Quarterly Report (10-q)

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 September 30, 2015



o	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 (Address of principal executive offices)		01748 (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 o

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 o

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 o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of September 30, 2015 was 1,938,837,339.

Table of Contents

EMC CORPORATION



	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at September 30, 2015 and December 31, 2014	3
Consolidated Income Statements for the Three and Nine Months Ended September 30, 2015 and 2014	4
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014	5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	6
Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2015 and 2014	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	54
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	55
Item 1A. Risk Factors	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. Defaults Upon Senior Securities	66
Item 4. Mine Safety Disclosures	66
Item 5. Other Information	66
Item 6. Exhibits	66
SIGNATURES	67
EXHIBIT INDEX	68

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.

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PART I

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

EMC CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(unaudited)



	September 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	5,324		$	6,343
Short-term investments	2,318			1,978
Accounts and notes receivable, less allowance for doubtful accounts of $87 and $72	3,134			4,413
Inventories	1,224			1,276
Deferred income taxes	1,088			1,070
Other current assets	649			653
Total current assets	13,737			15,733
Long-term investments	6,642			6,334
Property, plant and equipment, net	3,791			3,766
Intangible assets, net	2,239			2,125
Goodwill	17,083			16,134
Other assets, net	1,853			1,767
Total assets	$	45,345		$	45,859
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,115		$	1,696
Accrued expenses	2,831			3,141
Income taxes payable	208			852
Short-term debt (See Note 4)	1,970			—
Deferred revenue	6,187			6,021
Total current liabilities	12,311			11,710
Income taxes payable	380			306
Deferred revenue	4,436			4,144
Deferred income taxes	317			274
Long-term debt (See Note 4)	5,474			5,469
Other liabilities	472			431
Total liabilities	23,390			22,334
Commitments and contingencies (See Note 13)
Shareholders’ equity:
Preferred stock, par value $0.01; authorized 25 shares; none outstanding	—			—
Common stock, par value $0.01; authorized 6,000 shares; issued and outstanding 1,939 and 1,985 shares	19			20
Additional paid-in capital	—			—
Retained earnings	20,958			22,242
Accumulated other comprehensive loss, net	(533		)	(366		)
Total EMC Corporation’s shareholders’ equity	20,444			21,896
Non-controlling interests	1,511			1,629
Total shareholders’ equity	21,955			23,525
Total liabilities and shareholders’ equity	$	45,345		$	45,859

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

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EMC CORPORATION

CONSOLIDATED INCOME STATEMENTS

(in millions, except per share amounts)

(unaudited)



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Revenues:
Product sales	$	3,269		$	3,400		$	9,399		$	9,728
Services	2,810			2,632			8,290			7,663
	6,079			6,032			17,689			17,391
Costs and expenses:
Cost of product sales	1,379			1,400			4,141			4,068
Cost of services	995			889			2,917			2,579
Research and development	802			767			2,372			2,239
Selling, general and administrative	2,145			1,990			6,285			5,852
Restructuring and acquisition-related charges	68			39			226			187
Operating income	690			947			1,748			2,466
Non-operating income (expense):
Investment income	25			29			76			100
Interest expense	(41		)	(40		)	(121		)	(108		)
Other income (expense), net	22			(103		)	56			(245		)
Total non-operating income (expense)	6			(114		)	11			(253		)
Income before provision for income taxes	696			833			1,759			2,213
Income tax provision	168			206			420			532
Net income	528			627			1,339			1,681
Less: Net income attributable to the non-controlling interest in VMware, Inc.	(48		)	(40		)	(120		)	(113		)
Net income attributable to EMC Corporation	$	480		$	587		$	1,219		$	1,568

Net income per weighted average share, basic attributable to EMC Corporation common shareholders	$	0.25		$	0.29		$	0.63		$	0.77
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders	$	0.25		$	0.28		$	0.62		$	0.76

Weighted average shares, basic	1,934			2,032			1,945			2,033
Weighted average shares, diluted	1,948			2,057			1,963			2,065

Cash dividends declared per common share	$	0.12		$	0.12		$	0.34		$	0.33

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

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EMC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Net income	$	528		$	627		$	1,339		$	1,681
Other comprehensive income (loss), net of taxes (benefits):
Foreign currency translation adjustments	(52		)	(61		)	(137		)	(57		)
Changes in market value of investments:
Changes in unrealized gains (losses), net of taxes (benefits) of $(20), $16, $(7) and $65	(31		)	24			(10		)	107
Reclassification adjustment for net losses (gains) realized in net income, net of benefits (taxes) of $(3), $(5), $(16) and $(11)	(5		)	(8		)	(26		)	(19		)
Net change in market value of investments	(36		)	16			(36		)	88
Changes in market value of derivatives:
Changes in unrealized gains (losses), net of taxes (benefits) of $1, $3, $2 and $3	2			10			11			11
Reclassification adjustment for net losses (gains) included in net income, net of benefits (taxes) of $2, $0, $4 and $0	3			1			(8		)	(2		)
Net change in the market value of derivatives	5			11			3			9
Change in actuarial net gain (loss) from pension and other postretirement plans:
Recognition of actuarial net gain (loss) from pension and other postretirement plans, net of taxes (benefits)	—			2			—			2
Reclassification adjustments for net gains from pension and other postretirement plans, net of taxes (benefits)	—			(1		)	—			(1		)
Net change in actuarial gain (loss) from pension and other postretirement plans	—			1			—			1
Other comprehensive income (loss)	(83		)	(33		)	(170		)	41
Comprehensive income	445			594			1,169			1,722
Less: Net income attributable to the non-controlling interest in VMware, Inc.	(48		)	(40		)	(120		)	(113		)
Less: Other comprehensive (income) loss attributable to the non-controlling interest in VMware, Inc.	6			1			3			—
Comprehensive income attributable to EMC Corporation	$	403		$	555		$	1,052		$	1,609

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

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EMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)

	For the Nine Months Ended
	September 30, 2015			September 30, 2014
Cash flows from operating activities:
Cash received from customers	$	19,375		$	19,005
Cash paid to suppliers and employees	(14,894		)	(13,868		)
Dividends and interest received	98			119
Interest paid	(68		)	(67		)
Income taxes paid	(995		)	(897		)
Net cash provided by operating activities	3,516			4,292
Cash flows from investing activities:
Additions to property, plant and equipment	(671		)	(693		)
Capitalized software development costs	(411		)	(382		)
Purchases of short- and long-term available-for-sale securities	(5,553		)	(7,989		)
Sales of short- and long-term available-for-sale securities	3,389			6,396
Maturities of short- and long-term available-for-sale securities	1,465			2,135
Business acquisitions, net of cash acquired	(1,304		)	(1,771		)
Purchases of strategic and other related investments	(177		)	(101		)
Sales of strategic and other related investments	135			38
Joint venture funding	—			(163		)
Decrease (increase) in restricted cash	77			(76		)
Net cash used in investing activities	(3,050		)	(2,606		)
Cash flows from financing activities:
Proceeds from the issuance of EMC’s common stock	293			445
Proceeds from the issuance of VMware’s common stock	123			158
EMC repurchase of EMC’s common stock	(2,063		)	(1,374		)
VMware repurchase of VMware’s common stock	(1,050		)	(450		)
Excess tax benefits from stock-based compensation	62			85
Payment of long-term obligations	—			(1,665		)
Net proceeds from the issuance of short-term obligations	1,968			—
Dividend payment	(683		)	(644		)
Contributions from non-controlling interests	4			7
Net cash used in financing activities	(1,346		)	(3,438		)
Effect of exchange rate changes on cash and cash equivalents	(139		)	(84		)
Net decrease in cash and cash equivalents	(1,019		)	(1,836		)
Cash and cash equivalents at beginning of period	6,343			7,891
Cash and cash equivalents at end of period	$	5,324		$	6,055
Reconciliation of net income to net cash provided by operating activities:
Net income	$	1,339		$	1,681
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,423			1,370
Non-cash restructuring and other special charges	14			14
Stock-based compensation expense	785			770
Provision for doubtful accounts	50			11
Deferred income taxes, net	(39		)	(246		)
Excess tax benefits from stock-based compensation	(62		)	(85		)
Gain on previously held interests in strategic investments and joint venture	—			(45		)
Impairment of strategic investment	—			33
Other, net	22			20
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable	1,201			756
Inventories	(99		)	(252		)
Other assets	(92		)	169
Accounts payable	(537		)	(304		)
Accrued expenses	(434		)	(234		)
Income taxes payable	(535		)	(122		)
Deferred revenue	450			730
Other liabilities	30			26
Net cash provided by operating activities	$	3,516		$	4,292

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

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EMC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions)

(unaudited)

For the nine months ended September 30, 2015:



	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interests			Shareholders’ Equity
	Shares		Par Value			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interests			Shareholders’ Equity
Balance, January 1, 2015	1,985		$	20		$	—		$	22,242		$	(366	)	$	1,629		$	23,525
Stock issued through stock option and stock purchase plans	18		—			293			—			—			—			293
Tax benefit from stock options exercised	—		—			33			—			—			—			33
Restricted stock grants, cancellations and withholdings, net	12		—			(137		)	—			—			—			(137		)
Repurchase of common stock	(76	)	(1		)	(209		)	(1,823		)	—			—			(2,033		)
Stock options issued in business acquisitions	—		—			1			—			—			—			1
Stock-based compensation	—		—			845			—			—			—			845
Cash dividends declared	—		—			—			(680		)	—			—			(680		)
Impact from equity transactions of non-controlling interests	—		—			(826		)	—			—			(235		)	(1,061		)
Change in market value of investments	—		—			—			—			(34		)	(2		)	(36		)
Change in market value of derivatives	—		—			—			—			4			(1		)	3
Translation adjustment	—		—			—			—			(137		)	—			(137		)
Net income	—		—			—			1,219			—			120			1,339
Balance, September 30, 2015	1,939		$	19		$	—		$	20,958		$	(533	)	$	1,511		$	21,955

For the nine months ended September 30, 2014:



	Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interests		Shareholders’ Equity
	Shares		Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interests		Shareholders’ Equity
Balance, January 1, 2014	2,020		$	20	$	1,406		$	21,114		$	(239	)	$	1,485	$	23,786
Stock issued through stock option and stock purchase plans	29		—		445			—			—			—		445
Tax benefit from stock options exercised	—		—		80			—			—			—		80
Restricted stock grants, cancellations and withholdings, net	9		—		(101		)	—			—			—		(101		)
Repurchase of common stock	(52	)	—		(1,374		)	—			—			—		(1,374		)
Stock options issued in business acquisitions	—		—		33			—			—			—		33
Stock-based compensation	—		—		787			—			—			—		787
Cash dividends declared	—		—		—			(685		)	—			—		(685		)
Impact from equity transactions of non-controlling interests	—		—		(426		)	—			—			24		(402		)
Actuarial gain on pension plan	—		—		—			—			1			—		1
Change in market value of investments	—		—		—			—			88			—		88
Change in market value of derivatives	—		—		—			—			9			—		9
Translation adjustment	—		—		—			—			(57		)	—		(57		)
Convertible debt conversions and warrant settlement	29		—		—			—			—			—		—
Net income	—		—		—			1,568			—			113		1,681
Balance, September 30, 2014	2,035		$	20	$	850		$	21,997		$	(198	)	$	1,622	$	24,291

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

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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, solutions and services. EMC manages the Company as part of a federation of businesses: EMC Information Infrastructure, VMware Virtual Infrastructure, Pivotal and Virtustream.

EMC’s Information Infrastructure business provides a foundation for organizations to store, manage, protect, analyze and secure ever-increasing quantities of information, while at the same time improving business agility, lowering cost, and enhancing competitive advantage. EMC’s Information Infrastructure business comprises three segments – Information Storage, Enterprise Content Division and RSA Information Security. The results of Virtustream are currently reported within our Information Storage segment.

EMC’s VMware Virtual Infrastructure business, which is represented by EMC’s majority equity stake in VMware, Inc. (“VMware”), is the leader in virtualization infrastructure solutions utilized by organizations to help them transform the way they build, deliver and consume IT resources. VMware’s virtualization infrastructure solutions, which include a suite of products and services designed to deliver a software-defined data center, 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.

EMC’s Pivotal business (“Pivotal”) unites strategic technology, people and programs from EMC and VMware and has built a new platform comprised of next-generation data, agile development practices and a cloud independent platform-as-a-service (“PaaS”). These capabilities are made available through Pivotal’s three primary offerings: Pivotal Cloud Foundry, the Pivotal Big Data Suite and Pivotal Labs.

Proposed Transaction with Dell

On October 12, 2015, EMC entered into an Agreement and Plan of Merger (the “Merger Agreement”) among EMC, Denali Holding Inc., a Delaware corporation (“Parent”), Dell Inc., a Delaware corporation, and Universal Acquisition Co., a Delaware corporation and direct wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things and subject to the conditions set forth therein, Merger Sub will merge with and into EMC (the “Merger”), with EMC continuing as the surviving corporation and a wholly owned subsidiary of Parent.

At the effective time of the Merger (“Effective Time”), each share of EMC common stock issued and outstanding will be canceled and converted into the right to receive (i) $24.05 in cash and (ii) a number of shares of common stock of Parent designated as Class V Common Stock, par value $0.01 per share (the “Class V Common Stock”), equal to the quotient obtained by dividing (A) 222,966,450 by (B) the aggregate number of shares of EMC common stock issued and outstanding immediately prior to the Effective Time. The aggregate number of shares of Class V Common Stock issued as Merger Consideration in the transaction is intended to represent 65% of EMC’s economic interest in the approximately 81% of the outstanding shares of VMware currently owned by the EMC, reflecting approximately 53% of the total economic interest in the outstanding shares of VMware. Upon completion of the transaction, Parent will retain the remaining 28% of the total economic interest in the outstanding shares of VMware. Based on the estimated number of shares of EMC common stock at the closing of the transaction, EMC shareholders are expected to receive approximately 0.111 shares of Class V Common Stock for each share of EMC common stock.

Under the terms of the Merger Agreement, EMC may solicit alternative acquisition proposals from third parties until 11:59 p.m. on December 11, 2015. The Merger Agreement contains specified termination rights for both Parent and EMC, including that, in general, either party may terminate if the Merger is not consummated on or before December 16, 2016. If EMC terminates the Merger Agreement, we are required to pay Parent a termination fee of $2.5 billion (or, if EMC terminates for a superior proposal prior to December 12, 2015, the termination fee payable by EMC to Parent will be $2 billion). If Parent terminates the Merger Agreement, they are required to pay a termination fee of $4 billion under specified circumstances, and in certain instances, an alternative termination fee of $6 billion.

The transaction is expected to close in mid-2016. The completion of the Merger is subject to certain conditions including EMC shareholder approval, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the receipt of certain other regulatory approvals in various jurisdictions and the effectiveness of the registration statement on Form S-4 to be filed by Parent in connection with the registration of shares of Class V Common Stock issuable in connection with the Merger.

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Merger Agreement contains representations and warranties customary for transactions of this nature. EMC has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. In addition, without the consent of Parent, EMC may not take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including acquiring businesses or incurring capital expenditures above specified thresholds, issuing additional debt facilities and repurchasing outstanding EMC common stock.

Under the terms of the Merger Agreement, EMC is required to provide Parent with access to EMC’s cash to help fund the Merger consideration. At this time, EMC has not finalized its plan to access such cash and has not determined if there would be a need to repatriate cash to meet the requirements of the Merger. To date, we have asserted our overseas cash as indefinitely reinvested; however if these overseas funds are required to be repatriated to the U.S. in accordance with the Merger Agreement, we may be required to accrue and pay U.S. taxes to repatriate these funds.

Other than transaction expenses associated with the proposed Merger, the terms of the Merger Agreement did not impact EMC’s consolidated financial statements as of and for the three and nine months ended September 30, 2015.

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 (“GAAP”) for interim financial information. These consolidated financial statements include the accounts of EMC, its wholly owned subsidiaries, as well as VMware and Pivotal, companies 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, 2014 which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2015.

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 nine-month periods ended September 30, 2015 and 2014.

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, and in the three and nine months ended September 30, 2014, the shares issuable under our $1.725 billion 1.75% convertible senior notes due 2013 (the “2013 Notes”) and the 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.

Investments in Joint Ventures

We make investments in joint ventures. For each joint venture investment, we consider the facts and circumstances in order to determine whether it qualifies for cost, equity or fair value method accounting or whether it should be consolidated.

In 2009, Cisco and EMC formed VCE Company LLC (“VCE”), with investments from VMware and Intel. In December 2014, EMC acquired the controlling interest in VCE and, since the date of acquisition, has consolidated VCE’s financial position and results of operations as part of EMC’s consolidated financial statements.

Prior to the acquisition of the controlling interest in VCE, we considered VCE a variable interest entity and accounted for the investment under the equity method with our portion of the gains and losses recognized in other expense, net in the consolidated income statements for the majority of 2014. Our consolidated share of VCE’s losses, based upon our portion of the overall funding, was approximately 65% and 64% for the three and nine months ended September 30, 2014, respectively. During the three and nine months ended September 30, 2014, we recorded $101 million and $261 million, respectively, in net losses from VCE and $207 million and $550 million, respectively, in revenue from sales of product and services to VCE.

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year’s presentation. In April 2015, the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the related debt liability rather than as an asset. We adopted the guidance during the second quarter of 2015, and accordingly, reclassified the debt issuance costs on our consolidated balance sheets. There was no impact to our consolidated income statements or statements of cash flows.

Recent Accounting Pronouncements

In September 2015, the FASB issued updated guidance related to simplifying the accounting for measurement period adjustments related to business combinations. The amended guidance eliminates the requirement to retrospectively account for adjustments made during the measurement period. The standard is effective beginning January 1, 2016, with early adoption permitted. We do not expect it to have a material impact on our consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued guidance to customers about whether a cloud computing arrangement includes software and how to account for that software license. The new guidance does not change the accounting for a customer’s accounting for service contracts. The standard is effective beginning January 1, 2017, with early adoption permitted, and may be applied prospectively or retrospectively. We do not expect it to have a material impact on our consolidated financial position, results of operations or cash flows.

In May 2014, the FASB issued a standard on revenue recognition providing a single, comprehensive revenue recognition model for all contracts with customers. The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard, as amended, is effective beginning January 1, 2018, with early adoption permitted but not earlier than the original effective date of January 1, 2017. The principles may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently evaluating the adoption method options and the impact of the new guidance on our consolidated financial statements.

2. Non-controlling Interests

The non-controlling interests’ share of equity in VMware is reflected as a component of the non-controlling interests in the accompanying consolidated balance sheets and was $1,406 million and $1,524 million as of September 30, 2015 and December 31, 2014, respectively. At September 30, 2015, EMC held approximately 97% of the combined voting power of VMware’s outstanding common stock and approximately 81% of the economic interest in VMware.

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



	For the Nine Months Ended
	September 30, 2015			September 30, 2014
Net income attributable to EMC Corporation	$	1,219		$	1,568
Transfers (to) from the non-controlling interests in VMware, Inc.:
Increase in EMC Corporation’s additional paid-in-capital for VMware’s equity issuances	60			84
Decrease in EMC Corporation’s additional paid-in-capital for VMware’s other equity activity	(886		)	(510		)
Net transfers (to) from non-controlling interest	(826		)	(426		)
Change from net income attributable to EMC Corporation and transfers from the non-controlling interest in VMware, Inc.	$	393		$	1,142

The non-controlling interests’ share of equity in Pivotal is reflected as a component of the non-controlling interests in the accompanying consolidated balance sheets as $105 million at both September 30, 2015 and December 31, 2014. At September 30, 2015, EMC consolidated held approximately 84% of the economic interest in Pivotal. General Electric Company’s (“GE”) interest in Pivotal is in the form of a preferred equity instrument. Consequently, there is no net income attributable to non-controlling interest related to Pivotal on the consolidated income statements. Additionally, due to the terms of the preferred instrument, GE’s non-controlling interest on the consolidated balance sheets is generally not impacted by Pivotal’s equity related activity. The preferred equity instrument is convertible into common shares at GE’s election at any time.

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3. Business Combinations, Intangibles and Goodwill

Acquisition of Virtustream

On July 9, 2015, EMC acquired all of the outstanding capital stock of Virtustream Group Holdings, Inc. (“Virtustream”), a cloud software and services company that delivers mission-critical enterprise applications in the cloud. This acquisition represents a key element of EMC’s strategy to help customers move applications to cloud-based IT environments. The consideration paid for Virtustream was $1,219 million, net of cash acquired.

The following table summarizes the allocation of the consideration to the fair value of the assets acquired and net liabilities assumed, net of cash acquired (table in millions):



Current assets	$	18
Property, plant and equipment, net	14
Intangible assets:
Purchased technology (weighted-average useful life of 8.6 years)	302
Customer relationships and customer lists (weighted-average useful life of 12.3 years)	50
Trademarks and tradenames (weighted-average useful life of 7.6 years)	27
Total intangible assets, net, excluding goodwill	379
Goodwill	891
Other assets, net	12
Total assets acquired	1,314
Current liabilities	(27		)
Deferred income taxes	(61		)
Other liabilities	(7		)
Total net liabilities assumed	(95		)
Fair value of assets acquired and net liabilities assumed	$	1,219

The total weighted-average amortization period for the intangible assets is 9.0 years. The intangible assets are being amortized over the pattern in which the economic benefits of the intangible assets are being utilized, which in general reflects the cash flows generated from such assets. Goodwill is calculated as the excess of the consideration over the fair value of the net assets, including intangible assets, recognized and is primarily related to expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, which we believe will result in incremental revenue and profitability. The goodwill associated with this acquisition is currently reported within our Information Storage segment. None of the goodwill is deductible for tax purposes. The results of this acquisition 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 company were not material to our consolidated results of operations for the nine months ended September 30, 2015 or 2014.

