalized software development costs were $185.6 and $151.8 for the six months ended June 30, 2010 and 2009, respectively. The increase was primarily attributable to EMC Information Infrastructure’s efforts on its software development activities, partially offset by the decrease in capitalized software costs within our VMware Virtual Infrastructure segment. Net purchases of investments were $1,506.6 for the six months ended June 30, 2010 compared to net sales and maturities of $237.0 for the six months ended June 30, 2009. This activity varies from period to period based upon our cash collections, cash requirements and maturity dates of our investments.

Cash used in financing activities was $217.3 for the six months ended June 30, 2010 and cash provided by financing activities was $1.9 for the six months ended June 30, 2009. For the six months ended June 30, 2010, we spent $517.4 to repurchase 28.9 million shares of our common stock and $198.1 to purchase 3.5 million shares of VMware’s common stock. Additionally, VMware spent $144.5 to repurchase 2.4 million shares of its common stock. We made no share repurchases in the six months ended June 30, 2009. We generated $533.2 and $165.6 during the six months ended June 30, 2010 and 2009, respectively, from the exercise of stock options.

We have available for use a credit line of $50.0 in the United States. As of June 30, 2010, we had no borrowings outstanding on the line of credit. The credit line bears interest at the bank’s base rate and requires us, upon utilization of the credit line, to meet

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

certain financial covenants with respect to limitations on losses. In the event the covenants are not met, the lender may require us to provide collateral to secure the outstanding balance. At June 30, 2010, we were in compliance with the covenants. As of June 30, 2010, the aggregate amount of liabilities of our subsidiaries was approximately $4,269.7.

At June 30, 2010, our total cash, cash equivalents, and short-term and long-term investments were $10,339.3. This balance includes approximately $2,779.8 held by VMware and $2,972.6 held by EMC in overseas entities.

Use of Non-GAAP Financial Measures and Reconciliations to GAAP Results

EMC uses certain non-GAAP financial measures, which exclude stock-based compensation, amortization of intangible assets, restructuring and acquisition-related charges, infrequently occurring gains and losses and special tax items to measure its gross margin, operating margin, net income and diluted earnings per share. EMC also assesses its financial performance by measuring its free cash flow which is also a non-GAAP financial measure. These non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of EMC’s financial performance or liquidity prepared in accordance with GAAP. EMC’s non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how EMC defines its non-GAAP financial measures.

EMC’s management uses the non-GAAP financial measures to gain an understanding of EMC’s comparative operating performance (when comparing such results with previous periods or forecasts) and future prospects and excludes these items from its internal financial statements for purposes of its internal budgets and each reporting segment’s financial goals. These non-GAAP financial measures are used by EMC’s management in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons. EMC’s management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating EMC’s current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner EMC’s current financial results with EMC’s past financial results.

Our non-GAAP operating results for the three months ended June 30, 2010 and 2009 were as follows:

	For the Three Months Ended
	June 30, 2010			June 30, 2009
Gross margin	$	2,418.3		$	1,796.6
Gross margin percentage		60.1	%		55.2	%
Operating income		831.2			476.0
Operating income percentage		20.7	%		14.6	%
Income tax provision		197.0			91.2
Net income attributable to EMC		596.3			358.9
Diluted earnings per share attributable to EMC	$	0.28		$	0.18

The improvements in the gross margin and gross margin percentage were attributable to higher sales volume, a change in mix to overall higher margin products and services and improved cost control. The improvements in the operating income and operating income percentage were attributable to an improved gross margin percentage and growing revenues faster than both our R&D and SG&A expenses. R&D expenses, as a percentage of revenues, were 10.2% and 10.8% for the three months ended June 30, 2010 and 2009, respectively. SG&A expenses, as a percentage of revenues, were 29.3% and 29.8% for the three months ended June 30, 2010 and 2009, respectively.

