EMC Q4 & FY 2004 Financial Results Tony Takazawa Director, Global Investor Relations January 25, 2005

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1 EMC Q4 & FY 2004 Financial Results Tony Takazawa Director, Global Investor Relations January 25,

2 Forward-Looking Statements This presentation contains forward-looking statements as defined under the Federal Securities Laws. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in information technology spending; (iii) risks associated with acquisitions and investments, including the challenges and costs of integration, restructuring and achieving anticipated synergies; (iv) competitive factors, including but not limited to pricing pressures and new product introductions; (v) the relative and varying rates of product price and component cost declines and the volume and mixture of product and services revenues; (vi) component and product quality and availability; (vii) the transition to new products, the uncertainty of customer acceptance of new product offerings and rapid technological and market change; (viii) insufficient, excess or obsolete inventory; (ix) war or acts of terrorism; (x) the ability to attract and retain highly qualified employees; (xi) fluctuating currency exchange rates; and (xii) other one-time events and other important factors disclosed previously and from time to time in EMC s filings with the U.S. Securities and Exchange Commission. EMC disclaims any obligation to update any such forward-looking statements after the date of this presentation. This presentation and certain of the slides may contain information that is not prepared in accordance with generally accepted accounting principles ( GAAP ). If any historical non-gaap financial measures are presented, a reconciliation of these GAAP and non-gaap measures is included within these slides. 2

3 Agenda Q4 and FY2004 Earnings Highlights Tony Takazawa, Director, Global Investor Relations Q4 and FY2004 Financial Results and Outlook Bill Teuber, Executive Vice President & CFO CEO Commentary Joe Tucci, President & CEO Questions & Answers 3

4 EMC Q Results Revenues of $2.358B, up 27% vs. Q Net income of $321M EPS of $ 0.13 (per diluted share) ~2.5% Y/Y currency impact on consolidated revenues 4

5 EMC FY 2004 Results Revenues of $8.229B, up 32% vs Net income of $871M, up 76% vs EPS of $ 0.36 (per diluted share) 5

6 Q Revenue By Type ($ in millions) Q4 FY2004 Q4 FY2003 Y/Y Change % Total Systems $1,097 $957 15% 47% Software % 27% Services % 26% Subtotal Revenue 2,345 1,840 27% 100% Other Revenue (44%) 0% Total Consolidated Revenue $2,358 $1,863 27% 100% Totals may not foot and may not agree to other schedules due to rounding 6

7 Q Revenues by Geography Revenues (millions) Y/Y Growth % Total North America $1,342 27% 57% International $1,016 26% 43% EMEA $699 33% 30% APJK $251 13% 10% LA $66 22% 3% Totals may not foot and may not agree to other schedules due to rounding 7

8 Expense and Margins Gross Margin was $1.236B, 52.4% of revenues SG&A was $626M, 26.5% of revenues R&D was $222M, 9.4% of revenues 8

9 Other Items D&A was $185M CapEx was $112M 9

10 Balance Sheet Cash and investments were $7.441B Days Sales Outstanding (DSO) was 45 days Inventory turns were

11 CFO Commentary Bill Teuber Executive Vice President & CFO 11

12 Highlights Outstanding Q4, with records set across EMC Balance Sheet stronger than ever All-time high cash position from strong cash flow Q4 Revenues of $2,358M Strength across acquisitions, geographies and products Q4 EPS of $ 0.13 (per diluted share) 12

13 Q4 04 Impact of Special Items Q Actual Q Restructuring (net of tax) Q Tax Benefit Q Adjusted Net Income $320.5M $20.7M ($20.0)M $321.2M EPS (diluted) $0.13 $

14 FY 2004: Exceeded Financial Goals for the Year Actual Target Revenue Net Income Q1 Charge Adjusted Net Income $8.23B $871M $25M $896M $8.1B $850M* *excluding $25M charge in Q1 14

15 Q4 Operating Margin as a % of Revenue GAAP Restructuring Adjusted Revenue $2.358B $2.358B Operating Income $364M $23M $387M % of Total revenue 15.4% 16.4% 15