Other Acquisitions

During the nine months ended September 30, 2015, EMC acquired five businesses, excluding Virtustream, which were not material either individually or in the aggregate to our September 30, 2015 results. Complementing the Information Storage segment, we acquired all of the outstanding capital stock of Renasar Technologies, Inc., a provider of extensible physical middleware, CloudLink, a provider of cloud data security software and Graphite Systems, a developer of server-side flash storage. Complementing our Pivotal segment, we acquired all of the outstanding capital stock of Quickstep Technologies, LLC, a query execution technology developer. VMware acquired all of the outstanding capital stock of Immidio B.V.

The aggregate consideration for these five acquisitions was $89 million which represents cash consideration, net of cash acquired in the third quarter of 2015. The consideration was allocated to the fair value of the assets acquired and liabilities assumed based on estimated fair values as of the respective acquisition dates. The aggregate allocation to goodwill, intangibles, and net liabilities was approximately $64 million, $33 million and $8 million, respectively.

The intangible assets acquired were primarily comprised of purchased developed technology which have a weighted-average amortization period of 3.6 years. Most of our intangible assets are being amortized based upon the pattern in which the economic

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benefits of the intangible assets are being utilized; the remainder are amortized on a straight-line basis. Goodwill is calculated as the excess of the consideration over the fair value of the net assets, including intangible assets, and is primarily related to expected synergies from the transaction. The goodwill is not deductible for U.S. federal income tax purposes. 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 to our consolidated results of operations for the three and nine months ended September 30, 2015 or 2014.

Intangible Assets

Intangible assets, excluding goodwill, as of September 30, 2015 and December 31, 2014 consist of (tables in millions):



	September 30, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased technology	$	3,266	$	(1,845	)	$	1,421
Patents	225		(128		)	97
Software licenses	111		(94		)	17
Trademarks and tradenames	253		(151		)	102
Customer relationships and customer lists	1,523		(1,060		)	463
Leasehold interest	152		(19		)	133
Other	46		(40		)	6
Total intangible assets, excluding goodwill	$	5,576	$	(3,337	)	$	2,239



	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased technology	$	2,935	$	(1,668	)	$	1,267
Patents	225		(117		)	108
Software licenses	108		(93		)	15
Trademarks and tradenames	226		(136		)	90
Customer relationships and customer lists	1,473		(974		)	499
Leasehold interest	152		(16		)	136
Other	44		(34		)	10
Total intangible assets, excluding goodwill	$	5,163	$	(3,038	)	$	2,125

Goodwill

Changes in the carrying amount of goodwill, net, on a consolidated basis and by segment, for the nine months ended September 30, 2015 consist of (table in millions):



	Nine Months Ended September 30, 2015
	Information Storage		Enterprise Content Division			RSA Information Security		Pivotal		VMware Virtual Infrastructure		Total
Balance, beginning of the period	$	8,266	$	1,486		$	2,203	$	171	$	4,008	$	16,134
Goodwill resulting from acquisitions	935		—			—		3		17		955
Finalization of purchase price allocations and other, net	2		(8		)	—		—		—		(6		)
Balance, end of the period	$	9,203	$	1,478		$	2,203	$	174	$	4,025	$	17,083

4. Debt

Short-Term Debt

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“Credit Agreement”). The Credit Agreement provides for a $2.5 billion unsecured revolving credit facility to be used for general corporate purposes that is scheduled to mature on February 27, 2020. At our option, subject to certain conditions, any loan under the Credit Agreement will bear interest at a rate equal to, either (i) the LIBOR Rate or (ii) the Base Rate (defined as the highest of (a) the Federal Funds rate plus 0.50%, (b) Citibank, N.A.’s “prime rate” as announced from time to time, or (c) one-month LIBOR plus 1.00%), plus, in each case the Applicable Margin, as defined in the Credit Agreement. The Credit Agreement contains customary representations and warranties, covenants and events of default. We may also, upon the agreement of the existing lenders and/or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $1.0 billion. In addition, we may request to extend the maturity date of the credit facility, subject to certain conditions, for additional one-year periods. As of September 30, 2015, we were in compliance with customary required covenants and we had not borrowed any funds under the credit facility. At November 6, 2015, we had $600 million borrowed under the credit facility.

On March 23, 2015, we established a short-term debt financing program whereby we may issue short-term unsecured commercial paper notes (“Commercial Paper”). Amounts available under the program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding at any time not to exceed $2.5 billion. The Commercial Paper will have maturities of up to 397 days from the date of issue. The net proceeds from the issuance of the Commercial Paper are expected to be used for general corporate purposes. As of September 30, 2015, we were in compliance with customary required covenants. At September 30, 2015, we had $1,970 million of Commercial Paper outstanding, with a weighted-average interest rate of 0.24% and maturities ranging from 34 days to 80 days at the time of issuance. Commercial Paper outstanding is presented in short-term debt in the consolidated balance sheets, and the issuances and proceeds of the Commercial Paper are presented on a net basis in the consolidated statement of cash flows due to their short term nature. At November 6, 2015, we had $1,565 million of Commercial Paper outstanding.

Long-Term Debt

In June 2013, we issued $5.5 billion aggregate principal amount of senior notes (collectively, the “Notes”) which pay a fixed rate of interest semi-annually in arrears. The proceeds from the Notes have been used to satisfy the cash payment obligation of the converted 2013 Notes as well as for general corporate purposes including stock repurchases, business acquisitions, dividend payments, working capital needs and other business opportunities. The Notes of each series are senior, unsecured obligations of EMC and are not convertible or exchangeable. Unless previously purchased and canceled, we will repay the Notes of each series at 100% of the principal amount, together with accrued and unpaid interest thereon, at maturity. However, EMC has the right to redeem any or all of the Notes at specified redemption prices. As of September 30, 2015, we were in compliance with all debt covenants, which are customary in nature.

Our long-term debt as of September 30, 2015 was as follows (dollars in millions):



Senior Notes	Issued at Discount to Par		Carrying Value
$2.5 billion 1.875% Notes due 2018	99.943	%	$	2,499
$2.0 billion 2.650% Notes due 2020	99.760	%	1,996
$1.0 billion 3.375% Notes due 2023	99.925	%	1,000
			$	5,495
Debt issuance costs			(21		)
Net long-term debt			$	5,474

The unamortized discount on the Notes consists of $5 million, which will be fully amortized by June 1, 2023. The effective interest rate on the Notes was 2.55% for both the three and nine months ended September 30, 2015.

Convertible Debt

In November 2006, we issued the 2013 Notes. These 2013 Notes matured and a majority of the noteholders exercised their right to convert the outstanding 2013 Notes as of December 31, 2013. Pursuant to the settlement terms, the majority of the converted 2013 Notes were settled on January 7, 2014. At that time, we paid the noteholders $1.7 billion in cash for the outstanding principal and 35 million shares for the $858 million in excess of the conversion value over the principal amount, as prescribed by the terms of the 2013 Notes.

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With respect to the conversion value in excess of the principal amount of the 2013 Notes converted, we elected to settle the excess with shares of our common stock based on a daily conversion value, determined in accordance with the indenture, calculated on a proportionate basis for each day of the relevant 20-day observation period. The actual conversion rate for the 2013 Notes was 62.6978 shares of our common stock per one thousand dollars of principal amount of 2013 Notes, which represents a 26.5% conversion premium from the date the 2013 Notes were issued and is equivalent to a conversion price of approximately $15.95 per share of our common stock.

In connection with the issuance of the 2013 Notes, we entered into separate convertible note hedge transactions with respect to our common stock (the “Purchased Options”). The Purchased Options allowed us to receive shares of our common stock and/or cash related to the excess conversion value that we would pay to the holders of the 2013 Notes upon conversion. We exercised 108 million of the purchased options in conjunction with the planned settlements of the 2013 Notes and received 35 million shares of net settlement on January 7, 2014, representing the excess conversion value of the options.

We also entered into separate transactions in which we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 215 million shares of our common stock at an exercise price of approximately $19.55 per share of our common stock. We received aggregate proceeds of $391 million from the sale of the associated warrants. Upon exercise, the value of the warrants was required to be settled in shares. Approximately half of the associated warrants were exercised in 2012 and the remaining 109 million associated warrants were exercised between February 18, 2014 and March 17, 2014 and were settled with 29 million shares of our common stock.

The Purchased Options and associated warrants had the effect of increasing the conversion price of the 2013 Notes to approximately $19.31 per share of our common stock, representing an approximate 53% conversion premium based on the closing price of $12.61 per share of our common stock on November 13, 2006, which was the issuance date of the 2013 Notes.

Interest Rate Swap Contracts

In 2010, EMC entered into interest rate swap contracts with an aggregate notional amount of approximately $900 million. These swaps were designated as cash flow hedges of the semi-annual interest payments of the forecasted issuance of debt in 2011. In 2012, the interest rate swap contracts were settled and accumulated losses of $176 million were deferred as they were expected to be realized over the life of the new debt issued under the related interest rate swap contracts. The accumulated realized losses related to the settled swaps included in accumulated other comprehensive income are being realized over the remaining life of the ten year Notes. During the three and nine months ended September 30, 2015, $6 million and $17 million, respectively, in losses were reclassified from other comprehensive income and recognized as interest expense in the consolidated income statements.

5. Fair Value of Financial Assets and Liabilities

Our fixed income and equity investments 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 fixed income securities are classified as Level 2, with the exception of some of our U.S. government and agency obligations and our investments in publicly traded equity securities, which are classified as Level 1, and all of our auction rate securities, which are classified as Level 3. In addition, our strategic investments held at cost are classified as Level 3. At September 30, 2015, the vast majority of our Level 2 securities 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 fixed income 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.

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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. Our publicly traded equity securities are classified as long-term investments and our strategic investments held at cost are classified as other assets. As a result of the lack of liquidity for auction rate securities, we have classified these as long-term investments as of September 30, 2015 and December 31, 2014. At September 30, 2015 and December 31, 2014, all of our 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 September 30, 2015 and December 31, 2014, auction rate securities were valued using a discounted cash flow model.

The following tables summarize the composition of our short- and long-term investments at September 30, 2015 and December 31, 2014 (tables in millions):



	September 30, 2015
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	2,376	$	5	$	(1	)	$	2,380
U.S. corporate debt securities	2,549		4		(5		)	2,548
High yield corporate debt securities	370		2		(22		)	350
Asset-backed securities	30		—		—			30
Municipal obligations	850		2		—			852
Auction rate securities	27		—		(2		)	25
Foreign debt securities	2,559		3		(8		)	2,554
Total fixed income securities	8,761		16		(38		)	8,739
Publicly traded equity securities	178		52		(9		)	221
Total	$	8,939	$	68	$	(47	)	$	8,960



	December 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	1,951	$	2	$	(2	)	$	1,951
U.S. corporate debt securities	1,998		1		(4		)	1,995
High yield corporate debt securities	570		9		(16		)	563
Asset-backed securities	53		—		—			53
Municipal obligations	948		2		—			950
Auction rate securities	29		—		(2		)	27
Foreign debt securities	2,566		2		(4		)	2,564
Total fixed income securities	8,115		16		(28		)	8,103
Publicly traded equity securities	117		103		(11		)	209
Total	$	8,232	$	119	$	(39	)	$	8,312

We held approximately $2,554 million in foreign debt securities at September 30, 2015. These securities have an average credit rating of A+, and approximately 4% of these securities are deemed sovereign debt with an average credit rating of AA+. None of the securities deemed sovereign debt are from Argentina, Greece, Italy, Ireland, Portugal, Spain, Cyprus or Puerto Rico.

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The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of September 30, 2015 and December 31, 2014 (tables in millions):



	September 30, 2015
	Level 1		Level 2			Level 3		Total
Cash	$	1,643	$	—		$	—	$	1,643
Cash equivalents	3,264		417			—		3,681
U.S. government and agency obligations	1,404		976			—		2,380
U.S. corporate debt securities	—		2,548			—		2,548
High yield corporate debt securities	—		350			—		350
Asset-backed securities	—		30			—		30
Municipal obligations	—		852			—		852
Auction rate securities	—		—			25		25
Foreign debt securities	—		2,554			—		2,554
Publicly traded equity securities	221		—			—		221
Total cash and investments	$	6,532	$	7,727		$	25	$	14,284
Other items:
Strategic investments held at cost	$	—	$	—		$	382	$	382
Investment in joint venture	—		—			38		38
Long-term debt carried at discounted cost	—		(5,514		)	—		(5,514		)
Foreign exchange derivative assets	—		49			—		49
Foreign exchange derivative liabilities	—		(47		)	—		(47		)
Commodity derivative liabilities	—		(4		)	—		(4		)



	December 31, 2014
	Level 1		Level 2			Level 3		Total
Cash	$	2,022	$	—		$	—	$	2,022
Cash equivalents	3,710		611			—		4,321
U.S. government and agency obligations	1,141		810			—		1,951
U.S. corporate debt securities	—		1,995			—		1,995
High yield corporate debt securities	—		563			—		563
Asset-backed securities	—		53			—		53
Municipal obligations	—		950			—		950
Auction rate securities	—		—			27		27
Foreign debt securities	—		2,564			—		2,564
Publicly traded equity securities	209		—			—		209
Total cash and investments	$	7,082	$	7,546		$	27	$	14,655
Other items:
Strategic investments held at cost	$	—	$	—		$	333	$	333
Investment in joint venture	—		—			37		37
Long-term debt carried at discounted cost	—		(5,544		)	—		(5,544		)
Foreign exchange derivative assets	—		44			—		44
Foreign exchange derivative liabilities	—		(71		)	—		(71		)
Commodity derivative assets	—		12			—		12

Our auction rate securities are predominantly rated investment grade and are primarily collateralized by student loans. The underlying loans of all but one of our auction rate securities, with a market value of $6 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. We believe the quality of the collateral underlying most of our auction rate securities will enable us to recover our principal balance.

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To determine the estimated fair value of our investment in auction rate securities, we use a discounted cash flow model using a five year time horizon. As of September 30, 2015, the coupon rates used ranged from 0% to 2% and the discount rate was 1%, which rate represents the rate at which similar FFELP backed securities with a five year time horizon outside of the auction rate securities market were trading at September 30, 2015. 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 September 30, 2015 and December 31, 2014 due to the narrowing of credit spreads on AA-rated banks during 2014 and into 2015.

Significant changes in the unobservable inputs discussed above could result in a significantly lower or higher fair value measurement. Generally, an increase in the discount rate, liquidity discount margin or coupon rate results in a decrease in our fair value measurement and a decrease in the discount rate, liquidity discount margin or coupon rate results in an increase in our fair value measurement.

During the three and nine months ended September 30, 2015 and 2014, there were no material changes to the fair value of our auction rate securities.

EMC has a 49% ownership percentage of LenovoEMC Limited, a joint venture with Lenovo that was formed in 2012. We account for our LenovoEMC joint venture using the fair value method of accounting. To determine the estimated fair value at inception of our investment, we used a discounted cash flow model using a three year time horizon, and utilized a discount rate of 6%, which represented the incremental borrowing rate for a market participant. The assumptions used in preparing the discounted cash flow model include an analysis of estimated Lenovo NAS revenue against a prescribed target as well as consideration of the purchase price put and call features included in the joint venture agreement. The put and call features create a floor and a cap on the fair value of the investment. As such, there is a limit to the impact on the fair value that would result from significant changes in the unobservable inputs. We had no changes to the assumptions utilized in the fair value calculation in the third quarter of 2015 and there were no material changes to the fair value of this joint venture during the three and nine months ended September 30, 2015 and 2014.

The carrying value of the strategic investments held at cost were accounted for under the cost method. As part of our quarterly impairment review, we perform a fair value calculation of our strategic investments held at cost using the most currently available information. To determine the estimated fair value of private strategic investments held at cost, we use a combination of several valuation techniques including discounted cash flow models, acquisition and trading comparables. In addition, we evaluate the impact of pre- and post-money valuations of recent financing events and the impact of those on our fully diluted ownership percentages, and we consider any available information regarding the issuer’s historical and forecasted performance as well as market comparables and conditions. The fair value of these investments is considered in our review for impairment if any events and changes in circumstances occur that might have a significant adverse effect on their value.

Investment Losses

Unrealized losses on investments at September 30, 2015 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):



	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	$	321	$	(1	)	$	—	$	—		$	321	$	(1	)
U.S. corporate debt securities	1,103		(5		)	—		—			1,103		(5		)
High yield corporate debt securities	239		(17		)	30		(5		)	269		(22		)
Auction rate securities	—		—			25		(2		)	25		(2		)
Foreign debt securities	1,220		(8		)	—		—			1,220		(8		)
Publicly traded equity securities	2		(1		)	19		(8		)	21		(9		)
Total	$	2,885	$	(32	)	$	74	$	(15	)	$	2,959	$	(47	)

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For all of our securities for which the amortized cost basis was greater than the fair value at September 30, 2015, 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, 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 and the time to maturity.

Contractual Maturities

The contractual maturities of fixed income securities held at September 30, 2015 are as follows (table in millions):



	September 30, 2015
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	2,302	$	2,303
Due after 1 year through 5 years	5,618		5,617
Due after 5 years through 10 years	523		503
Due after 10 years	318		316
Total	$	8,761	$	8,739

Short-term investments on the consolidated balance sheet include $15 million in variable rate notes which have contractual maturities in 2015, and are not classified within investments due within one year above.

6. Inventories

Inventories consist of (table in millions):



	September 30, 2015		December 31, 2014
Work-in-process	$	580	$	627
Finished goods	644		649
	$	1,224	$	1,276

7. Accounts and Notes Receivable and Allowance for Credit Losses

Accounts and notes receivable are recorded at cost. The portion of our notes receivable due in one year or less are included in accounts and notes receivable and the long-term portion is included in other assets, net on the consolidated balance sheets. Lease receivables arise from sales-type leases of products. We typically sell, without recourse, the contractual right to the lease payment stream and assets under lease to third parties. For certain customers, we retain the lease.

The contractual amounts due under the leases we retained as of September 30, 2015 were as follows (table in millions):



Year	Contractual Amounts Due Under Leases
Due within one year	$	65
Due within two years	45
Due within three years	31
Thereafter	1
Total	142
Less: Amounts representing interest	5
Present value	137
Current portion (included in accounts and notes receivable)	62
Long-term portion (included in other assets, net)	$	75

Subsequent to September 30, 2015, we sold $23 million of these notes to third parties without recourse.

We maintain an allowance for credit losses on our accounts and notes receivable. The allowance is based on the credit worthiness of our customers, including an assessment of the customer’s financial position, operating performance and their ability to meet their contractual obligation. We assess the credit scores for our customers each quarter. In addition, we consider our historical

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experience, the age of the receivable and current market and economic conditions. Uncollectible amounts are charged against the allowance account.

In the event we determine that a lease may not be paid, we include in our allowance an amount for the outstanding balance related to the lease receivable. As of September 30, 2015, amounts from lease receivables past due for more than 90 days were not significant.

During the three and nine months ended September 30, 2015 and 2014, there were no material changes to our allowance for credit losses related to lease receivables.

Gross lease receivables totaled $142 million and $233 million as of September 30, 2015 and December 31, 2014, respectively, before the allowance. The components of these balances were individually evaluated for impairment and included in our allowance determination as necessary.

8. Property, Plant and Equipment

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



	September 30, 2015			December 31, 2014
Furniture and fixtures	$	280		$	255
Equipment and software	7,305			6,684
Buildings and improvements	2,357			2,308
Land	170			162
Building construction in progress	68			134
	10,180			9,543
Accumulated depreciation	(6,389		)	(5,777		)
	$	3,791		$	3,766

Building construction in progress at September 30, 2015 includes $39 million for facilities not yet placed in service that we are holding for future use.

9. Accrued Expenses

Accrued expenses consist of (table in millions):



	September 30, 2015		December 31, 2014
Salaries and benefits	$	1,075	$	1,251
Product warranties	180		207
Dividends payable (see Note 11)	232		237
Partner rebates	204		235
Restructuring, current (See Note 12)	162		123
Derivatives	51		75
Other	927		1,013
	$	2,831	$	3,141

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Product Warranties

Systems sales include a standard product warranty. At the time of the sale, we accrue for systems’ warranty costs. The initial systems’ warranty accrual is based upon our historical experience, expected future costs and specific identification of systems’ requirements. Upon sale or expiration of the initial warranty, we may sell additional maintenance contracts to our customers. Revenue from these additional maintenance contracts is included in deferred revenue and recognized ratably over the service period. The following represents the activity in our warranty accrual for the three and nine months ended September 30, 2015 and 2014 (table in millions):



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Balance, beginning of the period	$	189		$	254		$	207		$	286
Provision	32			32			109			107
Amounts charged against the accrual	(41		)	(59		)	(136		)	(166		)
Balance, end of the period	$	180		$	227		$	180		$	227

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.