We also monitor our ability to generate free cash flow in relationship to our non-GAAP net income attributable to EMC. For the twelve months ended June 30, 2010, our free cash flow was $3,124.9, an increase of 21.9% compared to the free cash flow generated for the twelve months ended June 30, 2009. The free cash flow for the twelve months ended June 30, 2010 exceeded our non-GAAP net income attributable to EMC by $803.3.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

The reconciliation of the above financial measures from GAAP to non-GAAP is as follows:

	For the Three Months Ended June 30, 2010
	GAAP		Restructuring and acquisition- related charges			Stock-based compensation		Intangible amortization		Non-GAAP
Gross margin	$	2,359.2	$	—		$	25.1	$	34.0	$	2,418.3
Operating income		588.0		9.8			161.4		72.0		831.2
Income tax provision (benefit)		137.0		(1.7	)		38.9		22.9		197.0
Net income attributable to EMC		426.2		10.4			111.8		47.8		596.3
Diluted earnings per share attributable to EMC	$	0.20	$	0.01		$	0.05	$	0.02	$	0.28

	For the Three Months Ended June 30, 2009
	GAAP		Restructuring and acquisition- related charges		Stock-based compensation		Intangible amortization		Non-GAAP
Gross margin	$	1,743.8	$	—	$	22.3	$	30.5	$	1,796.6
Operating income		261.5		33.2		121.9		59.4		476.0
Income tax provision		38.0		5.9		26.9		20.4		91.2
Net income attributable to EMC		205.2		27.3		87.7		38.6		358.9
Diluted earnings per share attributable to EMC	$	0.10	$	0.01	$	0.04	$	0.02	$	0.18

Free cash flow is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. EMC uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures and capitalized software development costs. Management believes that information regarding free cash flow provides investors with an important perspective on the cash available to make strategic acquisitions and investments, repurchase shares, service debt and fund ongoing operations. As free cash flow is not a measure of liquidity calculated in accordance with GAAP, free cash flow should be considered in addition to, but not as a substitute for, the analysis provided in the statements of cash flows.

The reconciliation of the above free cash flow from GAAP to non-GAAP is as follows:

	For the Twelve Months Ended
	June 30, 2010			June 30, 2009
Cash Flow from Operations	$	3,970.5		$	3,466.3
Capital Expenditures		(507.3	)		(575.0	)
Capitalized Software Development Costs		(338.4	)		(327.9	)
Free Cash Flow	$	3,124.9		$	2,563.4

Free cash flow represents a non-GAAP measure. In contrast, our GAAP measures of cash flow consist of three components. These are cash flows provided by operating activities of $2,074.2 and $1,438.1 for the six months ended June 30, 2010 and 2009, respectively, cash used in investing activities of $2,348.1 and $865.2 for the six months ended June 30, 2010 and 2009, respectively, and net cash used in financing activities of $217.3 and net cash provided by financing activities of $1.9 for the six months ended June 30, 2010 and 2009, respectively.

All of the foregoing non-GAAP financial measures have limitations. Specifically, the non-GAAP financial measures that exclude the items noted above do not include all items of income and expense that affect EMC’s operations. Further, these non-GAAP financial measures are not prepared in accordance with GAAP, may not be comparable to non-GAAP financial measures used by other companies and do not reflect any benefit that such items may confer on EMC. Management compensates for these limitations by also considering EMC’s financial results as determined in accordance with GAAP.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K filed with the SEC on February 26, 2010. Our exposure to market risks has not changed materially from that set forth in our Annual Report.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are involved in a variety of claims, demands, suits, investigations, and proceedings, including those identified below, that arise from time to time relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, product liability, employment, benefits and securities matters. As required by authoritative guidance, we have estimated the amount of probable losses that may result from any such pending matters, and such amounts are reflected in our consolidated financial statements. These recorded amounts are not material to our consolidated financial position or results of operations. While it is not possible to predict the outcome of these matters with certainty, we do not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial condition. Because litigation is inherently unpredictable, however, the actual amounts of loss may prove to be larger or smaller than the amounts reflected in our consolidated financial statements, and we could incur judgments or enter into settlements of claims that could adversely affect our operating results or cash flows in a particular period.

United States ex rel. Rille and Roberts v. EMC Corporation. Effective as of May 4, 2010, EMC entered into a settlement agreement (the “Agreement”) with the United States of America, acting through the Civil Division of the Department of Justice (the “DoJ”). The Agreement relates to a previously disclosed “qui tam” action that followed an investigation conducted by the DoJ regarding (i) EMC’s fee arrangements with systems integrators and other partners in federal government transactions, and (ii) EMC’s compliance with the terms and conditions of certain agreements pursuant to which we sold products and services to the federal government, primarily a schedule agreement we entered into with the General Services Administration in November 1999. Pursuant to the Agreement, EMC paid the United States $87.5 million in the second quarter of 2010. In consideration of this payment, the United States released EMC with respect to the matters investigated and the claims alleged by the DoJ in the civil action. As set forth in the Agreement, EMC expressly denies any liability or wrongdoing in connection with such matters and claims, and the settlement represented a compromise to avoid the costs, distraction and uncertainty of continued litigation. As previously disclosed, EMC recorded an $87.5 million accrual for this contingency as of December 31, 2009.