16 Q4 EMC Y/Y Growth Rates Consolidated Growth Apples to Apples * Growth EMC Core Growth 27% 21% 19% *Revenue comparison assuming all acquisitions included in both periods 16

17 Financial Results Detail Individual Revenue Streams Results in Major Geographies Factors impacting Gross and Operating Margins Highlights from Balance Sheet Expectations for Q1 and FY

18 Symmetrix Product Revenue* Revenue was $755M, up 3% Y/Y FY 2004 revenue was $2.72B, up 7% Y/Y Gained high-end share *Includes Symmetrix hardware, software, and upgrades 18

19 CLARiiON Product Revenue* Revenue was $393M, up 46% Y/Y Strong performance from CLARiiON Disk Library Balanced growth across geographies and channel partners FY 2004 revenue was $1.36B, up 44% Y/Y *Includes CLARiiON hardware, software, and upgrades 19

20 Connectivity Revenue* Revenue was $192M, up 19% Y/Y NAS rate of growth over 30% Strong acceptance of NS-G gateway products Connectrix port count grew in the high 30% range Y/Y *Includes switching products sold as Connectrix and Celerra, excluding disk revenue 20

21 Centera Revenue Centera product line grew nearly 50% Y/Y 250 new customers Enterprise Archive infrastructure of choice in financial services, medical, government and manufacturing verticals 21

22 Platform Software License Revenue* Revenue was $319M, up 27% Y/Y Revenue growth rate a blend across Symmetrix, CLARiiON, Celerra and Centera platforms Strength in CLARiiON management software and Symmetrix and CLARiiON replication software *Includes license revenue from software products that only work with EMC arrays 22

23 Revenue From Legato and Documentum Revenue streams for acquired companies Legato and Documentum based on historical product lines Revenue streams do not reflect current Go-To-Market approach 23

24 Legato Revenue* Revenue was $103M, up 19% Y/Y License revenue up 21% Y/Y Led by NetWorker backup software Service revenue up 17% Y/Y FY 2004 revenue was $363M, up 14% Y/Y *Includes Legato product and services, including revenue from historical product lines 24

25 Documentum Revenue* Revenue was $100M, up 25% Y/Y License revenue up 29% Y/Y Added 100 new customers in Q4 Service revenue up 21% Y/Y FY 2004 revenue was $345M, up 19% Y/Y *Includes Documentum product and services, including revenue from historical product lines 25

26 Core Multi-Platform License Software* Revenues were $160M, up 25% Y/Y Strong performances by VisualSRM, SAN Manager, and Automated Resource Manager (ARM) FY 2004 revenue was $565M, up 25% Y/Y *Includes license revenue from software products that operate in EMC and non-emc environments 26

27 Results from EMC Software Group EMC Software Group (ESG) revenues include: Core EMC Multi-Platform software license revenues and related software maintenance revenues Legato software license and services revenues Documentum software license and services revenues Dantz software license and service revenues ESG Q4 Revenues were $410M Up 23% Y/Y on an apples-to-apples basis 27

28 VMware Revenue* Revenue was $71M Revenue up more than 150% Y/Y Growth driven by both desktop and enterprise products Announced key strategic partnership with Oracle to drive VMware into 10g environments FY 2004 revenue was $220M, up nearly 200% Y/Y *Includes VMware product and services, including revenue from historical product lines 28

29 Overall License and Maintenance Software Revenue* SW License Revenues $637M SW Maintenance Revenues $225M Total Software Revenues $862M License and Maintenance Revenues = 37% Total Q4 Revenues *Includes license and maintenance revenue from EMC Platform Software, EMC Multi-Platform Software, Legato, Documentum, VMware, and Dantz 29

30 Q Revenues by Geography Revenues (millions) Y/Y Growth Y/Y Growth (ex. acquisitions) North America $1,342 27% 18% International $1,016 26% 19% EMEA $699 33% 24% APJK $251 13% 9% LA $66 22% 17% 30