10. Income Taxes

Our effective income tax rates were 24.1% and 23.9% for the three and nine months ended September 30, 2015, respectively. Our effective income tax rates were 24.7% and 24.0% for the three and nine months ended September 30, 2014, respectively. Our effective income tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax audits or other tax contingencies. For the three and nine months ended September 30, 2015, the effective income tax rate varied from the statutory income tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions and state taxes. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States; substantially all of our income before provision for income taxes from foreign operations has been earned by our Irish subsidiaries. For the three and nine months ended September 30, 2014, the effective income tax rate varied from the statutory income tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions and state taxes. On December 19, 2014, the Tax Increase Prevention Act was signed into law. Some of the provisions were retroactive to January 1, 2014 including an extension of the U.S. federal tax credit for increasing research activities through December 31, 2014. Our effective income tax rates for the three and nine months ended September 30, 2015 and 2014 do not reflect any federal tax credit for increasing research activities.

Our effective income tax rate decreased in the three months ended September 30, 2015 from the three months ended September 30, 2014 due primarily to a decrease in tax contingency reserves and lower state taxes partially offset by a lower tax rate differential for international jurisdictions. There were also differences in discrete items, the net impact of which is immaterial. Our effective income tax rate for the nine months ended September 30, 2015 was consistent with our effective income tax rate for the nine months ended September 30, 2014.

We are routinely under audit by the Internal Revenue Service (the “IRS”). We have concluded all U.S. federal income tax matters for years through 2008. In the third quarter of 2012, the IRS commenced a federal income tax audit for the tax years 2009 and 2010, which is expected to be completed in late 2015. In the first quarter of 2015, the IRS commenced a federal income tax audit for the tax year 2011, which is still in the early stage for information gathering. We also have income tax audits in process in numerous state, local and international jurisdictions. In our international jurisdictions that comprise a significant portion of our operations, the years that may be examined vary, with the earliest year being 2005. 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 consolidated balance sheets. We anticipate that several of these audits may be finalized within the next twelve months. While we expect the amount of unrecognized tax benefits to change in the next twelve months, we do not expect the change to have a significant impact on our consolidated results of operations or financial position.

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11. Shareholders’ Equity

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



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Numerator:
Net income attributable to EMC Corporation	$	480		$	587		$	1,219		$	1,568
Incremental dilution from VMware	(1		)	(1		)	(3		)	(4		)
Net income – dilution attributable to EMC Corporation	$	479		$	586		$	1,216		$	1,564
Denominator:
Weighted average shares, basic	1,934			2,032			1,945			2,033
Weighted common stock equivalents	14			25			18			26
Assumed conversion of the 2013 Notes and associated warrants	—			—			—			6
Weighted average shares, diluted	1,948			2,057			1,963			2,065

Due to the cash settlement feature of the principal amount of the 2013 Notes, we only included the impact of the premium feature in our diluted earnings per share calculation when the 2013 Notes were convertible due to maturity or when the average stock price exceeded the conversion price of the 2013 Notes.

Concurrent with the issuance of the 2013 Notes, we also entered into separate transactions in which we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 215 million shares of our common stock at an exercise price of approximately $19.55 per share of our common stock. Approximately half of the associated warrants were exercised in 2012 and the remaining 109 million warrants were exercised between February 18, 2014 and March 17, 2014 and were settled with 29 million shares of our common stock. As such, we included the impact of the remaining outstanding sold warrants in our diluted earnings per share calculation during the nine months ended September 30, 2014.

Restricted stock awards, restricted stock units and options to acquire shares of our common stock in the amount of 19 million and 7 million for the three and nine months ended September 30, 2015, respectively, and 3 million for the nine months ended September 30, 2014, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. There were minimal antidilutive restricted stock awards, restricted stock units and options to acquire shares of our common stock excluded from the calculation of diluted earnings per share for the three months ended September 30, 2014. 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 share by the number of VMware shares owned by EMC.

Repurchase of Common Stock

We utilize both authorized and unissued shares (including repurchased shares) for all issuances under our equity plans. Our Board of Directors authorized the repurchase of 250 million shares of our common stock in February 2013 and an additional 250 million shares of our common stock in December 2014. For the nine months ended September 30, 2015, we spent $2.0 billion to repurchase 76 million shares of our common stock. Of the 500 million shares authorized for repurchase, we have repurchased 277 million shares at a total cost of $7.4 billion, leaving a remaining balance of 223 million shares authorized for future repurchases.

VMware’s Board of Directors authorized the repurchase of $1.0 billion of VMware’s Class A common stock in January 2015. All shares repurchased under VMware’s stock repurchase programs are retired. For the nine months ended September 30, 2015, VMware spent $1,050 million to repurchase 13 million shares of their common stock. Of the $1.0 billion authorized for repurchase, VMware has a remaining balance of $910 million authorized for future repurchases.

Cash Dividend on Common Stock

In May 2013, our Board of Directors approved the initiation of a quarterly cash dividend to EMC shareholders of $0.10 per share of common stock and in April 2014, our Board of Directors increased the dividend to $0.115 per share of common stock.

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Our Board of Directors declared the following dividends during 2015 and 2014:



Declaration Date	Dividend Per Share		Record Date	Total Amount (in millions)		Payment Date
2015:
February 27, 2015	$	0.115	April 1, 2015	$	229	April 23, 2015
May 20, 2015	$	0.115	July 1, 2015	$	226	July 23, 2015
July 30, 2015	$	0.115	October 1, 2015	$	229	October 23, 2015

2014:
February 6, 2014	$	0.10	April 1, 2014	$	209	April 23, 2014
April 17, 2014	$	0.115	July 1, 2014	$	237	July 23, 2014
July 30, 2014	$	0.115	October 1, 2014	$	239	October 23, 2014
December 9, 2014	$	0.115	January 2, 2015	$	234	January 23, 2015

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), which is presented net of tax, for the nine months ended September 30, 2015 and 2014 consist of the following (tables in millions):



	Foreign Currency Translation Adjustments			Unrealized Net Gains on Investments			Unrealized Net Losses on Derivatives			Recognition of Actuarial Net Loss from Pension and Other Postretirement Plans			Accumulated Other Comprehensive Income Attributable to the Non-controlling Interest in VMware, Inc.			Total
Balance as of December, 31 2014^(a)	$	(187	)	$	49		$	(99	)	$	(126	)	$	(3	)	$	(366	)
Other comprehensive income (loss) before reclassifications	(137		)	(10		)	11			—			3			(133		)
Net losses (gains) reclassified from accumulated other comprehensive income	—			(26		)	(8		)	—			—			(34		)
Net current period other comprehensive income (loss)	(137		)	(36		)	3			—			3			(167		)
Balance as of September 30, 2015^(b)	$	(324	)	$	13		$	(96	)	$	(126	)	$	—		$	(533	)

__________________


(a)	Net of taxes (benefits) of $31 million for unrealized net gains on investments, $(64) million for unrealized net losses on derivatives and $(70) million for actuarial net loss on pension plans.


(b)	Net of taxes (benefits) of $8 million for unrealized net gains on investments, $(58) million for unrealized net losses on derivatives and $(70) million for actuarial net loss on pension plans.



	Foreign Currency Translation Adjustments			Unrealized Net Gains on Investments			Unrealized Net Losses on Derivatives			Recognition of Actuarial Net Loss from Pension and Other Postretirement Plans			Accumulated Other Comprehensive Income Attributable to the Non-controlling Interest in VMware, Inc.			Total
Balance as of December, 31 2013^(a)	$	(53	)	$	31		$	(106	)	$	(110	)	$	(1	)	$	(239	)
Other comprehensive income (loss) before reclassifications	(57		)	107			11			2			—			63
Net losses (gains) reclassified from accumulated other comprehensive income	—			(19		)	(2		)	(1		)	—			(22		)
Net current period other comprehensive income (loss)	(57		)	88			9			1			—			41
Balance as of September 30, 2014^(b)	$	(110	)	$	119		$	(97	)	$	(109	)	$	(1	)	$	(198	)

__________________


(a)	Net of taxes (benefits) of $18 million for unrealized net gains on investments, $(66) million for unrealized net losses on derivatives and $(61) million for actuarial net loss on pension plans.


(b)	Net of taxes (benefits) of $72 million for unrealized net gains on investments, $(63) million for unrealized net losses on derivatives and $(61) million for actuarial net loss on pension plans.

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The amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2015 and 2014 are as follows (tables in millions):



	For the Three Months Ended
Accumulated Other Comprehensive Income Components	September 30, 2015			September 30, 2014			Impacted Line Item on Consolidated Income Statements
Net gain on investments:	$	8		$	13		Investment income
	(3		)	(5		)	Provision for income tax
Net of tax	$	5		$	8

Net gain on derivatives:
Foreign exchange contracts	$	1		$	12		Product sales revenue
Foreign exchange contracts	—			(7		)	Cost of product sales
Interest rate swap	(6		)	(6		)	Other interest expense
Total net gain (loss) on derivatives before tax	(5		)	(1		)
	2			—			Provision for income tax
Net of tax	$	(3	)	$	(1	)

Net gain from pension and other postretirement plans	$	—		$	1		Selling, general and administrative expense
	—			—			Provision for income tax
Net of tax	$	—		$	1



	For the Nine Months Ended
Accumulated Other Comprehensive Income Components	September 30, 2015			September 30, 2014			Impacted Line Item on Consolidated Income Statements
Net gain on investments:	$	42		$	30		Investment income
	(16		)	(11		)	Provision for income tax
Net of tax	$	26		$	19

Net gain on derivatives:
Foreign exchange contracts	$	22		$	15		Product sales revenue
Foreign exchange contracts	(1		)	(7		)	Cost of product sales
Interest rate swap	(17		)	(6		)	Other interest expense
Total net gain on derivatives before tax	4			2
	4			—			Provision for income tax
Net of tax	$	8		$	2

Net gain from pension and other postretirement plans	$	—		$	1		Selling, general and administrative expense
	—			—			Provision for income tax
Net of tax	$	—		$	1

12. Restructuring and Acquisition-Related Charges

For the three and nine months ended September 30, 2015, we incurred restructuring and acquisition-related charges of $68 million and $226 million, respectively. For the three and nine months ended September 30, 2014, we incurred restructuring and acquisition-related charges of $39 million and $187 million, respectively. For the three and nine months ended September 30, 2015, EMC incurred $66 million and $200 million, respectively, of restructuring charges, primarily related to our current year restructuring programs, and $1 million and $4 million, respectively, of charges in connection with acquisitions for financial, advisory, legal and accounting services. For the nine months ended September 30, 2015, VMware incurred $20 million of restructuring charges, primarily related to its current year restructuring program. For the three and nine months ended September 30,

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2015, VMware incurred $1 million and $2 million, respectively, of charges in connection with acquisitions for financial, advisory, legal and accounting services.

For the three and nine months ended September 30, 2014, EMC incurred $31 million and $175 million, respectively, of restructuring charges, primarily related to our 2014 restructuring programs, and during the three and nine months ended September 30, 2014, EMC incurred $2 million and $3 million, respectively, of charges in connection with acquisitions for financial, advisory, legal and accounting services. For the three and nine months ended September 30, 2014, VMware incurred $6 million and $4 million, respectively, of restructuring charges, primarily related to its 2014 restructuring programs. For the nine months ended September 30, 2014, VMware incurred $5 million of charges in connection with acquisitions for financial, advisory, legal and accounting services.

In the first, second and third quarters of 2015, EMC implemented restructuring programs to create further operational efficiencies which will result in workforce reductions of approximately 1,320, 160 and 680 positions, respectively. The actions will impact positions around the globe covering our Information Storage, RSA Information Security, Enterprise Content Division and Pivotal segments. All of these actions are expected to be completed within a year of the start of the program.

During 2014, EMC implemented restructuring programs to create further operational efficiencies which resulted in a workforce reduction of approximately 2,100 positions, of which 1,320, 210 and 240 positions were identified in the first, second and third quarters of 2014, respectively. The actions impacted positions around the globe covering our Information Storage, RSA Information Security and Enterprise Content Division segments. All of these actions were completed within a year of the start of the program.

In the first quarter of 2015, VMware eliminated approximately 350 positions across all major functional groups and geographies to streamline its operations. All of these actions are expected to be completed within a year of the start of the program. During the third quarter of 2014, VMware eliminated approximately 90 positions across all major functional groups and geographies to streamline its operations.

For the three and nine months ended September 30, 2015, we recognized $5 million and $22 million, respectively, of lease termination costs for facilities vacated in the period in accordance with our plan as part of all of our restructuring programs and for costs associated with terminating other contractual obligations. For the three and nine months ended September 30, 2014, we recognized $2 million and $10 million, respectively, of lease termination costs for facilities vacated in the period in accordance with our plan as part of all of our restructuring programs and for costs associated with terminating other contractual obligations. These costs are expected to be utilized by the end of 2016.

The activity for the restructuring programs is presented below (tables in millions):

Three Months Ended September 30, 2015:



2015 EMC Programs
Category	Balance as of June 30, 2015		2015 Charges		Utilization			Balance as of September 30, 2015
Workforce reductions	$	89	$	62	$	(33	)	$	118
Consolidation of excess facilities and other contractual obligations	12		6		(3		)	15
Total	$	101	$	68	$	(36	)	$	133



Other EMC Programs
Category	Balance as of June 30, 2015		Adjustments to the Provision			Utilization			Balance as of September 30, 2015
Workforce reductions	$	43	$	(1	)	$	(14	)	$	28
Consolidation of excess facilities and other contractual obligations	13		(1		)	(1		)	11
Total	$	56	$	(2	)	$	(15	)	$	39

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Nine Months Ended September 30, 2015:



2015 EMC Programs
Category	Balance as of December 31, 2014		2015 Charges		Utilization			Balance as of September 30, 2015
Workforce reductions	$	—	$	185	$	(67	)	$	118
Consolidation of excess facilities and other contractual obligations	—		23		(8		)	15
Total	$	—	$	208	$	(75	)	$	133



Other EMC Programs
Category	Balance as of December 31, 2014		Adjustments to the Provision			Utilization			Balance as of September 30, 2015
Workforce reductions	$	102	$	(7	)	$	(67	)	$	28
Consolidation of excess facilities and other contractual obligations	19		(1		)	(7		)	11
Total	$	121	$	(8	)	$	(74	)	$	39



VMware Programs
Category	Balance as of December 31, 2014		2015 Charges		Utilization			Balance as of September 30, 2015
Workforce reductions	$	8	$	20	$	(27	)	$	1
Consolidation of excess facilities and other contractual obligations	—		—		—			—
Total	$	8	$	20	$	(27	)	$	1

Three Months Ended September 30, 2014:



2014 EMC Programs
Category	Balance as of June 30, 2014		2014 Charges		Utilization			Balance as of September 30, 2014
Workforce reductions	$	98	$	30	$	(33	)	$	95
Consolidation of excess facilities and other contractual obligations	3		2		(2		)	3
Total	$	101	$	32	$	(35	)	$	98



Other EMC Programs
Category	Balance as of June 30, 2014		Adjustments to the Provision			Utilization			Balance as of September 30, 2014
Workforce reductions	$	17	$	(1	)	$	(6	)	$	10
Consolidation of excess facilities and other contractual obligations	18		—			(1		)	17
Total	$	35	$	(1	)	$	(7	)	$	27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Nine Months Ended September 30, 2014:



2014 EMC Programs
Category	Balance as of December 31, 2013		2014 Charges		Utilization			Balance as of September 30, 2014
Workforce reductions	$	—	$	179	$	(84	)	$	95
Consolidation of excess facilities and other contractual obligations	—		7		(4		)	3
Total	$	—	$	186	$	(88	)	$	98



Other EMC Programs
Category	Balance as of December 31, 2013		Adjustments to the Provision			Utilization			Balance as of September 30, 2014
Workforce reductions	$	66	$	(14	)	$	(42	)	$	10
Consolidation of excess facilities and other contractual obligations	24		3			(10		)	17
Total	$	90	$	(11	)	$	(52	)	$	27

13. Commitments and Contingencies

Litigation

We are involved in a variety of claims, demands, suits, investigations and proceedings 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 all currently 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 and no additional material losses related to these pending matters are reasonably possible. 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.

During the second quarter of 2015, VMware reached an agreement with the Department of Justice (“DOJ”) and the General Services Administration (“GSA”) to pay $76 million to resolve allegations that VMware’s government sales practices between 2006 and 2013 had violated the federal False Claims Act. The settlement was paid and recorded as a reduction of VMware’s product revenues during the nine months ended September 30, 2015.

As of November 6, 2015, eleven lawsuits challenging the Merger have been filed purportedly on behalf of Company shareholders, of which eight were filed (or are now pending) in the Business Litigation Session of the Suffolk County Superior Court in Massachusetts, one was filed in the Middlesex County Superior Court in Massachusetts, and two were filed in the United States District Court for the District of Massachusetts.

All of the lawsuits are purported shareholder class actions advancing substantially the same allegations that the Merger Agreement was adopted in violation of the fiduciary duties of the Company’s directors and seeking injunctive relief to enjoin the merger, as well as other remedies. Certain of the lawsuits also allege that the Company, Denali Holding Inc., Dell Inc., Universal Acquisition Co., Silver Lake Partners, LLC, and/or MSD Partners, LLC aided and abetted the alleged breaches of fiduciary duty by the directors.

On October 23, 2015, the Company and its directors served a motion to consolidate all of the lawsuits then pending in state court in Massachusetts with and into the first-filed of those actions, IBEW Local No. 129 Benefit Fund v. Joseph M. Tucci, et al. That action names as defendants the Company and each member of its Board of Directors (as constituted as of October 12, 2015), Denali Holding Inc., Dell Inc., and Universal Acquisition Co.

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23.1 of the Massachusetts Rules of Civil Procedure, on the basis that the complaint asserts a derivative action on behalf of the Company and should be dismissed for failure to make the requisite pre-suit demand on the Company.

On November 5, 2015, the Company and its directors filed motions (i) to stay or dismiss the actions pending in the United States District Court for the District of Massachusetts on the ground that those actions are duplicative of the actions pending in state court in Massachusetts; and (ii) to dismiss those same actions pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure on the ground that the complaints in those actions fail to allege a basis for the federal court’s subject matter jurisdiction.

No defendant has yet filed a responsive pleading in the other lawsuits.

The outcome of these lawsuits is uncertain, and additional lawsuits may be brought or additional claims advanced concerning the Merger. An adverse judgment for monetary damages could have an adverse effect on the Company’s operations. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Merger.

14. Segment Information

We manage the Company as a federation of businesses: EMC Information Infrastructure, VMware Virtual Infrastructure, Pivotal and Virtustream. EMC Information Infrastructure operates in three segments: Information Storage, Enterprise Content Division and RSA Information Security, while VMware Virtual Infrastructure and Pivotal each operate as single segments. The results of Virtustream are currently reported within our Information Storage segment.