Derivative Demand Letters. We have received three derivative demand letters sent on behalf of purported EMC shareholders. The letters contain allegations to the effect that the existence of the matter captionedUnited States ex rel. Rille and Roberts v. EMC Corporation constitutes evidence that certain EMC officers and directors failed to exercise due care and/or failed to oversee compliance with certain federal laws. The matters relating to the demand letters were referred to a Special Committee of independent directors of the Board of Directors, which investigated and made a determination regarding the allegations. At the conclusion of their investigation, the Special Committee determined in good faith that commencing or maintaining derivative proceedings based on the allegations would not be in the best interests of EMC. In October 2009, one of the purported shareholders filed a complaint in the Superior Court for Middlesex County in Massachusetts alleging claims for breach of fiduciary duty against EMC directors and certain officers based on the same allegations set forth in the demand letter. In May 2010, another purported shareholder filed a complaint in the same court making virtually identical allegations. We are defending these matters vigorously.

Item 1A. RISK FACTORS

The risk factors that appear below could materially affect our business, financial condition and results of operations. This description includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The risks and uncertainties described below are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies.

Our business could be materially adversely affected as a result of general economic and market conditions, including the current economic crisis.

We are subject to the effects of general global economic and market conditions. If these conditions remain uncertain or persist, spread or deteriorate further, our business, results of operations or financial condition could be materially adversely affected. In addition, the financial crisis in the banking sector and financial markets have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility 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, customer insolvencies, increased risk that customers may delay payments, fail to pay or default on credit extended to them, and counterparty failures negatively impacting our treasury operations, could have a material adverse effect on our results of operations or financial condition.

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Our business could be materially adversely affected as a result of a lessening demand in the information technology market.

Our revenue and profitability depend on the overall demand for our products and services. Delays or reductions in IT spending, domestically or internationally, could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.

Our customers operate in a variety of markets, including the financial services, credit and housing, automotive and construction markets. Any adverse effects to such markets could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.

Competitive pricing, sales volume, mix and component costs could materially adversely affect our revenues, gross margins and earnings.

Our gross margins are impacted by a variety of factors, including competitive pricing, component and product design costs as well as the volume and relative mixture of product and services revenues. Increased component costs, increased pricing pressures, the relative and varying rates of increases or decreases in component costs and product price, changes in product and services revenue mixture or decreased volume could have a material adverse effect on our revenues, gross margins or earnings.

The costs of third-party components comprise a significant portion of our product costs. While we generally have been able to manage our component and product design costs, we may have difficulty managing such costs if supplies of certain components become limited or component prices increase. Any such limitation could result in an increase in our component costs. An increase in component or design costs relative to our product prices could have a material adverse effect on our gross margins and earnings. Moreover, certain competitors may have advantages due to vertical integration of their supply chain, which may include disk drives, microprocessors, memory components and servers.

The markets in which we do business are highly competitive, and we may encounter aggressive price competition for all of our products and services from numerous companies globally. There also has been and may continue to be a willingness on the part of certain competitors to reduce prices or provide information infrastructure and virtual infrastructure products or services, together with other IT products or services, at minimal or no additional cost in order to preserve or gain market share. Such price competition may result in pressure on our product and service prices, and reductions in product and service prices may have a material adverse effect on our revenues, gross margins and earnings. We currently believe that pricing pressures will continue.

If our suppliers are not able to meet our requirements, we could have decreased revenues and earnings.

We purchase or license many sophisticated components and products from one or a limited number of qualified suppliers, including some of our competitors. These components and products include disk drives, high density memory components, power supplies and software developed and maintained by third parties. We have experienced delivery delays from time to time because of high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements. If any of our suppliers were to cancel or materially change contracts or commitments with us or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, be unable to develop or sell certain products cost-effectively or on a timely basis, if at all, and have significantly decreased quarterly revenues and earnings, which would have a material adverse effect on our business, results of operations and financial condition. Additionally, we periodically transition our product line to incorporate new technologies. The importance of transitioning our customers smoothly to new technologies, along with our historically uneven pattern of quarterly sales, intensifies the risk that the failure of a supplier to meet our quality or delivery requirements will have a material adverse impact on our revenues and earnings. The current economic crisis may also negatively affect our suppliers’ solvency, which could, in turn, result in product delays or otherwise materially adversely affect our business, results of operations or financial condition.