31 Margins for Q Operating Margin was 15.4% Excluding restructuring charge, Operating Margin was 16.4% Gross Margins were 52.4% Up 100 bps from Q

32 Gross Margin Analysis Q3 04 Gross Margin 51.4% Volume effect Mix Price/Cost/Other ~200 bps ~20 bps ~(120) bps Total ~100 bps Q4 04 Gross Margin 52.4% 32

33 Operating Expenses Q (millions) Q (% of total revenues) Q/Q Change (bps) FY 2004 (% of total revenues) FY 2003 (% of total revenues) SG&A $ % -100bps 27.5% 26.6% R&D $ % -120bps 10.3% 11.5% 33

34 Q4 FY2004 Charges Q4 charge of $23M Includes workforce realignment, true-up of previous charges, and IP R&D from Dantz acquisition 34

35 Q Tax Rate Reconciliation Actuals Q4 Tax Provision - Normalized Amount $117.2M Tax Rate 27.5% Adjustments Q1 Q3 Rate Reduction Exposure Reversal Tax Benefit from Q4 Restructuring Q Actual Tax Provision ($12.1)M ($20.0)M ($2.7)M $82.4M 20.5% 35

36 Q Balance Sheet Highlights Cash and Investments were $7.441B Up $406M from Q3 $128M spent to buy back 9.5M shares in Q4 FY 2004 share buyback was 46.6M shares, for a total cost of $546M 36

37 EMC Outlook 37

38 Q Outlook Revenue of $2.23B to $2.25B Fully diluted EPS of $0.10 to $0.11 Revenue outlook reflects typical Q4 to Q1 seasonality Additional revenue from SMARTS will somewhat offset seasonality impact 38

39 FY 2005 Outlook Top priorities are: Growth Market Share Operating Margins FY 2005 consolidated revenue growth to be approximately twice the market rate Current market growth estimated to be 7% - 8% SMARTS acquisition will be additive High-teens Operating Margins exiting FY 2005 Certain forward-looking numbers may constitute non-gaap financial measures due to the exclusion of the impact of expensing of stock options under FAS 123R, which will be effective for fiscal quarters after June 15, EMC is unable to provide a quantitative reconciliation of such forward-looking measures to GAAP because EMC is currently in the process of assessing its implementation of FAS 123R and, therefore, the amount of stock option expense is unknown at this time. However, expensing of stock options would increase expenses, including cost of product sales, cost of services, research and development expenses, and selling, general and administrative expenses, would decrease gross margins, operating income, net income and diluted earnings per share, and would affect the income tax rate. 39

40 FY 2005 Outlook Factors Influencing Operating Margins 1. Gross Margins Full-Year Gross Margins expected to be around 52% Gross Margins to ebb and flow with revenue throughout the year Q1 Gross Margins could be lower than Q Factors Affecting Gross Margins International Investments Competitive Pressures Supply Chain Certain forward-looking numbers may constitute non-gaap financial measures due to the exclusion of the impact of expensing of stock options under FAS 123R, which will be effective for fiscal quarters after June 15, EMC is unable to provide a quantitative reconciliation of such forward-looking measures to GAAP because EMC is currently in the process of assessing its implementation of FAS 123R and, therefore, the amount of stock option expense is unknown at this time. However, expensing of stock options would increase expenses, including cost of product sales, cost of services, research and development expenses, and selling, general and administrative expenses, would decrease gross margins, operating income, net income and diluted earnings per share, and would affect the income tax rate. 40

41 FY 2005 Outlook Factors Influencing Operating Margins 2. Operating Expenses Full-Year Operating Expenses are expected to be in range of 35.5% to 37.0% High-end of range is lower than 2004 Operating Expenses of 37.8% Certain forward-looking numbers may constitute non-gaap financial measures due to the exclusion of the impact of expensing of stock options under FAS 123R, which will be effective for fiscal quarters after June 15, EMC is unable to provide a quantitative reconciliation of such forward-looking measures to GAAP because EMC is currently in the process of assessing its implementation of FAS 123R and, therefore, the amount of stock option expense is unknown at this time. However, expensing of stock options would increase expenses, including cost of product sales, cost of services, research and development expenses, and selling, general and administrative expenses, would decrease gross margins, operating income, net income and diluted earnings per share, and would affect the income tax rate. 41