Our management measures are designed to assess performance of these reporting 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, intangible asset amortization expense, restructuring charges and acquisition and other related charges. Additionally, in certain instances, infrequently occurring items are also excluded or included from the measures used by management in assessing segment performance. Research and development expenses, selling, general and administrative expenses and restructuring and acquisition-related charges 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 EMC Information Infrastructure business level. EMC Information Infrastructure and Pivotal have not been allocated non-operating income (expense), net and income tax provision as these costs are managed centrally at the EMC corporate level. Accordingly, for the three segments within the EMC Information Infrastructure business, gross profit is the segment operating performance measure, while for Pivotal, operating income is the operating performance measure. The VMware Virtual Infrastructure within EMC amounts represent the revenues and expenses of VMware as reflected within EMC’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our segment information for the three and nine months ended September 30, 2015 and 2014 is as follows (tables in millions, except percentages):



	EMC Information Infrastructure
	Information Storage			Enterprise Content Division			RSA Information Security			EMC Information Infrastructure			Pivotal			EMC Information Infrastructure plus Pivotal
Three Months Ended
September 30, 2015
Revenues:
Product revenues	$	2,424		$	37		$	106		$	2,567		$	22		$	2,589
Services revenues	1,537			107			137			1,781			45			1,826
Total consolidated revenues	3,961			144			243			4,348			67			4,415

Gross profit	$	2,071		$	97		$	163		$	2,331		$	24		$	2,355
Gross profit percentage	52.3		%	67.3		%	66.9		%	53.6		%	36.2		%	53.3		%

Research and development										397			28			425
Selling, general and administrative										1,220			54			1,274
Restructuring and acquisition-related charges										—			—			—
Total operating expenses										1,617			82			1,699
Operating income (expense)										$	714		$	(58	)	$	656



	EMC Information Infrastructure plus Pivotal			VMware Virtual Infrastructure			Corp Reconciling Items			Consolidated
Three Months Ended
September 30, 2015
Revenues:
Product revenues	$	2,589		$	680		$	—		$	3,269
Services revenues	1,826			984			—			2,810
Total consolidated revenues	4,415			1,664			—			6,079

Gross profit	$	2,355		$	1,451		$	(101	)	$	3,705
Gross profit percentage	53.3		%	87.2		%	—		%	60.9		%

Research and development	425			274			103			802
Selling, general and administrative	1,274			651			220			2,145
Restructuring and acquisition-related charges	—			—			68			68
Total operating expenses	1,699			925			391			3,015

Operating income (expense)	656			526			(492		)	690

Non-operating income (expense), net	2			4			—			6
Income tax provision (benefit)	185			89			(106		)	168
Net income	473			441			(386		)	528
Net income attributable to the non-controlling interest in VMware, Inc.	—			(77		)	29			(48		)
Net income attributable to EMC Corporation	$	473		$	364		$	(357	)	$	480

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	EMC Information Infrastructure
	Information Storage			Enterprise Content Division			RSA Information Security			EMC Information Infrastructure			Pivotal			EMC Information Infrastructure plus Pivotal
Three Months Ended
September 30, 2014
Revenues:
Product revenues	$	2,595		$	36		$	114		$	2,745		$	17		$	2,762
Services revenues	1,456			118			147			1,721			41			1,762
Total consolidated revenues	4,051			154			261			4,466			58			4,524

Gross profit	$	2,238		$	100		$	173		$	2,511		$	27		$	2,538
Gross profit percentage	55.2		%	65.2		%	66.3		%	56.2		%	46.9		%	56.1		%

Research and development										372			33			405
Selling, general and administrative										1,146			46			1,192
Restructuring and acquisition-related charges										—			—			—
Total operating expenses										1,518			79			1,597
Operating income (expense)										$	993		$	(52	)	$	941



	EMC Information Infrastructure plus Pivotal			VMware Virtual Infrastructure			Corp Reconciling Items			Consolidated
Three Months Ended
September 30, 2014
Revenues:
Product revenues	$	2,762		$	638		$	—		$	3,400
Services revenues	1,762			870			—			2,632
Total consolidated revenues	4,524			1,508			—			6,032

Gross profit	$	2,538		$	1,304		$	(99	)	$	3,743
Gross profit percentage	56.1		%	86.5		%	—		%	62.0		%

Research and development	405			263			99			767
Selling, general and administrative	1,192			586			212			1,990
Restructuring and acquisition-related charges	—			—			39			39
Total operating expenses	1,597			849			350			2,796

Operating income (expense)	941			455			(449		)	947

Non-operating income (expense), net	(120		)	6			—			(114		)
Income tax provision (benefit)	207			99			(100		)	206
Net income	614			362			(349		)	627
Net income attributable to the non-controlling interest in VMware, Inc.	—			(73		)	33			(40		)
Net income attributable to EMC Corporation	$	614		$	289		$	(316	)	$	587

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	EMC Information Infrastructure
	Information Storage			Enterprise Content Division			RSA Information Security			EMC Information Infrastructure			Pivotal			EMC Information Infrastructure plus Pivotal
Nine Months Ended
September 30, 2015
Revenues:
Product revenues	$	7,113		$	103		$	303		$	7,519		$	57		$	7,576
Services revenues	4,539			333			427			5,299			128			5,427
Total consolidated revenues	11,652			436			730			12,818			185			13,003

Gross profit	$	6,014		$	291		$	487		$	6,792		$	71		$	6,863
Gross profit percentage	51.6		%	66.8		%	66.7		%	53.0		%	38.7		%	52.8		%

Research and development										1,219			79			1,298
Selling, general and administrative										3,591			156			3,747
Restructuring and acquisition-related charges										—			—			—
Total operating expenses										4,810			235			5,045
Operating income (expense)										$	1,982		$	(164	)	$	1,818



	EMC Information Infrastructure plus Pivotal			VMware Virtual Infrastructure			Corp Reconciling Items			Consolidated
Nine Months Ended
September 30, 2015
Revenues:
Product revenues	$	7,576		$	1,899		$	(76	)	$	9,399
Services revenues	5,427			2,863			—			8,290
Total consolidated revenues	13,003			4,762			(76		)	17,689

Gross profit	$	6,863		$	4,143		$	(375	)	$	10,631
Gross profit percentage	52.8		%	87.0		%	—		%	60.1		%

Research and development	1,298			788			286			2,372
Selling, general and administrative	3,747			1,896			642			6,285
Restructuring and acquisition-related charges	—			—			226			226
Total operating expenses	5,045			2,684			1,154			8,883

Operating income (expense)	1,818			1,459			(1,529		)	1,748

Non-operating income (expense), net	7			24			(20		)	11
Income tax provision (benefit)	494			285			(359		)	420
Net income	1,331			1,198			(1,190		)	1,339
Net income attributable to the non-controlling interest in VMware, Inc.	—			(224		)	104			(120		)
Net income attributable to EMC Corporation	$	1,331		$	974		$	(1,086	)	$	1,219

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	EMC Information Infrastructure
	Information Storage			Enterprise Content Division			RSA Information Security			EMC Information Infrastructure			Pivotal			EMC Information Infrastructure plus Pivotal
Nine Months Ended
September 30, 2014
Revenues:
Product revenues	$	7,447		$	108		$	323		$	7,878		$	43		$	7,921
Services revenues	4,260			358			425			5,043			118			5,161
Total consolidated revenues	11,707			466			748			12,921			161			13,082

Gross profit	$	6,405		$	300		$	497		$	7,202		$	71		$	7,273
Gross profit percentage	54.7		%	64.4		%	66.4		%	55.7		%	44.3		%	55.6		%

Research and development										1,106			98			1,204
Selling, general and administrative										3,388			133			3,521
Restructuring and acquisition-related charges										—			—			—
Total operating expenses										4,494			231			4,725
Operating income (expense)										$	2,708		$	(160	)	$	2,548



	EMC Information Infrastructure plus Pivotal			VMware Virtual Infrastructure			Corp Reconciling Items			Consolidated
Nine Months Ended
September 30, 2014
Revenues:
Product revenues	$	7,921		$	1,807		$	—		$	9,728
Services revenues	5,161			2,502			—			7,663
Total consolidated revenues	13,082			4,309			—			17,391

Gross profit	$	7,273		$	3,761		$	(290	)	$	10,744
Gross profit percentage	55.6		%	87.3		%	—		%	61.8		%

Research and development	1,204			737			298			2,239
Selling, general and administrative	3,521			1,725			606			5,852
Restructuring and acquisition-related charges	—			—			187			187
Total operating expenses	4,725			2,462			1,091			8,278

Operating income (expense)	2,548			1,299			(1,381		)	2,466

Non-operating income (expense), net	(285		)	21			11			(253		)
Income tax provision (benefit)	584			274			(326		)	532
Net income	1,679			1,046			(1,044		)	1,681
Net income attributable to the non-controlling interest in VMware, Inc.	—			(211		)	98			(113		)
Net income attributable to EMC Corporation	$	1,679		$	835		$	(946	)	$	1,568

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EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 millions):



	For the Three Months Ended				For the Nine Months Ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
United States	$	3,318	$	3,212	$	9,602	$	9,102
Europe, Middle East and Africa	1,630		1,672		4,811		4,933
Asia Pacific and Japan	787		821		2,311		2,346
Latin America, Mexico and Canada	344		327		965		1,010
Total	$	6,079	$	6,032	$	17,689	$	17,391

No country other than the United States accounted for 10% or more of revenues during the three and nine months ended September 30, 2015 or 2014.

Long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets, in the United States were $4,496 million at September 30, 2015 and $4,355 million at December 31, 2014. Internationally, long-lived assets, excluding financial instruments, deferred tax assets, goodwill and intangible assets, were $985 million at September 30, 2015 and $1,021 million at December 31, 2014. No country other than the United States accounted for 10% or more of total long-lived assets, excluding financial instruments and deferred tax assets, at September 30, 2015 or December 31, 2014.

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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.

Certain tables may not add or recalculate due to rounding.

INTRODUCTION

We manage our company as a federation of businesses to capitalize on the emerging and rapidly growing trends of cloud computing, Big Data, mobile, social networking and security. Our federated businesses include EMC Information Infrastructure, Pivotal, VMware Virtual Infrastructure and Virtustream, which we acquired on July 9, 2015, to further develop our cloud services strategy.

To capitalize on these trends and align our businesses effectively, we have developed a market growth strategy that has four main pillars: our best-in class products and solutions that are or will be offered as a service, our continued focus on cloud services for both on and off premise implementations, a coordinated go-to-market approach led by a federation go-to-market organization and our leadership team and global talent. We believe these strategies enable us to become a more trusted partner to our customers as they embark on their digital transformation and transition to the hybrid cloud, and to drive the overall revenue and growth opportunity of EMC Information Infrastructure and the faster growth opportunities of VMware Virtual Infrastructure, Pivotal and Virtustream. Additionally, we recently announced our intention to form a cloud services business in the first quarter of 2016, by combining EMC managed services business and Virtustream with VMware’s vCloud Air to address the large market potential for cloud offerings across hybrid cloud, mission critical workloads, and managed cloud environments.

We continue to invest in the best technology and in building the most complete portfolio. Included within these investments are our six key areas of growth opportunities that further strengthen our ability to help customers meet their top IT priorities: Pivotal; AirWatch; NSX; DSSD; ViPR, Elastic Cloud Storage, ScaleIO; and XtremIO. The ability of our federated businesses to work together results in differentiated solutions, including Enterprise Hybrid Cloud and Business Data Lakes, with broad transformational capabilities which allow our customers to maximize their control, efficiency and choice.

In the second quarter of 2015, we initiated a cost reduction and business transformation program to better align our expenses and improve the operations of our federation of businesses. This program is primarily in response to increased pressure on our traditional storage businesses and accordingly, the vast majority of this program will be focused on our EMC Information Infrastructure segment. The goal of this new cost reduction and business transformation program is to reduce our current annual cost base by $850 million and currently addresses eleven major areas including direct materials procurement, facilities and manufacturing optimization and SKU simplification. We expect the $850 million reduction in our annual cost base to be achieved in 2017.

Proposed Transaction with Dell

On October 12, 2015, EMC and Denali Holding Inc. (“Parent”), the parent company of Dell Inc. (“Dell”), signed a definitive agreement (“Merger Agreement”) under which the Parent will acquire EMC Corporation, with VMware remaining a publicly-traded company. The combined company will be a leader in numerous high-growth areas of the $2 trillion information technology market, with a complementary portfolio, sales team and research and development (“R&D”) organization across four globally recognized technology franchises – servers, storage, virtualization and PCs – and brings together strong capabilities in the fast growing areas of the industry, including converged infrastructure, digital transformation, software-defined data center, hybrid cloud, mobile and security.

For additional information related to the Merger Agreement, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 13, 2015, which includes the full text of the Merger Agreement included as Exhibit 2.1.

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RESULTS OF OPERATIONS - (Continued)

EMC Information Infrastructure

Our EMC Information Infrastructure business consists of three segments: Information Storage, Enterprise Content Division, formerly known as Information Intelligence Group, and RSA Information Security. The objective for our EMC Information Infrastructure business is to simultaneously increase our market share through our strong portfolio of offerings while investing in the business. During 2015, we have continued to invest in expanding our total addressable market through increased internal R&D and through business acquisitions, with a focus on flash, Big Data storage, software-defined storage and converged infrastructure to facilitate the enablement of hybrid cloud infrastructures. We have developed a product portfolio to address customer needs that enables the adoption of hybrid cloud approaches as most enterprises and organizations embark on IT transformation initiatives incorporating both new and traditional storage architectures including converged infrastructure, cloud services, Flash, storage sharing, and software-defined and software-managed architectures.

Our go-to market model, where we continue to leverage our direct sales force and services organization, as well as our channel and services partners and service providers, positions us well to help enable customers to transition to cloud computing and benefit from Big Data in the most advantageous manner for their businesses. We offer three alternatives to help our customers transition to cloud architectures and leverage Big Data to meet these needs: our best-of-breed infrastructure products, proven infrastructure through our VSPEX reference architecture and converged infrastructure which support our federation-level solutions. Our service provider program continues to be an important part of our strategy to lead our customers to hybrid cloud infrastructures.

Pivotal

Pivotal is focused on building a platform comprising the next generation of data fabrics, application fabrics and a cloud independent platform-as-a-service (“PaaS”) to support cloud computing and Big and Fast Data Applications. The foundation of our technology platform, Pivotal Cloud Foundry (“Pivotal CF”), continues to gain momentum as an open platform for developing and operating new cloud applications that can be run on multiple leading private and public clouds, in addition to our own, and not lock a customer into any one cloud in particular. It continues to enable developers to produce next generation applications and user experiences as well as transform existing applications to operate with greater speed at lower costs. On top of this platform, Pivotal will continue to offer its own suite of big and fast data capabilities, the Big Data Suite (“BDS”), featuring game changing innovations that use Hadoop Distributed File System (“HDFS”) and scalar processing technologies. Additionally, its agile development services business, Pivotal Labs, continues to help existing customers and digital era startups build industrial-strength applications with more agility, more speed, and better quality. Pivotal is becoming an increasingly important factor in our cross-federation solutions, which offer a combination of products, converged infrastructure and services that offer a unique value proposition to customers, positioning the business for rapid growth in the future.

VMware Virtual Infrastructure

VMware is the leader in virtualization infrastructure solutions utilized by organizations to help transform the way they build, deliver and consume IT resources. VMware develops and markets its product and service offerings within three main product groups, and it leverages synergies across these three product and service areas: SDDC or Software-Defined Data Center, Hybrid Cloud Computing and End-User Computing.

VMware generally sells its solutions using enterprise agreements (“EAs”) or as part of its non-EA, transactional, business. EAs are comprehensive volume license offerings, offered both directly by VMware and through certain channel partners that also provide for multi-year maintenance and support.

Historically, the majority of VMware license sales have been from its standalone vSphere product, which is included in its compute product category within its SDDC architecture. However, over the last two years, standalone vSphere product license sales have been declining. As the transformation of the IT industry continues, VMware expects that its growth of license sales will be increasingly derived from sales of its newer products, suites and services solutions across its SDDC portfolio. Hybrid cloud computing continued to grow during the three and nine months ended September 30, 2015. VMware’s AirWatch business models include an on-premise solution that it offers through the sale of perpetual licenses and an off-premise solution that it offers as software-as-a-service. AirWatch products and services continued to contribute to the growth of its end-user computing products during the three and nine months ended September 30, 2015.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

RESULTS OF OPERATIONS

Revenues

The following tables present total revenue by our segments (in millions):



	For the Three Months Ended
	September 30, 2015		September 30, 2014		$ Change			% Change
Information Storage	$	3,961	$	4,051	$	(90	)	(2	)%
Enterprise Content Division	144		154		(10		)	(7	)%
RSA Information Security	243		261		(18		)	(7	)%
Pivotal	67		58		9			16	%
VMware Virtual Infrastructure	1,664		1,508		156			10	%
Total consolidated revenues	$	6,079	$	6,032	$	47		1	%



	For the Nine Months Ended
	September 30, 2015			September 30, 2014		$ Change			% Change
Information Storage	$	11,652		$	11,707	$	(55	)	—	%
Enterprise Content Division	436			466		(30		)	(6	)%
RSA Information Security	730			748		(18		)	(2	)%
Pivotal	185			161		24			14	%
VMware Virtual Infrastructure	4,762			4,309		453			11	%
Corporate reconciling items	(76		)	—		(76		)	—	%
Total consolidated revenues	$	17,689		$	17,391	$	298		2	%

Consolidated product revenues decreased 4% and 3% to $3,269 million and $9,399 million for both the three and nine months ended September 30, 2015, respectively. The decrease during the three month period was primarily driven by the decrease in Information Storage, somewhat offset by an increase in VMware Virtual Infrastructure. The decrease during the nine month period was primarily driven by the decrease in Information Storage as well as the VMware GSA settlement charge.

The Information Storage segment’s product revenues decreased 7% and 4% to $2,424 million and $7,113 million for the three and nine months ended September 30, 2015, respectively. These decreases were driven by the negative impact of foreign currency fluctuations and declines in our traditional storage product sales as customers continue to purchase these product categories primarily to cover short-term needs as they begin to drive digital transformation of their IT infrastructures. Additionally, customers remained cautious about their transactional spend which resulted in a higher than expected number of unshipped orders at September 30, 2015. These decreases were partially offset by an increase in revenue resulting from the consolidation of VCE. Revenue from the high-end storage business decreased 12% and 11% for the three and nine months ended September 30, 2015, respectively, and revenue from the Unified and Backup Recovery business decreased 10% during both the three and nine months ended September 30, 2015. Revenue from the Emerging Storage business increased 27% and 30% for the three and nine months ended September 30, 2015, respectively, primarily due to increased demand for XtremIO, Isilon and Software-Defined-Storage. XtremIO experienced triple-digit growth in both the three and nine months ended September 30, 2015, maintaining its lead in the all-flash-array market segment. Isilon continued to gain traction in Big Data analytics running Hadoop workloads; and our Software-Defined-Storage portfolio that includes ViPR, Elastic Cloud Storage and ScaleIO continues to add new customers.

The Pivotal segment’s product revenues increased 26% and 32% to $22 million and $57 million for the three and nine months ended September 30, 2015, respectively, due to a triple digit increase in subscription orders for Pivotal CF and BDS, partially offset by a decrease in up-front license revenue. Pivotal is benefiting from the transition to next-gen applications by the enterprise and continues to expand the number of customers adopting Pivotal CF.

The VMware Virtual Infrastructure segment’s product revenues increased 7% and 5% to $680 million and $1,899 million for the three and nine months ended September 30, 2015, respectively. VMware’s license revenues increased during the three and nine months ended September 30, 2015 primarily due to increased sales from its emerging product offerings including AirWatch mobile solutions and VMware NSX, as well as revenues from its hybrid cloud offerings. Sales of products beyond standalone vSphere, including vSphere with Operations Management, also contributed to license revenues growth, partially offset by a decline

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RESULTS OF OPERATIONS - (Continued)

in its standalone vSphere product license sales. Partially offsetting these increases was the negative impact of certain factors including lower sales of standalone vSphere, changes in foreign currency fluctuations, and increased growth derived from its hybrid cloud and SaaS offerings for which revenue is recognized over time. Growth from its hybrid and SaaS offerings has resulted in less revenue being recognized up-front which has had an adverse impact on its growth rate during 2015.

The RSA Information Security segment’s product revenues decreased 7% and 6% to $106 million and $303 million for the three and nine months ended September 30, 2015, respectively, resulting from declines in non-strategic products which more than offset growth in the rest of the RSA portfolio. Security remains a high customer priority and RSA is increasingly focused on the rapidly growing security analytics and next generation identity management solution as well as extending its market leadership in governance, risk and compliance (“GRC”) which enables them to help customers secure their cloud-based IT environments.

The Enterprise Content Division segment’s product revenues were flat at $37 million and decreased 4% to $103 million for the three and nine months ended September 30, 2015, respectively. The decrease during the nine months ended September 30, 2015 was primarily due to the timing of revenue recognition due to the increase in subscription-based offerings with ratable revenue recognition, partially offset by increased license sales during the second and third quarters. This business continues to innovate to meet customers’ demand for technologies that work seamlessly in mobile cloud environments.

Included in EMC’s consolidated product revenues in the nine months ended September 30, 2015 is the VMware GSA settlement charge. During the second quarter of 2015, VMware reached an agreement with the Department of Justice (“DOJ”) and the General Services Administration (“GSA”) to pay $76 million to resolve allegations that VMware’s government sales practices between 2006 and 2013 had violated the federal False Claims Act. The settlement was paid and recorded as a reduction to product revenues during the nine months ended September 30, 2015 and included in corporate reconciling items as noted above.

Consolidated services revenues increased 7% and 8% to $2,810 million and $8,290 million for the three and nine months ended September 30, 2015, respectively. The consolidated services revenues increases were primarily driven by the Information Storage and VMware Virtual Infrastructure segments’ services revenues resulting from increased revenue associated with maintenance services and increased demand for professional services due to growth in its license sales and solution offerings.

The Information Storage segment’s services revenues increased 6% and 7% to $1,537 million and $4,539 million for the three and nine months ended September 30, 2015, respectively. The increase in services revenues was primarily attributable to higher revenue associated with maintenance services due to a larger installed base as well as an increase in renewals associated with aforementioned customer caution on transactional spend. We have experienced a growing demand for professional services as we assist with customers’ transitions to cloud architectures, transforming IT infrastructures and virtualizing mission-critical applications.

The Pivotal segment’s services revenues increased 12% and 8% to $45 million and $128 million for the three and nine months ended September 30, 2015, respectively. Services revenues increased during both the three and nine months ended September 30, 2015 due to increases in professional services revenues resulting from continued strong demand for our Pivotal Labs services.

The VMware Virtual Infrastructure segment’s services revenues increased 13% and 14% to $984 million and $2,863 million for the three and nine months ended September 30, 2015, respectively. The increase in services revenues for both the three and nine months ended September 30, 2015 was primarily attributable to growth in VMware’s software maintenance revenues which benefited from renewals, multi-year software maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with new software license sales. In addition, professional services increased during both periods compared to the same periods in the prior year due to growth in VMware’s license sales and solution offerings.

The RSA Information Security segment’s services revenues decreased 7% to $137 million and increased slightly to $427 million for the three and nine months ended September 30, 2015, respectively. Services revenues decreased during the three months ended September 30, 2015 primarily due to decreases in professional services. Services revenues increased slightly during the nine months ended September 30, 2015 due to increases in maintenance revenues, resulting from continued demand for support from its installed base, somewhat offset by decreases in professional services.

The Enterprise Content Division segment’s services revenues decreased 9% and 7% to $107 million and $333 million for the three and nine months ended September 30, 2015, respectively. Services revenues decreased due to decreases in both maintenance and professional services.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Consolidated revenues by geography were as follows (in millions):



	For the Three Months Ended
	September 30, 2015		September 30, 2014		% Change
	September 30, 2015		September 30, 2014		% Change
United States	$	3,318	$	3,212	3	%
Europe, Middle East and Africa	1,630		1,672		(3	)%
Asia Pacific and Japan	787		821		(4	)%
Latin America, Mexico and Canada	344		327		5	%
Total revenues	$	6,079	$	6,032	1	%



	For the Nine Months Ended
	September 30, 2015		September 30, 2014		% Change
	September 30, 2015		September 30, 2014		% Change
United States	$	9,602	$	9,102	5	%
Europe, Middle East and Africa	4,811		4,933		(2	)%
Asia Pacific and Japan	2,311		2,346		(1	)%
Latin America, Mexico and Canada	965		1,010		(4	)%
Total revenues	$	17,689	$	17,391	2	%

Revenues increased in the three and nine months ended September 30, 2015 compared to the same periods in 2014 in the United States. Revenues decreased in the three and nine months ended September 30, 2015 compared to the same periods in 2014 in Europe, Middle East and Africa and in the Asia Pacific and Japan regions. Revenues increased in the three months and decreased in the nine months ended September 30, 2015 compared to the same periods in 2014 in Latin America, Mexico and Canada.