Our financial performance may be impacted by the financial performance of VMware.

Because we consolidate VMware’s financial results in our results of operations, our financial performance will be impacted by the financial performance of VMware. VMware’s financial performance may be affected by a number of factors, including, but not limited to:

• general economic conditions in their domestic and international markets;

• fluctuations in demand, adoption rates, sales cycles and pricing levels for VMware’s products and services;

• fluctuations in foreign currency exchange rates;

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• changes in customers’ budgets for information technology purchases and in the timing of their purchasing decisions;

• VMware’s ability to compete with existing or increased competition;

• the timing of recognizing revenues in any given quarter, which, as a result of software revenue recognition policies, can be affected by a number of factors, including product announcements and beta programs;

• the sale of VMware’s products in the timeframes anticipated, including the number and size of orders in each quarter;

• VMware’s ability to develop, introduce and ship in a timely manner new products and product enhancements that meet customer demand, certification requirements and technical requirements;

• the timing of the announcement or release of upgrades or new products by VMware or by its competitors;

• VMware’s ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions;

• VMware’s ability to control costs, including its operating expenses;

• changes to VMware’s effective tax rate;

• the increasing scale of VMware’s business and its effect on VMware’s ability to maintain historical rates of growth;

• VMware’s ability to attract and retain highly skilled employees, particularly those with relevant experience in software development and sales;

• VMware’s ability to conform to emerging industry standards and to technological developments by its competitors and customers;

• renewal rates for enterprise license agreements, or ELA’s, held by VMware’s customers as original ELA terms expire;

• the timing and amount of capitalized software development costs beginning when technological feasibility has been established and ending when the product is available for general release; and

• the recoverability of benefits from goodwill and intangible assets and the potential impairment of these assets.

Our stock price is volatile and may be affected by the trading price of VMware Class A common stock and/or speculation about the possibility of future actions we might take in connection with our VMware stock ownership.

Our stock price, like that of other technology companies, is subject to significant volatility because of factors such as:

• the announcement of acquisitions, new products, services or technological innovations by us or our competitors;

• quarterly variations in our operating results;

• changes in revenue or earnings estimates by the investment community; and

• speculation in the press or investment community.

The trading price of our common stock has been and likely will continue to be affected by various factors related to VMware, including:

• the trading price for VMware Class A common stock;

• actions taken or statements made by us, VMware, or others concerning the potential separation of VMware from us, including by spin-off, split-off or sale; and

• factors impacting the financial performance of VMware, including those discussed in the prior risk factor.

In addition, although we own a majority of VMware and consolidate their results, our stock price may not reflect our pro rata ownership interest of VMware.

We may be unable to keep pace with rapid industry, technological and market changes.

The markets in which we compete are characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing needs of customers. There can be no assurance that our existing products will be properly positioned in the market or that we will be able to introduce new or enhanced products into the market on a timely basis, or at all.

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We spend a considerable amount of money on research and development and introduce new products from time to time. There can be no assurance that enhancements to existing products and solutions or new products and solutions will receive customer acceptance. As competition in the IT industry increases, it may become increasingly difficult for us to maintain a technological advantage and to leverage that advantage toward increased revenues and profits.

Risks associated with the development and introduction of new products include delays in development and changes in data storage, networking virtualization, infrastructure management, information security and operating system technologies which could require us to modify existing products. Risks inherent in the transition to new products include:

• the difficulty in forecasting customer preferences or demand accurately;

• the inability to expand production capacity to meet demand for new products;

• the impact of customers’ demand for new products on the products being replaced, thereby causing a decline in sales of existing products and an excessive, obsolete supply of inventory; and

• delays in initial shipments of new products.

Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors, competitors’ responses to the introductions and the desire by customers to evaluate new products for extended periods of time. Our failure to introduce new or enhanced products on a timely basis, keep pace with rapid industry, technological or market changes or effectively manage the transitions to new products or new technologies could have a material adverse effect on our business, results of operations or financial condition.