42 FY 2005 Outlook Taxes and Share Count Expectations Tax Rate Full-Year 2005 tax rate expected to be around 28% Share Count Share count throughout 2005 will depend on average quarterly share price and impact of buyback program Ended FY 2004 with 2.446B diluted shares: a good place to start Certain forward-looking numbers may constitute non-gaap financial measures due to the exclusion of the impact of expensing of stock options under FAS 123R, which will be effective for fiscal quarters after June 15, EMC is unable to provide a quantitative reconciliation of such forward-looking measures to GAAP because EMC is currently in the process of assessing its implementation of FAS 123R and, therefore, the amount of stock option expense is unknown at this time. However, expensing of stock options would increase expenses, including cost of product sales, cost of services, research and development expenses, and selling, general and administrative expenses, would decrease gross margins, operating income, net income and diluted earnings per share, and would affect the income tax rate. 42

43 FY 2005 Outlook EPS Expectations FY 2005 Fully Diluted EPS expected to be between $0.47 and $0.51 Certain forward-looking numbers may constitute non-gaap financial measures due to the exclusion of the impact of expensing of stock options under FAS 123R, which will be effective for fiscal quarters after June 15, EMC is unable to provide a quantitative reconciliation of such forward-looking measures to GAAP because EMC is currently in the process of assessing its implementation of FAS 123R and, therefore, the amount of stock option expense is unknown at this time. However, expensing of stock options would increase expenses, including cost of product sales, cost of services, research and development expenses, and selling, general and administrative expenses, would decrease gross margins, operating income, net income and diluted earnings per share, and would affect the income tax rate. 43

44 CEO Commentary Joe Tucci President & CEO 44

45 2004: A Year of Balance Across hardware, software and services Across geographies Across the new members of the EMC family Legato, Documentum and VMware had record years 45

46 EMC is Well Positioned for 2005 ILM strategy is being well received by customers and the market VMware subsidiary rocking IT with its virtual infrastructure strategy 46

47 Outlook for 2005 Environment IT growth 4-5% Storage and Information Management growth 7-8% Terabytes stored on Disk Arrays growth >70% Virtual Infrastructure growth >75% Network Management growth >10% 47

48 EMC s Market Opportunity Market Size ~$42B Market Includes: External Storage SAN Connectivity Storage mgmt software Information mgmt software Backup and Archive Storage Services (excludes TPM) Market Size ~$47B Market Includes: External Storage SAN Connectivity Storage Mgmt Software Information Mgmt Software Backup and Archive Storage Services (excludes TPM) Content Mgmt Software Server Virtualization Share ~15% Share ~17% 04 & 05 Growth: 7-8% Sources: IDC, Gartner, EMC estimates 48

49 A Big Market Opportunity Once Again 2005 Market ~$51B Market Includes: External Storage SAN Connectivity Storage Mgmt Software Information Mgmt Software Backup and Archive Storage Services (excludes TPM) Content Mgmt Software Server Virtualization Network Mgmt Software 04 and 05 growth: 7%-8% EMC Expected Share ~19% Sources: IDC, Gartner, EMC estimates 49

50 Customer Needs Guide Our Actions Customers Want: Close the Information Growth Gap Continuous Uptime World-class Service and Support Reduce Complexity Fewer, Larger, Best of Breed Vendors Our actions are consistent with what customers want ILM Virtual Infrastructure Focus on Total Customer Experience (TCE) 50

51 Competitive Environment HDS IBM Network Appliance Veritas / Symantec 51

52 Our Strategy and Execution are Paying Off Successful transition over last few years From Turnaround to Transformation to Growth Mode Innovation engine more productive than ever Solidified EMC s core storage market Expanded into new markets through acquisitions Customers responding very positively Well positioned for the future 52

53 Q&A 53