Changes in exchange rates negatively impacted consolidated revenue growth by 4% for both the three and nine months ended September 30, 2015. Changes in exchange rates which impacted consolidated revenues include negative impacts to growth in Europe, Middle East and Africa by 3% and Asia Pacific and Japan by 1% for both the three and nine months ended September 30, 2015. The negative impact of the change in rates was most significant for the Euro, Japanese Yen, Australian dollar, British pound and Brazilian real.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Costs and Expenses

The following tables present our costs and expenses, operating income and net income attributable to EMC Corporation (in millions):



	For the Three Months Ended
	September 30, 2015			September 30, 2014			$ Change			% Change
	September 30, 2015			September 30, 2014			$ Change			% Change
Cost of revenue:
Information Storage	$	1,890		$	1,813		$	77		4	%
Enterprise Content Division	47			54			(7		)	(12	)%
RSA Information Security	80			88			(8		)	(8	)%
Pivotal	43			31			12			39	%
VMware Virtual Infrastructure	213			204			9			5	%
Corporate reconciling items	101			99			2			2	%
Total cost of revenue	2,374			2,289			85			4	%
Gross margins:
Information Storage	2,071			2,238			(167		)	(7	)%
Enterprise Content Division	97			100			(3		)	(4	)%
RSA Information Security	163			173			(10		)	(6	)%
Pivotal	24			27			(3		)	(10	)%
VMware Virtual Infrastructure	1,451			1,304			147			11	%
Corporate reconciling items	(101		)	(99		)	(2		)	2	%
Total gross margin	3,705			3,743			(38		)	(1	)%
Operating expenses:
Research and development⁽¹⁾	802			767			35			5	%
Selling, general and administrative⁽²⁾	2,145			1,990			155			8	%
Restructuring and acquisition-related charges	68			39			29			76	%
Total operating expenses	3,015			2,796			219			8	%
Operating income	690			947			(257		)	(27	)%
Investment income, interest expense and other expenses, net	6			(114		)	120			(106	)%
Income before provision for income taxes	696			833			(137		)	(16	)%
Income tax provision	168			206			(38		)	(18	)%
Net income	528			627			(99		)	(16	)%
Less: Net income attributable to the non-controlling interest in VMware, Inc.	(48		)	(40		)	(8		)	21	%
Net income attributable to EMC Corporation	$	480		$	587		$	(107	)	(18	)%

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	For the Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change			% Change
	September 30, 2015			September 30, 2014			$ Change			% Change
Cost of revenue:
Information Storage	$	5,638		$	5,302		$	336		6	%
Enterprise Content Division	145			166			(21		)	(13	)%
RSA Information Security	243			251			(8		)	(3	)%
Pivotal	114			90			24			26	%
VMware Virtual Infrastructure	619			548			71			13	%
Corporate reconciling items	299			290			9			3	%
Total cost of revenue	7,058			6,647			411			6	%
Gross margins:
Information Storage	6,014			6,405			(391		)	(6	)%
Enterprise Content Division	291			300			(9		)	(3	)%
RSA Information Security	487			497			(10		)	(2	)%
Pivotal	71			71			—			—	%
VMware Virtual Infrastructure	4,143			3,761			382			10	%
Corporate reconciling items	(375		)	(290		)	(85		)	29	%
Total gross margin	10,631			10,744			(113		)	(1	)%
Operating expenses:
Research and development⁽³⁾	2,372			2,239			133			6	%
Selling, general and administrative⁽⁴⁾	6,285			5,852			433			7	%
Restructuring and acquisition-related charges	226			187			39			21	%
Total operating expenses	8,883			8,278			605			7	%
Operating income	1,748			2,466			(718		)	(29	)%
Investment income, interest expense and other expenses, net	11			(253		)	264			(104	)%
Income before provision for income taxes	1,759			2,213			(454		)	(21	)%
Income tax provision	420			532			(112		)	(21	)%
Net income	1,339			1,681			(342		)	(20	)%
Less: Net income attributable to the non-controlling interest in VMware, Inc.	(120		)	(113		)	(7		)	5	%
Net income attributable to EMC Corporation	$	1,219		$	1,568		$	(349	)	(22	)%

___________


(1)	Amount includes corporate reconciling items of $103 million and $99 million for the three months ended September 30, 2015 and 2014, respectively.


(2)	Amount includes corporate reconciling items of $220 million and $212 million for the three months ended September 30, 2015 and 2014, respectively.


(3)	Amount includes corporate reconciling items of $286 million and $298 million for the nine months ended September 30, 2015 and 2014, respectively.


(4)	Amount includes corporate reconciling items of $642 million and $606 million for the nine months ended September 30, 2015 and 2014, respectively.

Gross Margins

Overall our gross margin percentages were 60.9% and 62.0% for the three months ended September 30, 2015 and 2014, respectively. The decrease in the gross margin percentage in the three months ended September 30, 2015 compared to 2014 was attributable to the Information Storage segment, which decreased overall gross margins by 180 basis points, and the Pivotal segment, which decreased overall gross margin by 14 basis points. This decrease was partially offset by the VMware Virtual Infrastructure segment, which increased overall gross margins by 82 basis points, the Enterprise Content Division segment, which increased overall gross margins by 4 basis points and the RSA Information Security segment, which increased overall gross margins by 1 basis point. In addition, the increase in corporate reconciling items, consisting of stock-based compensation and intangible asset amortization, decreased the consolidated gross margin percentage by 4 basis points.

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Overall our gross margin percentages were 60.1% and 61.8% for the nine months ended September 30, 2015 and 2014, respectively. The decrease in the gross margin percentage in the nine months ended September 30, 2015 compared to 2014 was attributable to the Information Storage segment, which decreased overall gross margins by 202 basis points, and the Pivotal segment, which decreased overall gross margins by 8 basis points. These decreases were partially offset by the VMware Virtual Infrastructure segment, which increased overall gross margins by 58 basis points, the RSA Information Security segment, which increased overall gross margins by 2 basis points, and the Enterprise Content Division segment, which increased overall gross margins by 5 basis points. In addition, the increase in corporate reconciling items, consisting of stock-based compensation and intangible asset amortization, decreased the consolidated gross margin percentage by 22 basis points.

The gross margin percentages for the Information Storage segment were 52.3% and 55.2% for the three months ended September 30, 2015 and 2014, respectively, and 51.6% and 54.7% for the nine months ended September 30, 2015 and 2014, respectively. The decrease in gross margin percentage for the three and nine months ended September 30, 2015 compared to the same periods in 2014 was primarily due to the consolidation of VCE and foreign currency impacts to revenue that do not impact costs in the same manner, as our costs of sales tend to have less exposure to currency volatility. In addition, there were lower product volumes during the three and nine months ended September 30, 2015 compared to the same periods in 2014. These decreases were partially offset by an increase in the mix of services revenues which have higher gross margins.

The gross margin percentages for the Pivotal segment were 36.2% and 46.9% for the three months ended September 30, 2015 and 2014, respectively, and 38.7% and 44.3% for the nine months ended September 30, 2015 and 2014, respectively. The decrease in gross margin percentage for the three and nine months ended September 30, 2015 compared to the same periods in 2014 was primarily due to a decrease in professional service margins due to the higher mix of professional services relative to agile development services.

The gross margin percentages for the VMware Virtual Infrastructure segment were 87.2% and 86.5% for the three months ended September 30, 2015 and 2014, respectively, and 87.0% and 87.3% for the nine months ended September 30, 2015 and 2014, respectively. The increase in gross margin percentage for the three months ended September 30, 2015 was due to slight increases in both product and service margins due to higher sales volume. The decrease in gross margin percentage for the nine months ended September 30, 2015 compared to the same period in 2014 was due to a higher mix of services revenues which have lower margins. In addition, costs of services revenues were higher than the comparable period in the prior year due to employee-related expenses resulting from organic growth in headcount. VMware’s acquisition of AirWatch, which occurred during the three months ended March 31, 2014, also contributed to the growth in employee-related expenses during the nine months ended September 30, 2015. Also contributing to the decrease in margin for the nine months ended September 30, 2015 was the growth in its SaaS and professional services offerings which led to an increase in professional services costs and increases in costs incurred to provide technical support as well as increases in equipment and depreciation costs.

The gross margin percentages for the RSA Information Security segment were 66.9% and 66.3% for the three months ended September 30, 2015 and 2014, respectively, and 66.7% and 66.4% for the nine months ended September 30, 2015 and 2014, respectively. Gross margins increased slightly for both the three and nine months ended September 30, 2015 compared to the same periods in 2014 due to slight increases in both product and services margins.

The gross margin percentages for the Enterprise Content Division segment were 67.3% and 65.2% for the three months ended September 30, 2015 and 2014, respectively, and 66.8% and 64.4% for the nine months ended September 30, 2015 and 2014, respectively. The increase in gross margin percentage for the three and nine months ended September 30, 2015 compared to the same periods in 2014 was driven by an increase in the mix of license revenues which have higher margins.

For segment reporting purposes, stock-based compensation and intangible asset amortization are recognized as corporate expenses and are not allocated among our various operating segments. The increase of $85 million in the corporate reconciling items impacting gross margins for the nine months ended September 30, 2015 compared to the same period in 2014 was primarily attributable to the VMware GSA settlement. Also contributing to the increase for the nine months ended September 30, 2015 was a $6 million increase in intangible asset amortization.

Research and Development

Research and development expenses include payroll, stock-based compensation expense and other personnel-related costs associated with product development. Also included in R&D expenses are infrastructure costs, which consist of equipment and facilities costs, and depreciation expense, intangible asset amortization and capitalized software development costs.

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The following table summarizes our consolidated R&D expenses for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Research and development	$	802		$	767		$	35	5	%	$	2,372		$	2,239		$	133	6	%
Percentage of revenue	13		%	13		%					13		%	13		%

The increase in R&D expenses for the three months ended September 30, 2015 compared to 2014 was attributable to the EMC Information Infrastructure business, which increased overall R&D expenses by $25 million and the VMware Virtual Infrastructure business, which increased overall R&D expenses by $11 million. In addition, corporate reconciling items increased consolidated R&D expenses by $4 million. These increases were partially offset by the Pivotal business, which decreased overall R&D expenses by $5 million.

The increase in R&D expenses for the nine months ended September 30, 2015 compared to 2014 was attributable to the EMC Information Infrastructure business, which increased overall R&D expenses by $113 million and the VMware Virtual Infrastructure business, which increased overall R&D expenses by $51 million. These increases were partially offset by the Pivotal business, which decreased overall R&D expenses by $19 million. In addition, the decrease in corporate reconciling items decreased consolidated R&D expenses by $12 million.

The following table summarizes R&D expenses within EMC’s Information Infrastructure business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Research and development	$	397		$	372		$	25	7	%	$	1,219		$	1,106		$	113	10	%
Percentage of revenue	9		%	8		%					10		%	9		%

R&D expenses within EMC’s Information Infrastructure business increased for the three and nine months ended September 30, 2015 primarily due to increases in personnel-related costs, which are expenses driven by incremental headcount from strategic hiring and business acquisitions, and infrastructure costs. Personnel-related costs increased by $24 million and $73 million for the three and nine months ended September 30, 2015, respectively, primarily due to the consolidation of VCE and increased investments in our Emerging Storage business, partially offset by decreases in our traditional storage businesses. Also, infrastructure costs increased by $5 million and $27 million and depreciation related expense increased by $9 million and $25 million for the three and nine months ended September 30, 2015, respectively, as EMC continues to develop product software and service offerings. These increases were partially offset by a decrease in capitalized software development cost of $12 million and $32 million for the three and nine months ended September 30, 2015, respectively.

The following table summarizes R&D expenses within the Pivotal business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended											Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change			% Change		September 30, 2015			September 30, 2014			$ Change			% Change
Research and development	$	28		$	33		$	(5	)	(16	)%	$	79		$	98		$	(19	)	(19	)%
Percentage of revenue	41		%	56		%						43		%	61		%

R&D expenses within the Pivotal business decreased for the three and nine months ended September 30, 2015 primarily due to a decrease in personnel-related costs as the business transitioned away from non-strategic offerings during 2014.

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The following table summarizes R&D expenses within the VMware Virtual Infrastructure business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Research and development	$	274		$	263		$	11	4	%	$	788		$	737		$	51	7	%
Percentage of revenue	16		%	17		%					17		%	17		%

R&D expenses within the VMware Virtual Infrastructure business increased for the three and nine months ended September 30, 2015 primarily due to growth in personnel-related expenses of $14 million and $50 million, respectively, due to organic growth in headcount and through the AirWatch acquisition, which was partially offset by the positive impact from fluctuations in the exchange rate between the U.S. dollar and foreign currencies. Additionally, depreciation related R&D expenses within the VMware Virtual Infrastructure business decreased for both the three and nine months ended September 30, 2015.

The following table summarizes corporate reconciling items within R&D expenses for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended								Nine Months Ended
	September 30, 2015		September 30, 2014		$ Change		% Change		September 30, 2015		September 30, 2014		$ Change			% Change
Corporate reconciling items	$	103	$	99	$	4	4	%	$	286	$	298	$	(12	)	(4	)%

Corporate reconciling items within R&D, which consist of stock-based compensation expense and intangible asset amortization, increased for the three months ended September 30, 2015 primarily due to stock-based compensation expense, which increased by $6 million. For the nine months ended September 30, 2015, corporate reconciling items decreased primarily due to intangible asset amortization, which decreased by $5 million.

Selling, General and Administrative

Selling expenses include payroll, sales commissions, stock-based compensation expense and other personnel-related costs associated with the marketing and sale of product offerings. Also included in selling expenses are product launch and business development costs, including travel expenses, as well as equipment and facilities costs, including the related depreciation expense and intangible asset amortization. General and administrative expenses include payroll, stock-based compensation expense and other personnel-related costs incurred to support the overall business. These expenses include costs associated with the finance, human resources, legal and other administrative functions and initiatives.

The following table summarizes our consolidated selling, general and administrative (“SG&A”) expenses for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Selling, general and administrative	$	2,145		$	1,990		$	155	8	%	$	6,285		$	5,852		$	433	7	%
Percentage of revenue	35		%	33		%					36		%	34		%

The increase in SG&A expenses for the three months ended September 30, 2015 compared to 2014 was attributable to the Information Infrastructure business, which increased overall SG&A expenses by $74 million, the VMware Virtual Infrastructure business, which increased overall SG&A expenses by $65 million and the Pivotal business, which increased overall SG&A expenses by $8 million. In addition, corporate reconciling items increased consolidated SG&A expenses by $8 million.

The increase in SG&A expenses for the nine months ended September 30, 2015 compared to 2014 was attributable to the Information Infrastructure business, which increased overall SG&A expenses by $203 million, the VMware Virtual Infrastructure business, which increased overall SG&A expenses by $171 million and the Pivotal business, which increased overall SG&A expenses by $23 million. In addition, the increase in corporate reconciling items increased consolidated SG&A expenses by $36 million.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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The following table summarizes SG&A expenses within EMC’s Information Infrastructure business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Selling, general and administrative	$	1,220		$	1,146		$	74	6	%	$	3,591		$	3,388		$	203	6	%
Percentage of revenue	28		%	26		%					28		%	26		%

SG&A expenses within EMC’s Information Infrastructure business increased for the three and nine months ended September 30, 2015 primarily due to personnel-related costs, which are expenses driven by incremental headcount from strategic hiring and business acquisitions. Personnel-related costs increased $60 million and $195 million and infrastructure cost increased $15 million and $14 million for the three and nine months ended September 30, 2015, respectively, primarily due to the consolidation of VCE, the acquisition of Virtustream and increased investments in our Emerging Storage business, partially offset by decreases in our traditional storage businesses. Partially offsetting the increase was a decrease in business development costs of $7 million and $9 million for the three and nine months ended September 30, 2015, respectively.

The following table summarizes SG&A expenses within the Pivotal business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Selling, general and administrative	$	54		$	46		$	8	17	%	$	156		$	133		$	23	17	%
Percentage of revenue	81		%	80		%					84		%	82		%

SG&A expenses within the Pivotal business increased for the three and nine months ended September 30, 2015 primarily due to personnel-related costs, which are expenses driven by incremental headcount from strategic hiring and business acquisitions. Personnel-related costs increased by $6 million and $13 million for the three and nine months ended September 30, 2015, respectively, as the business continues to build out its go-to-market capabilities.

The following table summarizes SG&A expenses within the VMware Virtual Infrastructure business for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended										Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change		% Change		September 30, 2015			September 30, 2014			$ Change		% Change
Selling, general and administrative	$	651		$	586		$	65	11	%	$	1,896		$	1,725		$	171	10	%
Percentage of revenue	39		%	39		%					40		%	40		%

SG&A expenses within the VMware Virtual Infrastructure business increased for the three and nine months ended September 30, 2015 primarily due to growth in personnel-related costs of $24 million and $90 million, respectively, due to organic growth in headcount and through the AirWatch acquisition, which was partially offset by the positive impact from fluctuations in the exchange rate between the U.S. dollar and foreign currencies. Additionally, charitable donations, infrastructure and business development costs increased during the three and nine months ended September 30, 2015.

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The following table summarizes corporate reconciling items within SG&A expenses for the three and nine months ended September 30, 2015 and 2014 (dollars in millions):



	Three Months Ended								Nine Months Ended
	September 30, 2015		September 30, 2014		$ Change		% Change		September 30, 2015		September 30, 2014		$ Change		% Change
Corporate reconciling items	$	220	$	212	$	8	4	%	$	642	$	606	$	36	6	%

Corporate reconciling items within SG&A, which consist of stock-based compensation, intangible asset amortization and acquisition and other related charges, increased for the three and nine months ended September 30, 2015, which was primarily due to an increase in stock-based compensation of $19 million and $23 million for the three and nine months ended September 30, 2015, respectively. The increase in corporate reconciling items for the nine months ended September 30, 2015 was due to an increase in acquisition and other related charges of $15 million, relating to the specified future employment conditions of AirWatch and DSSD employees.

Restructuring and Acquisition-Related Charges

In the second quarter of 2015, we initiated a cost reduction and business transformation program to better align our expenses and improve the operations of our federation of businesses. We expect to incur restructuring charges related to this program once the details are finalized and approved during the fourth quarter of 2015.

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recognized $2 million and $10 million, respectively, of lease termination costs for facilities vacated in the period in accordance with our plan as part of all of our restructuring programs and for costs associated with terminating other contractual obligations. These costs are expected to be utilized by the end of 2016.

Investment Income

Investment income was $25 million and $76 million for the three and nine months ended September 30, 2015, respectively. Investment income was $29 million and $100 million for the three and nine months ended September 30, 2014, respectively. Investment income decreased for both the three and nine months ended September 30, 2015 when compared to the same periods in 2014 primarily due to a decrease in net realized gains.

For the three and nine months ended September 30, 2015, interest income was $28 million and $79 million, respectively, and net realized losses were $4 million and $6 million, respectively. For the three and nine months ended September 30, 2014, interest income was $24 million and $76 million, respectively, and net realized gains were $3 million and $19 million, respectively.

Interest Expense

Interest expense was $41 million and $121 million for the three and nine months ended September 30, 2015, respectively. Interest expense was $40 million and $108 million for the three and nine months ended September 30, 2014, respectively. Interest expense during the three and nine months ended September 30, 2015 and 2014 consists primarily of interest on the $5.5 billion aggregate principal amount of senior notes (collectively, the “Notes”), which we issued in June 2013.

The increase in interest expense for the three and nine months ended September 30, 2015 when compared to the same periods in 2014 is due primarily to the amortization of interest rate swap losses of $17 million during the nine months ended September 30, 2015, compared to $6 million in the nine months ended September 30, 2014.

Other Income (Expense), Net

Other income, net was $22 million and $56 million for the three and nine months ended September 30, 2015, respectively. Other expense, net was $103 million and $245 million for the three and nine months ended September 30, 2014, respectively. Other income (expense), net primarily consists of net gains and losses on strategic investments and foreign exchange gains and losses. During 2014, other income (expense), net also included our consolidated share of the losses from our converged infrastructure joint venture, VCE Company LLC (“VCE”).

During the three months ended September 30, 2015, we recognized net gains from strategic investments of $16 million. During the nine months ended September 30, 2015, we recognized net gains from strategic investments of $66 million and foreign currency exchange gains of $7 million. These gains were partially offset by a fair value adjustment on an asset held for sale of $20 million for the nine months ended September 30, 2015.

During the three months ended September 30, 2014, we recognized net gains from strategic investments which were offset by foreign currency exchange losses. During the nine months ended September 30, 2014, we recognized net gains from strategic investments of $39 million. Included in the net gains on strategic investments during the nine months ended September 30, 2014 was a gain on previously held interests in strategic investments of $45 million and an impairment of a strategic investment of $33 million.