The markets we serve are highly competitive and we may be unable to compete effectively.

We compete with many companies in the markets we serve, certain of which offer a broad spectrum of IT products and services and others which offer specific 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 to customers and greater opportunity to address customers’ various IT requirements than us. In addition, as the IT industry consolidates, companies may improve their competitive position and ability to compete against us. We compete on the basis of our products’ features, performance and price as well as our services. Our failure to compete on any of these bases could affect demand for our products or services, which could have a material adverse effect on our business, results of operations or financial condition.

Companies may develop new technologies or products in advance of us or establish business models or technologies disruptive to us. Our business may be materially adversely affected by the announcement or introduction of new products, including hardware and software products and services by our competitors, and the implementation of effective marketing or sales strategies by our competitors. The material adverse effect to our business could include a decrease in demand for our products and services and an increase in the length of our sales cycle due to customers taking longer to compare products and services and to complete their purchases.

We may have difficulty managing operations.

Our future operating results will depend on our overall ability to manage operations, which includes, among other things:

• retaining and hiring, as required, the appropriate number of qualified employees;

• managing, protecting and enhancing, as appropriate, our infrastructure, including but not limited to, our information systems (and such systems’ ability to protect confidential information residing on the systems) and internal controls;

• 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 expenses;

• managing our manufacturing capacity, real estate facilities and other assets; and

• executing on our plans.

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An unexpected decline in revenues without a corresponding and timely reduction in expenses or a failure to manage other aspects of our operations could have a material adverse effect on our business, results of operations or financial condition.

Our investment portfolio could experience a decline in market value which could adversely affect our financial results.

We held $4.6 billion in short and long-term investments as of June 30, 2010. The investments are invested primarily in investment grade debt securities, and we limit the amount of investment with any one issuer. A further deterioration in the economy, including a continuing credit crisis, increased defaults by issuers, or significant volatility in interest rates, could cause the investments to decline in value or could impact the liquidity of the portfolio. If market conditions deteriorate significantly, our results of operations or financial condition could be materially adversely affected.

Our business may suffer if we are unable to retain or attract key personnel.

Our business depends to a significant extent on the continued service of senior management and other key employees, the development of additional management personnel and the hiring of new qualified employees. There can be no assurance that we will be successful in retaining existing personnel or recruiting new personnel. The loss of one or more key or other employees, our inability to attract additional qualified employees or the delay in hiring key personnel could have a material adverse effect on our business, results of operations or financial condition.

Our quarterly revenues and earnings could be materially adversely affected by uneven sales patterns and changing purchasing behaviors.

Our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter’s total sales occur in the last month and weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each financial period especially difficult and uncertain and increases the risk of unanticipated variations in quarterly results and financial condition. We believe this uneven sales pattern is a result of many factors including:

• the relative dollar amount of our product and services offerings in relation to many of our customers’ budgets, resulting in long lead times for customers’ budgetary approval, which tends to be given late in a quarter;

• the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more competitors seeking their business;

• the fourth quarter influence of customers’ spending their remaining capital budget authorization prior to new budget constraints in the first nine months of the following year; and

• seasonal influences.

Our uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity or our supply chain accordingly. If predicted demand is substantially greater than orders, there will be excess inventory. Alternatively, if orders substantially exceed predicted demand, the ability to assemble, test and ship orders received in the last weeks and days of each quarter may be limited, which could materially adversely affect quarterly revenues and earnings.

In addition, our revenues in any quarter are substantially dependent on orders booked and shipped in that quarter and our backlog at any particular time is not necessarily indicative of future sales levels. This is because:

• we assemble our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers;

• we generally ship products shortly after receipt of the order; and

• customers may generally reschedule or cancel orders with little or no penalty.

Loss of infrastructure, due to factors such as an information systems failure, loss of public utilities, natural disasters or extreme weather conditions, could impact our ability to ship products in a timely manner. Delays in product shipping or an unexpected decline in revenues without a corresponding and timely slowdown in expenses, could intensify the impact of these factors on our business, results of operations and financial condition.

In addition, unanticipated changes in our customers’ purchasing behaviors such as customers taking longer to negotiate and complete their purchases or making smaller, incremental purchases based on their current needs, also make the prediction of revenues, earnings and working capital for each financial period difficult and uncertain and increase the risk of unanticipated variations in our quarterly results and financial condition.