Prior to EMC’s acquisition of the controlling interest in VCE in December 2014, the VCE joint venture had been accounted for under the equity method and our consolidated share of VCE’s losses was based upon our portion of the overall funding. This represented our share of the net losses of the joint venture, net of equity accounting adjustments. During the three and nine months ended September 30, 2014, we incurred losses related to VCE of $101 million and $261 million, respectively.

Provision for Income Taxes

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subsidiaries. For the three and nine months ended September 30, 2014, the effective income tax rate varied from the statutory income tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions and state taxes. On December 19, 2014, the Tax Increase Prevention Act was signed into law. Some of the provisions were retroactive to January 1, 2014 including an extension of the U.S. federal tax credit for increasing research activities through December 31, 2014. Our effective income tax rates for the three and nine months ended September 30, 2015 and 2014 do not reflect any federal tax credit for increasing research activities.

Our effective income tax rate for the remainder of 2015 may be affected by such factors as changes in tax laws, regulations or income tax rates, changing interpretation of existing laws or regulations, the impact of accounting for stock-based compensation, the impact of accounting for business combinations, changes in our international organization, and changes in overall levels of income before provision for income taxes. Our effective income tax rate may also be adversely affected by earnings being lower than anticipated in countries where we have lower statutory income tax rates and higher than anticipated in countries where we have higher statutory income tax rates.

Non-controlling Interest in VMware, Inc.

The net income attributable to the non-controlling interest in VMware was $48 million and $40 million for the three months ended September 30, 2015 and 2014, respectively, and was $120 million and $113 million for the nine months ended September 30, 2015 and 2014, respectively. The slight increase in the three and nine months ended September 30, 2015 compared to the same periods in 2014 was due to increases in VMware’s reported net income. VMware’s reported net income was $256 million and $194 million for the three months ended September 30, 2015 and 2014, respectively, and was $623 million and $560 million for the nine months ended September 30, 2015 and 2014, respectively. The weighted average non-controlling interest in VMware was approximately 19% for both the three and nine months ended September 30, 2015, and was approximately 20% for both the three and nine months ended September 30, 2014. EMC did not purchase any shares of VMware common stock during the three and nine months ended September 30, 2015.

Financial Condition

Proposed Transaction with Dell

On October 12, 2015, EMC and Denali signed a definitive Merger Agreement. EMC has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. In addition, without the consent of Parent, we may not take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including acquiring businesses or incurring capital expenditures above specified thresholds, issuing additional debt facilities, and repurchasing outstanding EMC common stock. We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements for the next twelve months.

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Cash, Cash Equivalents and Investments

At September 30, 2015, our total cash, cash equivalents, and short-term and long-term investments were $14.3 billion. This balance includes approximately $7.2 billion held by VMware, of which $5.7 billion is held overseas and $1.5 billion is held in the U.S. and $7.1 billion held by EMC, of which $5.7 billion is held overseas and $1.4 billion is held in the U.S. If these overseas funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Under the terms of the Merger Agreement, EMC is required to provide Parent with access to EMC’s cash to help fund the Merger consideration. At this time, EMC has not finalized its plan to access such cash and has not determined if there would be a need to repatriate cash to meet the requirements of the Merger. If these overseas funds are required to be repatriated to the U.S. in accordance with the Merger Agreement, we may be required to accrue and pay U.S. taxes to repatriate these funds.

We expect that existing domestic cash and cash equivalents, together with any cash generated from operations, will be sufficient to meet normal operating requirements for the next twelve months. We expect to continue to generate positive cash flows from operations and to use cash generated by operations as a primary source of liquidity. Should we require more capital than is generated by our operations to fund discretionary activities, such as business acquisitions and share repurchases, we have the ability to raise capital through the issuance of commercial paper or by drawing on our credit facility at reasonable interest rates.

Cash Flow

The following table summarizes our cash flow activity for the nine months ended September 30, 2015 and 2014 (in millions):



	For the Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change
Cash provided by operating activities	$	3,516		$	4,292		$	(776	)
Cash used in investing activities	(3,050		)	(2,606		)	(444		)
Cash used in financing activities	(1,346		)	(3,438		)	2,092
Effect of exchange rates on cash and cash equivalents	(139		)	(84		)	(55		)
Net decrease in cash and cash equivalents	$	(1,019	)	$	(1,836	)	$	817

Cash provided by operating activities consists primarily of cash collections from our customers somewhat offset by cash used for employee related expenditures, cash paid to suppliers for material and manufacturing costs and income tax payments.

The following table summarizes the primary drivers of the decrease in cash provided by operating activities for the nine months ended September 30, 2015 and 2014 (in millions):



	For the Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change
Cash received from customers	$	19,375		$	19,005		$	370
Cash paid to suppliers and employees	(14,894		)	(13,868		)	(1,026		)
Income taxes paid	(995		)	(897		)	(98		)

Net cash provided by operating activities decreased by $776 million to $3,516 million for the nine months ended September 30, 2015 compared to the same period in 2014 primarily due to an increase in cash paid to suppliers and employees due to general growth in the business to support the increased revenue base as well as income tax payments, which 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

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

tax audits, and which increased primarily due to higher pre-tax income in 2014 compared to 2013. These were partially offset by an increase in cash received from customers, attributable to an increase in sales volume.

Cash used in investing activities consists primarily of the timing of purchases, sales and maturities of our investments in available-for-sale securities, business acquisitions and the purchase of capital and other assets.

The following table summarizes the primary drivers of the increase in cash used in investing activities for the nine months ended September 30, 2015 and 2014 (in millions):



	For the Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change
Net (purchases) sales of available-for-sale securities	$	(699	)	$	542		$	(1,241	)
Business acquisitions, net of cash acquired	(1,304		)	(1,771		)	467

Net cash used in investing activities decreased by $444 million to $3,050 million for the nine months ended September 30, 2015 compared to the same period in 2014 primarily due to a decrease in cash spent on business acquisitions, partially offset by an increase in cash used in the net purchases and sales of available-for-sale securities. Acquisition activity varies from period to period based upon the number and size of acquisitions in a given period. During 2014, EMC had significant acquisition activity and VMware spent $1,068 million on the AirWatch acquisition. During the third quarter of 2015, EMC paid $1,219 million in net cash to acquire Virtustream. The net purchase and sales of available-for-sale securities varies from period to period based upon our cash collections, cash requirements and maturity dates of our investments as well as cash available after the issuance and payment of debt.

Cash used in financing activities consists primarily of net proceeds or payments from the issuance or repayment of short-term and long-term debt as well as proceeds from the issuance of common stock, stock repurchases and dividend payments.

The following table summarizes the primary drivers of the decrease in cash used in financing activities for the nine months ended September 30, 2015 and 2014 (in millions):



	For the Nine Months Ended
	September 30, 2015			September 30, 2014			$ Change
Repurchase of EMC and VMware common stock	$	(3,113	)	$	(1,824	)	$	(1,289	)
Payment of long-term obligations	—			(1,665		)	1,665
Net proceeds from the issuance of short-term obligations	1,968			—			1,968

Net cash used in financing activities decreased by $2,092 million to $1,346 million for the nine months ended September 30, 2015 compared to the same period in 2014 primarily due to cash inflows related to the net proceeds from the issuance of Commercial Paper in 2015 and cash outflows related to the repayment of convertible debt in 2014. These were partially offset by an increase in cash spent on EMC and VMware stock repurchases during 2015. During the nine months ended September 30, 2015 and 2014, we continued to return value to shareholders by spending cash to repurchase shares as part of our greater capital allocation strategy.

Share Repurchase

During the nine months ended September 30, 2015 and 2014, we spent $2,063 million and $1,374 million, respectively, to repurchase 76 million and 52 million shares of our common stock, and VMware spent $1,050 million and $450 million, respectively, to repurchase 13 million and 5 million shares of their common stock.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Dividends

Our Board of Directors declared the following dividends during 2015 and 2014:



Declaration Date	Dividend Per Share		Record Date	Total Amount (in millions)		Payment Date
2015:
February 27, 2015	$	0.115	April 1, 2015	$	229	April 23, 2015
May 20, 2015	$	0.115	July 1, 2015	$	226	July 23, 2015
July 30, 2015	$	0.115	October 1, 2015	$	229	October 23, 2015

2014:
February 6, 2014	$	0.10	April 1, 2014	$	209	April 23, 2014
April 17, 2014	$	0.115	July 1, 2014	$	237	July 23, 2014
July 30, 2014	$	0.115	October 1, 2014	$	239	October 23, 2014
December 9, 2014	$	0.115	January 2, 2015	$	234	January 23, 2015

Short-Term Debt

On February 27, 2015, we entered into a credit agreement with the lenders named therein, Citibank, N.A., as Administrative Agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as Syndication Agents, and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Bookrunners (the “Credit Agreement”). The Credit Agreement provides for a $2.5 billion unsecured revolving credit facility to be used for general corporate purposes that is scheduled to mature on February 27, 2020. At our option, subject to certain conditions, any loan under the Credit Agreement will bear interest at a rate equal to, either (i) the LIBOR Rate or (ii) the Base Rate (defined as the highest of (a) the Federal Funds rate plus 0.50%, (b) Citibank, N.A.’s “prime rate” as announced from time to time, or (c) one-month LIBOR plus 1.00%), plus, in each case the Applicable Margin, as defined in the Credit Agreement. The Credit Agreement contains customary representations and warranties, covenants and events of default. We may also, upon the agreement of the existing lenders and/or additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $1.0 billion. In addition, we may request to extend the maturity date of the credit facility, subject to certain conditions, for additional one-year periods. As of September 30, 2015, we were in compliance with required covenants and we had not borrowed any funds under the credit facility. At November 6, 2015, we had $600 million borrowed under the credit facility.

Long-Term Debt

In June 2013, we issued $5.5 billion aggregate principal amount of senior Notes which pay a fixed rate of interest semi-annually in arrears. The first interest payment occurred on December 2, 2013. The proceeds from the Notes have been used to satisfy the cash payment obligation of the converted $1.725 billion 1.75% convertible senior notes due 2013 Notes (“2013 Notes”) as well as for general corporate purposes including stock repurchases, business acquisitions, dividend payments, working capital needs and other business opportunities. The Notes of each series are senior, unsecured obligations of EMC and are not convertible or exchangeable. Unless previously purchased and canceled, we will repay the Notes of each series at 100% of the principal amount, together with accrued and unpaid interest thereon, at maturity. However, EMC has the right to redeem any or all of the Notes at specified redemption prices. As of September 30, 2015, we were in compliance with all debt covenants, which are customary in nature.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Convertible Debt

In November 2006, we issued $1.725 billion 1.75% convertible senior notes due 2013. The 2013 Notes matured and a majority of the noteholders exercised their right to convert the outstanding 2013 Notes as of December 31, 2013. Pursuant to the settlement terms, the majority of the converted 2013 Notes were settled on January 7, 2014. At that time, we paid the noteholders $1.7 billion in cash for the outstanding principal and 35 million shares for the $858 million in excess of the conversion value over the principal amount, as prescribed by the terms of the 2013 Notes.

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

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). EMC uses certain non-GAAP financial measures, which exclude stock-based compensation, intangible asset amortization, restructuring charges, acquisition and other related charges, infrequently occurring gains, losses, benefits and charges, and special tax items to measure its revenues, gross margin, operating margin, net income and diluted earnings per share for purposes of managing our business. EMC also assesses its financial performance by measuring its free cash flow which is also a non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized software development costs. 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

Our non-GAAP operating results for the three months ended September 30, 2015 and 2014 were as follows (in millions):



	For the Three Months Ended
	September 30, 2015			September 30, 2014
Gross margin	$	3,806		$	3,842
Gross margin percentage	62.6		%	63.7		%
Operating income	1,182			1,396
Operating margin percentage	19.4		%	23.1		%
Income tax provision	274			306
Net income attributable to EMC	837			903
Diluted earnings per share attributable to EMC	$	0.43		$	0.44

The decrease in non-GAAP gross margin for the period was attributable to lower sales volume and higher costs of revenue in Information Storage, partially offset by higher sales volume in VMware Virtual Infrastructure. The decrease in non-GAAP gross margin percentage for the three months ended September 30, 2015 was primarily attributable to a decrease in Information Storage gross margins. Information Storage gross margins decreased year over year primarily due to decreases in product margins resulting from the consolidation of VCE and foreign currency impacts to revenue that do not impact costs in the same manner, as our costs of sales tend to have less exposure to currency volatility. These decreases were partially offset by an increase in the mix of services revenues which have higher gross margins.

The decrease in the non-GAAP operating income for the three months ended September 30, 2015 was primarily attributable to an increase in EMC Information Infrastructure operating expenses resulting from the consolidation of VCE. Non-GAAP operating margin percentage decreased for the three months ended September 30, 2015 primarily due to a decrease in gross margin percentage and a decrease in operating margin driven by the consolidation of VCE.

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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 (in millions):



	For the Three Months Ended September 30, 2015
	Gross margin		Operating income		Income tax provision (benefit)			Net income attributable to EMC		Diluted Earnings per share attributable to EMC
GAAP	$	3,705	$	690	$	168		$	480	$	0.25
Stock-based compensation expense	39		282		65			198		0.10
Intangible asset amortization	62		100		28			67		0.03
Restructuring charges	—		66		11			55		0.03
Acquisition and other related charges	—		44		14			26		0.01
R&D tax credit	—		—		(12		)	11		0.01
Non-GAAP	$	3,806	$	1,182	$	274		$	837	$	0.43



	For the Three Months Ended September 30, 2014
	Gross margin		Operating income		Income tax provision (benefit)			Net income attributable to EMC		Diluted Earnings per share attributable to EMC
GAAP	$	3,743	$	947	$	206		$	587	$	0.28
Stock-based compensation expense	37		255		60			174		0.09
Intangible asset amortization	62		102		30			67		0.03
Restructuring charges	—		37		9			27		0.01
Acquisition and other related charges	—		55		15			35		0.02
R&D tax credit	—		—		(12		)	11		0.01
VMware litigation and other contingencies	—		—		(2		)	2		—
Non-GAAP	$	3,842	$	1,396	$	306		$	903	$	0.44

We also monitor our ability to generate free cash flow in relationship to our non-GAAP net income attributable to EMC over comparable periods. For the three months ended September 30, 2015, our free cash flow was $1,033 million, a decrease of 23% compared to the free cash flow generated for the three months ended September 30, 2014. For the nine months ended September 30, 2015, our free cash flow was $2,434 million, a decrease of 24% compared to the free cash flow generated for the nine months ended September 30, 2014. 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 and issue debt, pay dividends 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 (in millions):



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Cash Flow from Operations	$	1,403		$	1,701		$	3,516		$	4,292
Capital expenditures	(222		)	(222		)	(671		)	(693		)
Capitalized software development costs	(148		)	(137		)	(411		)	(382		)
Free Cash Flow	$	1,033		$	1,342		$	2,434		$	3,217

Free cash flow represents a non-GAAP measure related to operating cash flows. In contrast, our GAAP measure of cash flow consists of three components. These are cash flows provided by operating activities of $3,516 million and $4,292 million for the nine months ended September 30, 2015 and 2014, respectively, cash used in investing activities of $3,050 million and $2,606

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

million for the nine months ended September 30, 2015 and 2014, respectively, and net cash used in financing activities of $1,346 million and $3,438 million for the nine months ended September 30, 2015 and 2014, 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 or cash flows. 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 27, 2015. 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

On October 27, 2015, the Company and its directors served a motion to dismiss the amended complaint in the IBEW matter pursuant to provisions of the Massachusetts Business Corporation Act, M.G.L. c. 156D, § 7.40 et seq., and Rules 12(b)(6) and 23.1 of the Massachusetts Rules of Civil Procedure, on the basis that the complaint asserts a derivative action on behalf of the Company and should be dismissed for failure to make the requisite pre-suit demand on the Company.

No defendant has yet filed a responsive pleading in the other lawsuits.

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, 2014. 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.

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The announcement and pendency of the Dell transaction may adversely affect our business.

Uncertainty about the effect of the proposed merger on our employees, customers, and other parties may have an adverse effect on our business. Such uncertainty may impair our ability to attract, retain, and motivate our employees, including key personnel and could cause customers, suppliers, and others to seek to change existing business relationships or delay or defer certain business decisions with us.

Pursuant to the terms of the merger agreement, we are subject to certain restrictions on the conduct of our business, including the ability in certain cases to enter into contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures, until the proposed merger closes or the merger agreement terminates. The restrictions may prevent us from pursuing otherwise attractive business opportunities and taking other actions with respect to our business that we may consider advantageous, and our business and operations could be negatively affected by such limitations.

We have incurred, and will continue to incur, significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed merger. We will be required to pay such costs relating to the transaction whether or not the merger is completed.

Failure to consummate the Dell transaction could have a material adverse impact on our business and financial results.

There can be no assurance that the proposed merger with Denali will occur. Consummation of the merger is subject to certain conditions, including, among others, (i) approval by our shareholders; (ii) the absence of an order or law prohibiting consummation of the merger; (iii) the expiration or termination of the waiting period under the HSR Act and the receipt of consents under other specified antitrust laws; (iv) the absence of a material adverse effect on us; (v) the accuracy of the parties’ respective representations and warranties; and (vi) the parties’ respective compliance with agreements and covenants contained in the Merger Agreement. There can be no assurance that these and other conditions to closing will be satisfied. In addition, the closing may not occur if the required financing for the transaction is unavailable or delayed.

The Merger Agreement also contains certain termination rights for both us and Denali, and in certain specified circumstances upon termination of the Merger Agreement, including a termination by us to enter into an agreement for a superior proposal, we will be required to pay Denali a termination fee. This payment could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us and could deter such third party from making a competing acquisition proposal.

The Merger Agreement provides for limited remedies for us in the event of a breach by Dell or its affiliates, including the right to a reverse termination fee payable under certain specified circumstances. There can be no assurance that a remedy will be available to us in the event of a breach or that any damages incurred by us in connection with the merger will not exceed the amount of the reverse termination fee. A failed transaction may result in negative publicity and a negative impression of us in the investment community. Further, any disruptions to our business resulting from the announcement and pendency of the merger, including any adverse changes in our relationships with our customers, partners and employees, could continue or accelerate in the event of a failed transaction. In addition, if the merger is not completed, the share price of our common stock may change to the extent that the current market price of our common stock reflects an assumption that the merger will be completed.

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. In addition, our industry is experiencing one of the most disruptive periods of transition in its history as we move from IT solutions built for the client-server second platform into the next phase of IT growth and innovation, or the third platform. There can be no assurance that our existing products will be properly positioned in the third platform or that we will be able to introduce new or enhanced products into the market on a timely basis, or at all. 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. In addition, there can be no assurance that our vision of enabling hybrid cloud computing, Big Data and trust through infrastructure and application transformation will be accepted or validated in the marketplace.

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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 inability to successfully manage the interoperability and transition from older 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;


•	delays in initial shipments of new products; and


•	delays in sales caused by the desire of customers to evaluate new products for extended periods of time.

Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors and competitors’ responses to such new product introductions. 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 transition 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. Some of our competitors offer a broad spectrum of IT products and services, and others offer specific information storage, protection, security, management, virtualization and intelligence products or services. Some of our competitors (whether independently or by establishing alliances) may have substantially greater financial, marketing or technological resources, larger distribution capabilities, earlier access to customers or greater opportunity to address customers’ various IT requirements than us. In addition, through further consolidation in the IT industry, 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 new services offered 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:


•	successfully communicating and executing on our unique federation strategy;


•	retaining and hiring the appropriate number of qualified employees;


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


•	accurately forecasting revenues;


•	training our sales force to sell effectively, given the breadth of our offerings;


•	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;


•	meeting our sustainability goals; 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 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 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 sectors and across many geographies. Any adverse effects to such markets could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.

Pricing pressures, increases in component and product design costs, decreases in sales volume, or changes to the relative mixture of our revenues could materially adversely affect our revenues, gross margins or earnings.

Our gross margins are impacted by a variety of factors, including competitive pricing, component and product design costs, sales volume and the relative mixture of product and services revenue. Increased component costs, increased pricing pressures, the relative and varying rates of increases or decreases in component costs and product price, changes in our product and services revenue mixture, including the mixture of subscription based product revenue, or decreased sales 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. We may have difficulty managing our component and product design 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 with respect to component costs 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 or earnings.

Our financial performance is impacted by the financial performance of VMware.

Because we consolidate VMware’s financial results in our results of operations, our financial performance is 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 its domestic and international markets and the effect that these conditions have on VMware’s customers’ capital budgets and the availability of funding for software purchases;


•	fluctuations in demand, adoption rates, sales cycles (which have been increasing in length) and pricing levels for VMware’s products and services;


•	fluctuations in foreign currency exchange rates;


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


•	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, beta programs and product promotions that can cause revenue recognition of certain orders to be deferred until future products to which customers are entitled become available;


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


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


•	VMware’s ability to compete effectively;

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•	the introduction of new pricing and packaging models for VMware’s product offerings;


•	the timing of the announcement or release of upgrades or new products and services by VMware or by their 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;


•	seasonal factors such as the end of fiscal period budget expenditures by VMware’s customers and the timing of holiday and vacation periods;


•	renewal rates and the amounts of the renewals for enterprise agreements, or EA’s, as original EA terms expire;


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


•	unplanned events that could affect market perception of the quality or cost-effectiveness of VMware’s products and solutions;


•	VMware’s ability to accurately predict the degree to which customers will elect to purchase its subscription-based offerings in place of licenses to its on-premises offerings; and


•	the recoverability by VMware of benefits from goodwill and acquired intangible assets, and the potential impairment of these assets.