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Risks associated with our distribution channels may materially adversely affect our 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 from such distribution channels. Our financial results could be materially adversely affected if our contracts with channel partners were terminated, if our relationship with channel partners were to deteriorate, if the financial condition of our channel partners were to weaken, if our channel partners are not able to timely and effectively implement their planned actions or if the level of demand for our channel partners’ products and services decreases. In addition, as our market opportunities change, we may have an increased reliance on channel partners, which may negatively impact our gross margins. There can be no assurance that we will be successful in maintaining or expanding these channels. If we are not successful, we may lose sales opportunities, customers and market share. Furthermore, the partial reliance on channel partners may materially reduce the visibility to our management of potential customers and demand for products and services, thereby making it more difficult to accurately forecast such demand. In addition, there can be no assurance that our channel partners will not develop, market or sell products or services or acquire other companies that develop, market or sell products or services in competition with us in the future.

In addition, as we focus on new market opportunities and additional customers through our various distribution channels, including small-to-medium sized businesses, we may be required to provide different levels of service and support than we typically provided in the past. We may have difficulty managing directly or indirectly through our channels these different service and support requirements and may be required to incur substantial costs to provide such services which may adversely affect our business, results of operations or financial condition.

Due to the international nature of our business, changes in foreign conditions or other factors could impair our international operations, future revenue or financial condition.

A substantial portion of our revenues is derived from sales outside the United States. In addition, a substantial portion of our products is manufactured outside of the United States. Accordingly, our future results could be materially adversely affected by a variety of factors, including changes in foreign currency exchange rates, changes in a specific country’s or region’s political or economic conditions, trade restrictions, import or export licensing requirements, the overlap of different tax structures or changes in international tax laws, changes in regulatory requirements, compliance with a variety of foreign laws and regulations and longer payment cycles in certain countries. In addition, we hold a significant portion of our cash and investments in our international subsidiaries. Potential regulations could impact our ability to transfer the cash and investments to the United States. Additionally, should we desire to repatriate cash, we may incur a significant tax obligation.

We operate a Venezuelan sales subsidiary in which the Bolivar is the functional currency. Due to limitations in accessing the dollar at the official exchange rate, we have utilized the “System for Transactions in Foreign Currency Securities” or SITME rate, which is the available market rate in the country to translate the foreign currency denominated balance sheet. Our operations in Venezuela include U.S. dollar-denominated assets and liabilities which we remeasure to Bolivars. The remeasurement may result in transaction gains or losses. We have used either the official exchange rate or the parallel exchange rate to remeasure these balances based upon the expected rate at which we believe the items will be settled. As a result of continued hyper-inflation in Venezuela, effective in 2010, we have modified the functional currency to be the U.S. dollar. As a result of this change, Bolivar-denominated transactions will be subject to exchange gains and losses that may impact our earnings. While we do not believe this change will have a material impact on our financial position, results of operations or cash flows, these items could be adversely affected if there is a significant change in exchange rates.

Undetected problems in our products could directly impair our financial results.

If flaws in design, production, assembly or testing of our products (by us or our suppliers) were to occur, we could experience a rate of failure in our products that would result in substantial repair, replacement or service costs and potential damage to our reputation. Continued improvement in manufacturing capabilities, control of material and manufacturing quality and costs and product testing are critical factors in our future growth. There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our products will be sufficient to permit us to avoid a rate of failure in our products that results in substantial delays in shipment, significant repair or replacement costs or potential damage to our reputation, any of which could have a material adverse effect on our business, results of operations or financial condition.

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Our business could be materially adversely affected as a result of the risks associated with alliances.

We have alliances with leading information technology companies and we plan to continue our strategy of developing key alliances in order to expand our reach into markets. There can be no assurance that we will be successful in our ongoing strategic alliances or that we will be able to find further suitable business relationships as we develop new products and strategies. Any failure to continue or expand such relationships could have a material adverse effect on our business, results of operations or financial condition.

There can be no assurance that companies with which we have strategic alliances, certain of which have substantially greater financial, marketing or technological resources than us, will not develop or market products in competition with us in the future, discontinue their alliances with us or form alliances with our competitors.

Our business may suffer if we cannot protect our intellectual property.

We generally rely upon patent, copyright, trademark and trade secret laws and contract rights in the United States and in other countries to establish and maintain our proprietary rights in our technology and products. However, there can be no assurance that any of our proprietary rights will not be challenged, invalidated or circumvented. In addition, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Therefore, there can be no assurance that we will be able to adequately protect our proprietary technology against unauthorized third-party copying or use, which could adversely affect our competitive position. Further, there can be no assurance that we will be able to obtain licenses to any technology that we may require to conduct our business or that, if obtainable, such technology can be licensed at a reasonable cost.

From time to time, we receive notices from third parties claiming infringement by our products of third-party patent or other intellectual property rights. Responding to any such claim, regardless of its merit, could be time-consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. In the event there is a temporary or permanent injunction entered prohibiting us from marketing or selling certain of our products or a successful claim of infringement against us requiring us to pay royalties to a third party, and we fail to develop or license a substitute technology, our business, results of operations or financial condition could be materially adversely affected.

We may become involved in litigation that may materially adversely affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, 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 incur significant expenses. Furthermore, because litigation is inherently unpredictable, there can be no assurance that the results of any of these actions will not have a material adverse effect on our business, results of operations or financial condition.

We may have exposure to additional income tax liabilities.

As a multinational corporation, we are subject to income taxes in both the United States and various foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file and changes to tax laws. From time to time, we are subject to income tax audits. While we believe we have complied with all applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. Should we be assessed with additional taxes, there could be a material adverse effect on our results of operations or financial condition.

The renewal of the U.S. research and development tax credit which benefited our tax rate in 2009 is uncertain from year to year. It currently is repealed for 2010.

In April 2010, the IRS released a draft of Schedule UTP, Uncertain Tax Positions Statement. The schedule is an annual disclosure of certain UTPs, inclusive of concise descriptions and rationales for each, and the maximum exposure thereon. If implemented, such proposal could increase the amount of taxes paid.

In February 2010, President Obama, as part of the Administration’s FY 2011 budget, proposed changing certain of the U.S. tax rules for U.S. corporations doing business outside the United States. The proposed changes include limiting the ability of U.S.

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corporations to deduct certain expenses attributable to offshore earnings, modifying the foreign tax credit rules and taxing currently certain transfers of intangibles offshore. Although the scope of the proposed changes is unclear, it is possible that these or other changes in the U.S. tax laws could increase the Company’s effective tax rate and adversely affect our profitability. We will continue to monitor the status of these proposals.

Changes in regulations could materially adversely affect us.

Our business, results of operations or financial condition could be materially adversely affected if laws, regulations or standards relating to us or our products are newly implemented or changed. In addition, our compliance with existing regulations may have a material adverse impact on us. Under applicable federal securities laws, including the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal control structure and procedures for financial reporting. Should we or our independent auditors determine that we have material weaknesses in our internal controls, our results of operations or financial condition may be materially adversely affected or our stock price may decline. In March 2010, President Obama signed into law a comprehensive health care reform package. We cannot currently determine the impact that such legislation could have on our business, results of operations or financial condition.

Changes in generally accepted accounting principles may adversely affect us.

From time to time, the Financial Accounting Standards Board (“FASB”) promulgates new accounting principles that could have a material adverse impact on our results of operations or financial condition. The FASB is currently contemplating a number of new accounting pronouncements which, if approved, could materially change our reported results. Such changes could have a material adverse impact on our results of operations and financial position.

Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.

As part of our business strategy, we seek to acquire businesses that offer complementary products, services or technologies. These acquisitions are accompanied by the risks commonly encountered in an acquisition of a business, which may include, among other things:

• the effect of the acquisition on our financial and strategic position and reputation;

• the failure of an acquired business to further our strategies;

• the failure of the acquisition to result in expected benefits, which may include benefits relating to enhanced revenues, technology, human resources, cost savings, operating efficiencies and other synergies;

• the difficulty and cost of integrating the acquired business, including costs and delays in implementing common systems and procedures and costs and delays caused by communication difficulties or geographic distances between the two companies’ sites;

• the assumption of liabilities of the acquired business, including litigation-related liability;

• the potential impairment of acquired assets;

• the lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners;

• the diversion of our management’s attention from other business concerns;

• the impairment of relationships with customers or suppliers of the acquired business or our customers or suppliers;

• the potential loss of key employees of the acquired company; and

• the potential incompatibility of business cultures.