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

We are involved in various legal proceedings in connection with our proposed merger. From time to time, we may also 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.

Cybersecurity breaches could expose us to liability, damage our reputation, compromise our ability to conduct business, require us to incur significant costs or otherwise adversely affect our financial results.

We retain sensitive data, including intellectual property, proprietary business information and personally identifiable information, in our secure data centers and on our networks. We face a number of threats to our data centers and networks of unauthorized access, including security breaches and other system disruptions. It is critical to our business strategy that our infrastructure remains secure and is perceived by our customers and business partners to be secure. Despite our security measures, our infrastructure may be vulnerable to attacks by hackers or other disruptive problems, such as the sophisticated cyber attack on our RSA division that we disclosed in March 2011. Any such security breach may compromise information stored on our networks and may result in significant data losses or theft of our, our customers’, our business partners’ or our employees’ intellectual property, proprietary business information or personally identifiable information. In addition, we have outsourced a number of our business functions to third party contractors, and any breach of their security systems could adversely affect us.

A cybersecurity breach could negatively affect our reputation as a trusted provider of information infrastructure by adversely affecting the market’s perception of the security or reliability of our products or services. In addition, a cyber attack could result in other negative consequences, including remediation costs, disruption of internal operations, increased cybersecurity protection costs, lost revenues or litigation.

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Our quarterly revenues or earnings could be materially adversely affected by uneven sales patterns or 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 uneven sales pattern makes it difficult for us to accurately predict revenues, earnings and working capital for each financial period and increases the risk of unanticipated variations in our 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 makes it extremely difficult to predict near-term demand and adjust manufacturing capacity or our supply chain accordingly. Our backlog at any particular time is also 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.

If predicted demand is substantially greater than orders, we will have excess inventory. Alternatively, if orders substantially exceed predicted demand, our ability to assemble, test and ship orders received in the last weeks and days of each quarter may be limited. This could materially adversely affect quarterly revenues or earnings as our revenues in any quarter are substantially dependent on orders booked and shipped in that quarter.

Loss of infrastructure, due to factors such as an information systems failure, loss of public utilities, natural disasters or extreme weather conditions, could also impact our ability to book orders or 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 or 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, can also make it difficult for us to accurately predict revenues, earnings and working capital for each financial period and increase the risk of unanticipated variations in our quarterly results and financial condition.

Our business could be materially adversely affected as a result of general global economic and market conditions.

We are subject to the effects of general global economic and market conditions that are beyond our control. If these conditions remain challenging or worsen, our business, results of operations or financial condition could be materially adversely affected. Possible consequences of macroeconomic global challenges that could have a material adverse effect on our results of operations or financial condition include 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 that negatively impact our treasury operations.

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 and developing existing personnel or recruiting new personnel. The loss of one or more key employees, our inability to attract or develop additional qualified employees or any delay in hiring key personnel could have a material adverse effect on our business, results of operations or financial condition.

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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 delays in shipment, significant repair, replacement or service costs or potential damage to our reputation. Any of these results could have a material adverse effect on our business, results of operations or financial condition. Continued improvement in manufacturing capabilities, control of material and manufacturing quality and costs and product testing are critical factors in our future growth. However, there can be no assurance that our efforts to monitor, develop, modify and implement appropriate testing and manufacturing processes for our products will be sufficient to avoid a rate of failure in our products that could otherwise have a material adverse effect on our business, results of operations or financial condition.

Our stock price is volatile and may be affected by factors related to VMware.

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 our relationship with VMware; and


•	factors impacting the performance of VMware, including those discussed in the risk factor above regarding the impact of VMware’s financial performance on our financial performance.

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

Due to the global nature of our business, political, economic or regulatory changes or other factors in a specific country or region could impair our international operations, future revenue or financial condition.

A substantial portion of our revenues is derived from sales outside the United States including, increasingly, in rapid growth markets such as Brazil, Russia, India and China. 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 relating to our operations outside the United States, including, among others, the following:


•	changes in foreign currency exchange rates;


•	changes in a specific country’s or region’s economic conditions;


•	political or social unrest;


•	trade restrictions;


•	import or export licensing requirements;


•	the overlap of different tax structures or changes in international tax laws;


•	changes in regulatory requirements;


•	difficulties in staffing and managing international operations;


•	stringent privacy policies in some foreign countries;


•	compliance with a variety of foreign laws and regulations; and


•	longer payment cycles in certain countries.

Our foreign operations, particularly in those countries with developing economies, are also subject to laws prohibiting improper payments and bribery, including the U.S. Foreign Corrupt Practices Act and similar regulations in foreign jurisdictions. Our

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employees, contractors and agents may take actions in violation of our policies that are designed to ensure compliance with these laws. Any such violations could subject us to civil or criminal penalties or otherwise have an adverse effect on our business and reputation.

In addition, we hold a significant portion of our cash and investments in our international subsidiaries. Potential regulations could impact our ability to transfer this cash and these investments to the United States. Although the international cash is permanently reinvested, should we be required to repatriate cash, we may incur a significant tax obligation.

We operate a Venezuelan sales subsidiary with a U.S. dollar functional currency. As a result, Bolivar-denominated transactions are subject to exchange gains and losses that may impact our earnings. As of quarter end, three exchange rates are available, via legal mechanisms administered by the Venezuelan government, to convert Bolivars into U.S. dollars. These three mechanisms are CENCOEX (official exchange rate), SICAD I and Simadi (formerly known as SICAD II). We have continued to use CENCOEX to remeasure these balances based upon the expected rate at which we believe is most appropriate for these items to be settled. We are closely monitoring information concerning these rates in the event it becomes appropriate to adopt a rate other than CENCOEX. Changing the rate used to re-measure our Bolivar-denominated transactions to either the SICAD I or Simadi rates could have an adverse effect on our financial position, results of operations or cash flows.

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 flash drives, 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. Natural disasters have also in the past impacted, and may continue to impact, our ability to procure certain components in a timely fashion, and an economic crisis could also negatively affect the solvency of our suppliers, resulting in product delays. Current or future social and environmental regulations or issues, such as those relating to the sourcing of conflict minerals from the Democratic Republic of the Congo or the elimination of environmentally sensitive materials from our products, could restrict the supply of resources used in production or increase our costs. 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 or financial condition. Additionally, we periodically transition our product line to incorporate new technologies. The importance of transitioning our customers smoothly to such new technologies, along with our historically uneven pattern of quarterly sales (as discussed in a prior risk factor), 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.

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

We held $9.0 billion in short- and long-term investments as of September 30, 2015. These investments consist primarily of investment grade debt securities, and we limit the amount of investment with any one issuer. A further deterioration in the economy, including a tightening of credit markets, increased defaults by issuers, or significant volatility in interest rates, could cause these investments to decline in value or could otherwise impact the liquidity of our portfolio. If market conditions deteriorate significantly, our results of operations or financial condition could be materially adversely affected.

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 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 were not able to timely and effectively implement their planned actions or if the level of demand for our channel partners’ products and services were to decrease. 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 in maintaining or expanding these channels, we may lose sales opportunities, customers and market share. Furthermore, our partial reliance on channel partners may materially reduce our management’s visibility 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,

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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 have 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.

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

We have strategic alliances with leading information technology companies, some of whom may be our competitors in other areas, and we plan to continue our strategy of developing key alliances in order to expand our reach into existing and new 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.

In addition, although we believe we have adequate security measures, if our intellectual property or other sensitive data is misappropriated, we could suffer monetary and other losses and reputational harm, which could materially adversely affect our business, results of operations or financial condition.

Issues arising during the upgrade of our enterprise resource planning system could affect our operating results and ability to manage our business effectively.

We are in the process of upgrading our enterprise resource planning, or ERP, computer system to enhance operating efficiencies and provide more effective management of our business operations. While one phase of our upgrade was implemented in the third quarter of 2012, we still have further planned phases to our upgrade. The upgrade could cause substantial business interruption that could adversely impact our operating results. We are investing significant financial and personnel resources into this project. However, there is no assurance that the system upgrade will meet our current or future business needs or that it will operate as designed. We are heavily dependent on such computer systems, and any significant failure or delay in the system upgrade could cause a substantial interruption to our business and additional expense, which could result in an adverse impact on our operating results, cash flows or financial condition.

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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. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change, which might significantly impact our effective income tax rate in the future. 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.

As part of the current Administration’s ongoing negotiations, President Obama, House of Representatives and Senate Committees have called for a comprehensive tax reform, which might change certain U.S. tax rules for U.S. corporations doing business outside the United States. While the scope of future changes differs among various tax proposals and remains unclear, proposed changes might include limiting the ability of U.S. corporations to deduct certain expenses attributable to offshore earnings, modifying the foreign tax credit rules and taxing currently certain transfers of intangibles offshore. The enactment of some or all of these proposals could increase the Company's effective tax rate and adversely affect our profitability.

Recent developments in 2014, including the Irish government’s announced changes to the taxation of certain existing non-resident Irish companies beginning in January 2021, and the Organisation for Economic Co-operation and Development’s project on Base Erosion and Profit Shifting, could ultimately impact our tax liabilities to foreign jurisdictions and treatment of our foreign earnings from a U.S. perspective, which may adversely impact our effective tax rate.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the U.S. Tax Court due to other outstanding procedural issues. At this time, the U.S. Department of the Treasury has not withdrawn the requirement from its regulations to include stock-based compensation. The I.R.S. has the right to appeal the U.S. Tax Court decision. We concluded that no adjustment to our consolidated financial statements is appropriate at this time due to the uncertainties with respect to the ultimate resolution of this case.

Changes in laws or 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.

Changes in generally accepted accounting principles may materially 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, investments and joint ventures.

As part of our business strategy, we seek to acquire businesses that offer complementary products, services or technologies. These acquisitions are accompanied by 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 strategic plans;

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•	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 known or unknown 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 recoverability of benefits from goodwill and intangible assets and the potential impairment of these assets;


•	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 or failing to close an announced transaction. Further, the risks described above may be exacerbated as a result of managing multiple acquisitions at the same time.

We also seek to invest in businesses that offer complementary products, services or technologies and to, from time to time, create new joint ventures or alliances. These investments and ventures 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. For 2014, the expected long-term rate of return on the plan’s assets was 6.75%, but we experienced a 13.14% gain on plan assets. As of December 31, 2014, the ten-year historical rate of return on plan assets was 7.18%, and the inception to date return on plan assets was 9.97%. For 2015, the expected long-term rate of return on the plan’s assets is 6.50%. As market conditions permit, we expect to continue to shift the asset allocation to lower the percentage of investments in equities and increase the percentage of investments in long-duration fixed-income securities. The effect of such change could result in a reduction in the long-term rate of return on plan assets and an increase in future pension expense. Should we not achieve the expected rate of return on the plan’s assets or if the plan experiences a decline in the fair value of its assets, we may be required to contribute assets to the plan 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 environmental analyses have focused on the estimated amount of global carbon emissions that are generated by information technology products. As a result, governmental and non-governmental organizations have turned their attention to the development of regulations and standards to drive technological improvements to reduce the amount of such carbon emissions. There is a risk that any regulations or standards developed by these organizations will not fully address the complexity of the products and technology developed by the IT industry or will favor certain technological approaches to reducing such carbon emissions. Depending on the regulations or standards that are ultimately adopted, compliance with such regulations or standards could materially adversely affect our business, results of operations or financial condition.

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Our business could be materially adversely affected as a result of war, acts of terrorism, natural disasters or climate change.

Terrorist acts, acts of war, natural disasters, or the direct and indirect effects of climate change (such as a rise in sea level, increased storm severity, drought, flooding, wildfires, pandemics, and social unrest from resource depletion and rising food prices) 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 events 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.

Our failure to pay quarterly dividends to our shareholders could materially adversely affect our stock price.

Our ability to pay quarterly dividends will be subject to, among other things, our financial position and results of operations, available cash and cash flow, and capital requirements. Any reduction or discontinuation of quarterly dividends could cause our stock price to decline significantly.

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

ISSUER PURCHASES OF EQUITY SECURITIES IN THE THIRD QUARTER OF 2015

(table in millions, except per share amounts)



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 (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2015 – July 31, 2015	1		$	26.84	—	223
August 1, 2015 – August 31, 2015	1		26.82		—	223
September 1, 2015 – September 30, 2015	—		—		—	223
Total	2	⁽²⁾	$	26.83	—	223

__________________________


(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 December 2014 to repurchase a total of 250 million shares of our common stock. This repurchase authorization does not have a fixed termination date.


(2)	Includes 2 million shares withheld from employees for the payment of taxes

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS


(a)	Exhibits

See index to Exhibits on page 68 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.



Date: November 9, 2015	EMC CORPORATION

	By:	/s/ Zane C. Rowe
		Zane C. Rowe
		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. (1)
4.1		Form of Stock Certificate. (2)
4.2		Underwriting Agreement, dated as of June 3, 2013, by and among the Company, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named therein. (3)
4.3		Indenture, dated as of June 6, 2013, by and between the Company and Wells Fargo Bank, National Association, as Trustee. (3)
10.1		Agreement and Plan of Merger, by and among, EMC Corporation, Embrace Merger Corporation, Virtustream Group Holdings, Inc. and the Stockholder Representative named therein, dated May 22, 2015. (4)
10.2		Virtustream Group Holdings, Inc. 2009 Equity Incentive Plan, as amended. (filed herewith)
10.3		Agreement and Plan of Merger, dated as of October 12, 2015, among Denali Holding Inc., Dell Inc., Universal Acquisition Co. and EMC Corporation (5)
10.4*		Form of Change in Control Severance Agreement for Executive Officers. (filed herewith)
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)

_________________



*	Identifies an exhibit that is a management contract or compensatory plan or arrangement.
**	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 Quarterly Report on Form 10-Q filed May 3, 2013 (No. 1-9853).


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


(3)	Incorporated by reference to EMC Corporation’s Current Report on Form 8-K filed June 6, 2013 (No. 1-9853).


(4)	Incorporated by reference to EMC Corporation’s Current Report on Form 8-K filed July 9, 2015 (No. 1-9853).


(5)	Incorporated by reference to EMC Corporation’s Current Report on Form 8-K filed October 13, 2015 (No. 1-9853).

Exhibit 10.2

VIRTUSTREAM GROUP HOLDINGS, INC.

2009 EQUITY INCENTIVE PLAN

ADOPTED BY THE BOARD OF DIRECTORS: JANUARY 12, 2009

APPROVED BY THE STOCKHOLDERS: JANUARY 16, 2009

AMENDED: DECEMBER 15, 2009, JANUARY 15, 2010, DECEMBER 14, 2011, MARCH 14, 2012 AND APRIL 21, 2014

APPROVED BY THE STOCKHOLDERS: DECEMBER 15, 2009, JANUARY 15, 2010, JANUARY 10, 2012 AND APRIL 2, 2012

TERMINATION DATE: JANUARY 11, 2019


1.	GENERAL.

(a)Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are Employees, Directors and Consultants.

(b)Available Stock Awards. The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, and (v) Stock Appreciation Rights.

(c)Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section 1(a), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.


2.	ADMINISTRATION.

(a)Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).

(b)Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i)To determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award.

(ii)To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan. The Board,

in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective.

(iii)To settle all controversies regarding the Plan and Stock Awards granted under it.

(iv)To accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

(v)To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

(vi)To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to Capitalization Adjustments, to the extent required by applicable law, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan. Except as provided above, rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.

(vii)To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options.

(viii)To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without the affected Participant’s consent, the Board may amend the terms of any one or more Stock Awards if necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder.

(ix)Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.

(x)To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.

(xi)To effect, at any time and from time to time, with the consent of any adversely affected Participant, (1) the reduction of the exercise price or strike price of any outstanding Option or Stock Appreciation Right under the Plan, (2) the cancellation of any outstanding Option or Stock Appreciation Right under the Plan and the grant in substitution therefor of (A) a new Option under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (B) a Restricted Stock Award, (C) Restricted Stock Unit Award, (D) cash and/or (E) other valuable consideration (as determined by the Board, in its sole discretion), or (3) any other action that is treated as a repricing under generally accepted accounting principles; provided, however, that no such reduction or cancellation may be effected if it is determined, in the Company’s sole discretion, that such reduction or cancellation would result in any such outstanding Option becoming subject to the requirements of Section 409A of the Code.

(c)Delegation to Committee. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

(d)Delegation to an Officer. The Board may delegate to one or more Officers of the Company the authority to do one or both of the following: (i) designate Officers and Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by applicable law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may not delegate authority to an Officer to determine the Fair Market Value of the Common Stock pursuant to Section 13(t) below.

(e)Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

(f)Arbitration. Any dispute or claim concerning any Stock Awards granted (or not granted) pursuant to the Plan or any disputes or claims relating to or arising out of the Plan shall be fully, finally and exclusively resolved by binding and confidential arbitration conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association in the location of the Company’s principal headquarters. The Company shall pay the costs of filing the arbitration and the arbitrator’s fees and expenses (but each side shall be responsible for paying their own attorneys’ fees and expenses). By accepting a Stock Award, Participants and the Company waive their respective rights to have any such disputes or claims tried by a judge or jury.


3.	SHARES SUBJECT TO THE PLAN.

(a)Share Reserve. Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards after the Effective Date shall not exceed 23,175,541 shares. For clarity, the limitation in this Section 3(a) is a limitation in the number of shares of Common Stock that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).

(b)Reversion of Shares to the Share Reserve. If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares which are forfeited shall revert to and again become available for issuance under the Plan. Also, any shares reacquired by the Company pursuant to Section 8(g) or as consideration for the exercise of an Option shall again become available for issuance under the Plan. Furthermore, if a Stock Award (i) expires or otherwise terminates without having been exercised in full or (ii) is settled in cash (i.e., the holder of the Stock Award receives cash rather than stock), such expiration, termination or settlement shall not reduce (or otherwise offset) the number of shares of Common Stock that may be issued pursuant to the Plan. Notwithstanding the provisions of this Section 3(b), any such shares shall not be subsequently issued pursuant to the exercise of Incentive Stock Options.

(c)Incentive Stock Option Limit. Notwithstanding anything to the contrary in this Section 3, subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 12,565,418 shares of Common Stock.

(d)Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.


4.	ELIGIBILITY.

(a)Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

(b)Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

(c)Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”) because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.


5.	OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

(a)Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement.

(b)Exercise Price. Subject to the provisions of Section 4(b) regarding Incentive Stock Options granted to Ten Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code (whether or not such options are Incentive Stock Options).

(c)Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The permitted methods of payment are as follows:

(i)by cash, check, bank draft or money order payable to the Company;

(ii)pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

(iii)by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

(iv)by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;

(v)according to a deferred payment or similar arrangement with the Optionholder; provided, however, that interest shall compound at least annually and shall be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or

(vi)in any other form of legal consideration that may be acceptable to the Board.

(d)Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

(i)Restrictions on Transfer. An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option to such extent as permitted by Rule 701 of the Securities Act at the time of the grant of the Option and in a manner consistent with applicable tax and securities laws upon the Optionholder’s request.

(ii)Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that an Incentive Stock Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

(iii)Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be the beneficiary of an Option with the right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

(e)Vesting of Options Generally. The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

(f)Termination of Continuous Service. Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(g)Extension of Termination Date. Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

(h)Disability of Optionholder. Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option

within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(i)Death of Optionholder. Except as otherwise provided in the applicable Option Agreement or other agreement between the Optionholder and the Company, in the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated as the beneficiary of the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. If the Optionholder designates a third party beneficiary of the Option in accordance with Section 5(d)(iii), then upon the death of the Optionholder such designated beneficiary shall have the sole right to exercise the Option and receive the Common Stock or other consideration resulting from the Option exercise.

(j)Termination for Cause. Except as explicitly provided otherwise in an Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate upon the termination date of such Optionholder’s Continuous Service, and the Optionholder shall be prohibited from exercising his or her Option from and after the time of such termination of Continuous Service.

(k)Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

(l)Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company shall not be required to exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.

(m)Company Investment Documents. The Option may, but need not, include a provision whereby the Company may require that as a condition to exercising the Option, the

Optionholder must become a party to the Company’s Voting Agreement, Right of First Refusal and Co-Sale Agreement, and/or such other stockholder agreements as the Company may request.

(n)Right of Repurchase. The Option may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Optionholder pursuant to the exercise of the Option.

(o)Right of First Refusal. The Option may include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option. Except as expressly provided in this Section 5(o) or in the Stock Award Agreement for the Option, such right of first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.


6.	PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

(a)Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i)Consideration. A Restricted Stock Award may be awarded in consideration for (A) past or future services actually or to be rendered to the Company or an Affiliate, or (B) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii)Vesting. Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

(iii)Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

(iv)Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

(b)Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall include (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i)Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii)Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

(iii)Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

(iv)Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

(v)Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

(vi)Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

(vii)Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the

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Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.

(c)Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however, that each Stock Appreciation Right Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i)Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of grant or such shorter period specified in the Stock Appreciation Right Agreement.

(ii)Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents. The strike price of each Stock Appreciation Right granted as a stand-alone or tandem Stock Award shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.

(iii)Calculation of Appreciation. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that will be determined by the Board on the date of grant.

(iv)Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

(v)Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

(vi)Non-Exempt Employees. No Stock Appreciation Right granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Stock Appreciation Right. The foregoing provision is intended

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to operate so that any income derived by a non-exempt employee in connection with the exercise of a Stock Appreciation Right will be exempt from his or her regular rate of pay.