These factors could have a material adverse effect on our business, results of operations or financial condition. To the extent that we issue shares of our common stock or other rights to purchase our common stock in connection with any future acquisition, existing shareholders may experience dilution. Additionally, regardless of the form of consideration issued, acquisitions could negatively impact our net income and our earnings per share.

In addition to the risks commonly encountered in the acquisition of a business as described above, we may also experience risks relating to the challenges and costs of closing a transaction. Further, the risks described above may be exacerbated as a result of managing multiple acquisitions at the same time.

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We also seek to invest in businesses that offer complementary products, services or technologies. These investments are accompanied by risks similar to those encountered in an acquisition of a business.

Our pension plan assets are subject to market volatility.

We have a noncontributory defined benefit pension plan assumed as part of our Data General acquisition. The plan’s assets are invested in common stocks, bonds and cash. The expected long-term rate of return on the plans’ assets is 8.25%. This rate represents the average of the expected long-term rates of return weighted by the plan’s assets as of December 31, 2009. As of December 31, 2009, the ten-year historical rate of return on plan assets was 2.8%, and the inception to date return on plan assets was 9.7%. In 2009, we experienced a 25.1% gain on plan assets. Given current market conditions, should we not achieve the expected rate of return on our plans’ assets or if our plans experience a decline in the fair value of their assets, we may be required to contribute assets to the plans which could materially adversely affect our results of operations or financial condition.

Our business could be materially adversely affected by changes in regulations or standards regarding energy use of our products.

We continually seek ways to increase the energy efficiency of our products. Recent analyses have estimated the amount of global carbon emissions that are due to information technology products. As a result, governmental and non-governmental organizations have turned their attention to development of regulations and standards to drive technological improvements and reduce such amount of carbon emissions. There is a risk that the rush to development of these standards will not fully address the complexity of the technology developed by the IT industry or will favor certain technological approaches. Depending on the regulations or standards that are ultimately adopted, compliance could adversely affect our business, results of operations or financial condition.

Our business could be materially adversely affected as a result of war or acts of terrorism.

Terrorist acts or acts of war may cause damage or disruption to our employees, facilities, customers, partners, suppliers, distributors and resellers, which could have a material adverse effect on our business, results of operations or financial condition. Such conflicts may also cause damage or disruption to transportation and communication systems and to our ability to manage logistics in such an environment, including receipt of components and distribution of products.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES IN THE SECOND QUARTER OF 2010

Period	Total Number  of Shares Purchased(1)		Average Price Paid per  Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2010 – April 30, 2010	1,301,857		$	19.37	1,300,000	177,010,131
May 1, 2010 – May 31, 2010	17,415,347		$	18.30	17,268,406	159,741,725
June 1, 2010 – June 30, 2010	581,884		$	18.07	—	159,741,725
Total	19,299,088	(2)	$	18.36	18,568,406	159,741,725

(1) Except as noted in note (2), all shares were purchased in open-market transactions pursuant to our previously announced authorization by our Board of Directors in April 2008 to repurchase 250.0 million shares of our common stock. This repurchase authorization does not have a fixed termination date.

(2) Includes an aggregate of 730,682 shares withheld from employees for the payment of taxes.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. RESERVED

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

(a) Exhibits

See index to Exhibits on page 47 of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EMC CORPORATION
Date: August 9, 2010	By:	/s/ DAVID I. GOULDEN
		David I. Goulden
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

3.1	Restated Articles of Organization of EMC Corporation. (1)
3.2	Amended and Restated Bylaws of EMC Corporation. (2)
4.1	Form of Stock Certificate. (3)
31.1	Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
31.2	Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
101.INS*	XBRL Instance Document. (filed herewith)
101.SCH*	XBRL Taxonomy Extension Schema. (filed herewith)
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase. (filed herewith)
101.DEF*	XBRL Taxonomy Extension Definition Linkbase. (filed herewith)
101.LAB*	XBRL Taxonomy Extension Label Linkbase. (filed herewith)
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase. (filed herewith)

* Pursuant to Rule 406T of Regulation S-T, these interactive data files shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

(1) Incorporated by reference to EMC Corporation’s Annual Report on Form 10-K filed February 27, 2009 (No. 1-9853).

(2) Incorporated by reference to EMC Corporation’s Quarterly Report on Form 10-Q filed August 5, 2009 (No. 1-9853).

(3) Incorporated by reference to EMC Corporation’s Annual Report on Form 10-K filed February 29, 2008 (No. 1-9853).

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