(vii)Payment. The appreciation distribution in respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

(viii)Termination of Continuous Service. Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s death or Disability), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

(ix)Disability of Participant. Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (A) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

(x)Death of Participant. Except as otherwise provided in the applicable Stock Appreciation Right Agreement or other agreement between the Participant and the Company, in the event that (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Appreciation Right Agreement after the termination of the Participant’s Continuous Service for a reason other than death, then the Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Stock Appreciation Right as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a person designated as the beneficiary of the Stock Appreciation Right upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of such Stock

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Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after the Participant’s death, the Stock Appreciation Right is not exercised within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

(xi)Termination for Cause. Except as explicitly provided otherwise in an Participant’s Stock Appreciation Right Agreement, in the event that a Participant’s Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his or her Stock Appreciation Right from and after the time of such termination of Continuous Service.

(xii)Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Stock Appreciation Rights will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. For example, such restrictions may include, without limitation, a requirement that a Stock Appreciation Right that is to be paid wholly or partly in cash must be exercised and paid in accordance with a fixed pre-determined schedule.


7.	COVENANTS OF THE COMPANY.

(a)Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock reasonably required to satisfy such Stock Awards.

(b)Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.

(c)No Obligation to Notify. The Company shall have no duty or obligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

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8.	MISCELLANEOUS.

(a)Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

(b)Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.

(c)Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms and the Participant shall not be deemed to be a stockholder of record until the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company.

(d)No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

(e)Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

(f)Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise

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distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

(g)Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding payment from any amounts otherwise payable to the Participant; (iv) withholding cash from a Stock Award settled in cash; or (v) by such other method as may be set forth in the Stock Award Agreement.

(h)Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

(i)Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

(j)Compliance with Section 409A. To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the

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contrary, in the event that following the Effective Date the Board determines that any Stock Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Stock Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

(k)Compliance with Exemption Provided by Rule 12h-1(f). If: (i) the aggregate of the number of Optionholders and the number of holders of all other outstanding compensatory employee stock options to purchase shares of Common Stock equals or exceeds five hundred (500), and (ii) the assets of the Company at the end of the Company’s most recently completed fiscal year exceed $10 million, then the following restrictions shall apply during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (A) the Options and, prior to exercise, the shares of Common Stock acquired upon exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-1(f) promulgated under the Exchange Act (“Rule 12h-1(f)”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Optionholder, or (3) to an executor upon the death of the Optionholder (collectively, the “Permitted Transferees”); provided, however, the following transfers are permitted: (i) transfers by the Optionholder to the Company, and (ii) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and shares of Common Stock acquired upon exercise of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by the Optionholder prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-1(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company shall deliver to Optionholders (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4), and (5) promulgated under the Securities Act every six (6) months, including financial statements that are not more than one hundred eighty (180) days old; provided, however, that the Company may condition the delivery of such information upon the Optionholder’s agreement to maintain its confidentiality.


9.	ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

(a)Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall proportionately and appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of

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securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

(b)Dissolution or Liquidation. Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c)Corporation Transaction. The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

(i)arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

(ii)arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

(iii)accelerate the vesting of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine (and contingent upon the effectiveness of the Corporate Transaction);

(iv)arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

(v)cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction;

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(vi)arrange for the Stock Award to be subject to any holdbacks, escrows and contingencies to which such Stock Award would have been subject had it been fully vested and exercised prior to the closing or completion of the Corporate Transaction; and

(vii)make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise. For purposes of clarity, this payment may be zero if the value of the property is equal to or less than the exercise price.

The Board need not take the same action with respect to all Stock Awards (and may take different actions with respect to the vested and unvested portions of the same Stock Award) or with respect to all Participants.

(d)Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur.


10.	TERMINATION OR SUSPENSION OF THE PLAN.

(a)Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated by the Board pursuant to Section 2, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Pan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

(b)No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.


11.	EFFECTIVE DATE OF PLAN.

This Plan shall become effective on the Effective Date.


12.	CHOICE OF LAW.

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

13. DEFINITIONS. As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a)“Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act. The

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Board shall have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

(b)“Board” means the Board of Directors of the Company.

(c)“Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

(d)“Cause” shall have the meaning of the term “Cause” (or any comparable term) contained in any then effective employment agreement or other letter between the Participant and the Company, or if no such agreement or letter exists, or if the term is not defined, shall mean with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated by reason of dismissal without Cause for the purposes of outstanding Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

(e)“Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i)any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a

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result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

(ii)there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

(iii)the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;

(iv)there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

(v)individuals who, on the date this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.


(f)	“Code” means the Internal Revenue Code of 1986, as amended.

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(g)“Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

(h)“Common Stock” means the common stock of the Company.

(i)“Company” means Virtustream Group Holdings, Inc., a Delaware corporation.

(j)“Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

(k)“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director, or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an employee of the Company to a consultant of an Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

(l)“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i)the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii)the consummation of a sale or other disposition of at least fifty percent (50%) of the outstanding securities of the Company;

(iii)the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv)the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted

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or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(m)“Director” means a member of the Board.

(n)“Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

(o)“Effective Date” means the effective date of this Plan, which is the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, or (ii) the date this Plan is adopted by the Board.

(p)“Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

(q)“Entity” means a corporation, partnership, limited liability company or other entity.

(r)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(s)“Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) of 14(d) of the Exchange Act) that, as of the Effective Date of the Plan as set forth in Section 11, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

(t)“Fair Market Value” means, as of any date, the value of the Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.

(u)“Good Reason” means that one or more of the following are undertaken by the Company without your express written consent: (i) the assignment to you of any duties or responsibilities that results in a material diminution of your function as in effect immediately prior to the effective date of the Change in Control; provided, however, that a change in your title or reporting relationships shall not provide the basis for a voluntary termination with Good Reason; (ii) a material reduction by the Company in your annual base salary, as in effect on the effective date of the Change in Control or as increased thereafter; provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your annual base salary that is pursuant to a salary reduction program affecting substantially all of the employees

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of the Company and that does not adversely affect you to a greater extent than other similarly situated employees; (iii) any failure by the Company to continue in effect any benefit plan or program, including incentive plans or plans with respect to the receipt of securities of the Company, in which you were participating immediately prior to the effective date of the Change in Control (hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company that would adversely affect your participation in or reduce your benefits under the Benefit Plans or deprive you of any fringe benefit that you enjoyed immediately prior to the effective date of the Change in Control; provided, however, that Good Reason shall not be deemed to have occurred if the Company provides for your participation in benefit plans and programs that, taken as a whole, are comparable to the Benefit Plans; (iv) a relocation of your business office to a location more than 100 miles from the location at which you performed you duties as of the effective date of the Change in Control, except for required travel by you on the Company’s business to an extent substantially consistent with your business travel obligations prior to the effective date of the Change in Control; or (v) a material breach by the Company of any provision of the Plan or the Option Agreement or any other material agreement between you and the Company concerning the terms and conditions of your employment.

(v)“Incentive Stock Option” means an Option that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(w)“Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock Option.

(x)“Officer” means any person designated by the Company as an officer.

(y)“Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

(z)“Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

(aa)“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(bb) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(cc) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

(dd) “Plan” means this Virtustream Group Holdings, Inc. 2009 Equity Incentive Plan, as amended from time to time.

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(ee) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

(ff) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(gg) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

(hh) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

(ii) “Securities Act” means the Securities Act of 1933, as amended.

(jj) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c).

(kk) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

(ll) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, or a Stock Appreciation Right.

(mm) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(nn) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).

(oo) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

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Exhibit 10.4

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT, dated [DATE], is made by and between EMC Corporation (the “Company”), and [NAME] (the “Executive”) residing at [ADDRESS].

WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and

WHEREAS, the Executive is expected to make a significant contribution to the profitability, growth and financial strength of the Company; and

WHEREAS, the Company, as a publicly held corporation, recognizes that the possibility of a Change in Control may exist, and that such possibility and the uncertainty and questions which it may raise among management may result in the departure or distraction of the Executive in the performance of the Executive's duties, to the detriment of the Company and its stockholders; and

WHEREAS, it is in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to ensure the continued availability to the Employer of the Executive in the event of a Change in Control.

THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:


1.	Defined Terms. The definitions of capitalized terms used in this Agreement are provided in Section 16.

Term of Agreement. The term of this Agreement (the “Term”) shall commence on [DATE] and shall continue in effect through [DATE]; provided, however, that commencing on January 1,[YEAR] and each January 1^st thereafter, the Term shall automatically be extended for one additional year unless, not later than April 1^st of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire on the last day of the twenty-fourth (24^th) month following the month in which such Change in Control occurred.

Company's Covenants Summarized. In order to induce the Executive to remain in the employ of the Employer and in consideration of the Executive's covenants in Section 4, the Company, under the conditions described herein, shall pay or cause to be paid to the Executive the Severance Payments and the other payments and benefits described herein. No Severance Payments shall be payable under this Agreement unless there shall have been (or, pursuant to the second sentence of Section 6.1, there shall be deemed to have been) a termination of the Executive's employment with the Company, the Employer and

their Affiliates following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company or the Employer, the Executive shall not have any right to be retained in the employ of the Company or the Employer.

The Executive's Covenants. Subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control, the Executive shall remain in the employ of the Employer until the earliest of (i) the date which is six (6) months from the date of the first occurrence of a Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Employer of the Executive's employment for any reason.


5.	Compensation Other Than Severance Payments; Equity Awards.

5.1 If the Executive fails to perform the Executive's full‑time duties with the Employer following a Change in Control as a result of incapacity due to physical or mental illness, during any period when the Executive so fails to perform the Company shall pay or cause to be paid the Base Salary to the Executive, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement (other than the Company's or the Employer's short- or long-term disability plan, as applicable, but including any bonus or incentive plan) maintained by the Company or the Employer, as applicable, during such period, until the Executive resumes the full time performance of such duties or the Executive's employment is terminated by the Employer for Disability.

5.2 If the Executive's employment with the Company, the Employer and their Affiliates shall be terminated for any reason following a Change in Control, the Company shall pay or cause to be paid the Base Salary to the Executive through the Date of Termination, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the applicable compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

5.3 Except as expressly provided herein, if the Executive's employment with the Company, the Employer and their Affiliates shall be terminated for any reason following a Change in Control, the Company shall pay or cause to be paid to the Executive the Executive's normal post‑termination compensation and benefits as such payments become due. Such post‑termination compensation and benefits shall be determined under, and paid in accordance with, the applicable retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.

5.4 Notwithstanding anything to the contrary contained in any equity plan or arrangement of the Company or any agreement between the Company or the Employer and the

Executive (but subject to the provisions of Section 14.3(D)), upon the occurrence of a Change in Control, any outstanding stock option, restricted stock or other equity or equity-based award granted to the Executive shall become immediately vested and exercisable if the Executive becomes entitled to the Severance Payments described in Section 6.1. From and after the occurrence of a Change in Control, the “detrimental activity” provisions in the Company's equity plans shall no longer apply to any award issued to the Executive under such plans.


6.	Severance Payments.

6.1 If the Executive's employment with the Company, the Employer and their Affiliates is terminated within twenty-four (24) months following a Change in Control, other than (a) by the Employer for Cause, (b) by reason of death or Disability, or (c) by the Executive without Good Reason, then the Company shall, subject to Section 15 hereof, pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”), in addition to any payments and benefits to which the Executive is entitled under Section 5. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated within twenty-four (24) months following a Change in Control and during the Term by the Employer without Cause or by the Executive with Good Reason, if (i) the Executive's employment is terminated by the Employer without Cause during a Potential Change in Control Period, or (ii) the Executive terminates Executive’s employment for Good Reason during a Potential Change in Control Period. In the event that the Executive's employment is terminated in the manner described in the preceding sentence during a Potential Change in Control Period, a Change in Control shall be deemed to have occurred immediately preceding such termination for purposes of Section 5.4 hereof, except with respect to equity awards held by the Executive which are intended to constitute qualified performance based compensation for purposes of Section 162(m) of the Code and regulations promulgated thereunder (other than stock options and stock appreciation rights). Except as described above, the Executive shall not be entitled to benefits pursuant to this Section 6.1 unless a Change in Control shall have occurred during the Term.

(A)The Company shall pay to the Executive a lump sum severance payment, in cash, equal to 2.0 times the sum of (a) the Base Salary, and (b) the sum of the target annual bonus available to the Executive pursuant to each of the Employer's annual bonus plans or any successor plans (but excluding any special performance or incentive plan) in which the Executive participates in respect of the fiscal year in which the Date of Termination occurs (without giving effect to any event or circumstance constituting Good Reason), assuming for this purpose attainment of 100% of any applicable target; provided, however, that if the applicable target bonus would have been pro-rated for a partial fiscal year, such target bonus shall be recalculated for purposes of this Section 6.1(A) to equal the amount for which the Executive would have been eligible for the entire fiscal year.

(B)For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and the Executive’s dependents life, disability, accident and health insurance benefits substantially similar to those provided to the Executive and the Executive’s dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those

provided to the Executive and the Executive’s dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater after-tax cost to the Executive than the cost to the Executive immediately prior to such date or occurrence. If, at the end of the twenty-four (24) month period following the Date of Termination, the Executive has not previously become eligible to receive comparable benefits from a new employer or pursuant to a government-sponsored health insurance or health care program, then the Company shall arrange, at its sole cost and expense, to enable the Executive to convert coverage for the Executive and the Executive's dependents being provided hereunder to individual policies or programs, if applicable, upon the same terms as other former employees of the Company may apply for such conversion. The cost of providing the benefits set forth in this Section 6.1(B) shall be in addition to (and shall not reduce) the Severance Payments. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to the extent the Executive becomes eligible to receive comparable benefits from a new employer or pursuant to a government-sponsored health insurance or health care program. Unless the Executive agrees to another method, the coverage described in this Section 6.1(B) will be provided through a third party insurer.

(C)The Company shall pay to the Executive a prorated portion of the Executive's bonus compensation for the fiscal year in which the Date of Termination occurs (assuming that any applicable performance objectives were achieved at the target level of performance and without giving effect to any event or circumstance constituting Good Reason) calculated by multiplying (i) the target amount of such bonus compensation by (ii) a fraction, the numerator of which is the number of days in the applicable fiscal year through the Date of Termination and the denominator of which is 365. The foregoing payment shall be reduced by the sum of any quarterly, semi-annual and other partial year bonus payments previously paid to the Executive in respect of the fiscal year in which the Date of Termination occurs.

6.2 (A) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a Change in Control or the termination of the Executive's employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the Severance Payments, being hereinafter referred to as the “Total Payments”) would be subject (in whole or part) to the Excise Tax, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). If a reduction in the Total Payments is required under this Section 6.2(A),

the Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash payment (excluding any cash payment with respect to the acceleration of equity awards) that is otherwise payable to the Executive that is exempt from Section 409A of the Code; (B) reduction of any other payments or benefits otherwise payable to the Executive (other than those described in clause (C) below) on a pro-rata basis or such other manner that complies with Section 409A of the Code; and (C) reduction of any payment or benefit with respect to the acceleration of equity awards that is otherwise payable to the Executive (on a pro-rata basis as between equity awards that are covered by Section 409A of the Code and those that are not (or such other manner that complies with Section 409A of the Code)).

(B) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm (the “Auditor”) which was, immediately prior to the Change in Control, the Company's independent auditor, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, and (iii) the value of any non‑cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(C) At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). If the Executive objects to the Company's calculations, the Company shall pay to the Executive such portion of the Severance Payments (up to 100% thereof) as the Executive determines is necessary to result in the proper application of subsection (A) of this Section 6.2.

6.3 Subject to Section 14.3(A), the payments provided in subsection (A) and (C) of Section 6.1 shall be made on the eighth (8^th) day following the Release Deadline; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) on the thirtieth (30th) day after the Release Deadline (also subject to Section 14.3(A)). In the event that

the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).

6.4 The Company shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive's employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. The Executive's reimbursement rights described in this Section 6.4 shall remain in effect for the life of the Executive, provided, that, in order for the Executive to be entitled to reimbursement hereunder, the Executive must submit the written reimbursement request described above within 180 days following the date upon which the applicable fee or expense is incurred.


7.	Termination Procedures and Compensation During Dispute.

7.1 Notice of Termination. After a Change in Control, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail any facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i), (ii) or (iii) of the definition of Cause herein, and specifying the particulars thereof in detail.

7.2 Date of Termination. “Date of Termination,” with respect to any purported termination of the Executive's employment with the Company, the Employer and their Affiliates after a Change in Control, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided, that the Executive shall not have returned to the full‑time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Employer,

shall not be less than ninety (90) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

7.3 Dispute Concerning Termination. If within ten (10) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence.

7.4 Compensation During Dispute. If the Date of Termination is extended in accordance with Section 7.3, the Company shall continue to pay or cause to be paid to the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, the Base Salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2) and shall not be offset against or reduce any other amounts due under this Agreement.

No Mitigation. If the Executive's employment with the Company, the Employer and their Affiliates terminates following a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Except as set forth in Section 6.1(B), the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or the Employer, or otherwise.


9.	Successors; Binding Agreement.

9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement.

9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs,

distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate.

10.

Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the last known residence address of the Executive or in the case of the Company, to its principal office to the attention of the Chief Executive Officer of the Company with a copy to its clerk or Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

11.

Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes, effective as of the date hereof, any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party or the Employer (including, without limitation, any prior Change in Control Severance Agreement by and between the Company and the Executive; provided, however, that this Agreement shall not supersede any agreement setting forth the terms and conditions of the Executive's employment with the Employer. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7) shall survive such expiration.


12.	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.


13.	Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.


14.	Settlement of Disputes; Arbitration; 409A Compliance.

14.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied.

14.2 Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

14.3 It is the intention of the Company and the Executive that this Agreement not result in taxation of the Executive under Section 409A of the Code and the regulations and guidance promulgated thereunder and that the Agreement shall be construed in accordance with such intention. Without limiting the generality of the foregoing, the Company and the Executive agree as follows:

(A)Notwithstanding anything to the contrary herein, if the Executive is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) with respect to the Company, any amounts (or benefits) otherwise payable to or in respect of the Executive under this Agreement pursuant to the Executive's termination of employment with the Company, the Employer and their Affiliates shall be delayed, to the extent required so that taxes are not imposed on the Executive pursuant to Section 409A of the Code, and shall be paid upon the earliest date permitted by Section 409A(a)(2) of the Code;

(B)For purposes of this Agreement, the Executive's employment with the Company, the Employer and their Affiliates will not be treated as terminated unless and until such termination of employment constitutes a “separation from service” for purposes of Section 409A of the Code;

(C)To the extent necessary to comply with the provisions of Section 409A of the Code and the guidance issued thereunder (1) reimbursements to the Executive as a result of the operation of Section 6.1(B) or Section 6.4 hereof shall be made not later than the end of the calendar year following the year in which the reimbursable expense is incurred and shall otherwise be made in a manner that complies with the requirements of Treasury Regulation Section 1.409A-3(i)(l)(iv), (2) if Executive is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), any reimbursements to the Executive as a result of the operation of such sections with respect to a reimbursable event within the first six months following the Date of

Termination which are required to be delayed pursuant to Section 14.3(A) shall be made as soon as practicable following the date which is six months and one day following the Date of Termination (subject to clause (1) of this sentence); and

(D) If the provisions of Section 5.4 are applicable to an equity or equity-based award subject to the provisions of Section 409A of the Code and the immediate payment of the award contemplated by Section 5.4 would result in taxation under Section 409A, payment of such awards shall be made upon the earliest date upon which such payment may be made without resulting in taxation under Section 409A of the Code. For the avoidance of doubt, with respect to any equity or equity-based awards which are subject to Section 409A of the Code and which comply with the permissible payment requirements of such section by providing for payments pursuant to a fixed schedule, the application of Section 5.4, as modified (to the extent required) by this Section 14.3(D), shall require that the payment of such awards continue upon such fixed schedule following the Date of Termination until the award is fully vested.

15.

Release. Notwithstanding anything to the contrary herein, the payment to the Executive of the benefits provided in Section 6 upon the Executive’s termination of employment shall be subject to the execution and non-revocation by the Executive of the Company’s standard form of release in favor of the Company and its Affiliates, as in effect immediately prior to the Change in Control. Such release must be executed by the Executive within 45 days following the Date of Termination (the “Release Deadline”).


16.	Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:

16.1 “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

16.2 “Auditor” shall have the meaning set forth in Section 6.2.

16.3 “Base Amount” shall have the meaning set forth in Section 280G(b)(3) of the Code.

16.4 “Base Salary” shall mean the annual base salary in effect for the Executive immediately prior to a Change in Control, as such salary may be increased from time to time during the Term (in which case such increased amount shall be the Base Salary for purposes hereof), but without giving effect to any reduction thereto.

16.5 “Beneficial Owner” shall have the meaning set forth in Rule 13d‑3 under the Exchange Act.

16.6 “Board” shall mean the Board of Directors of the Company.

16.7 “Cause” for termination by the Employer of the Executive's employment shall mean (i) the willful and continued failure by the Executive (other than any such failure resulting from (A) the Executive’s incapacity due to physical or mental illness, (B) any such

actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason or (C) the Company’s or the Employer’s active or passive obstruction of the performance of the Executive's duties and responsibilities) to perform substantially the duties and responsibilities of the Executive’s position with the Employer after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed such duties or responsibilities; (ii) the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct; or (iii) the willful engaging by the Executive in fraud or dishonesty which is demonstrably and materially injurious to the Company or its reputation, monetarily or otherwise. No act, or failure to act, on the Executive’s part shall be deemed “willful” unless committed or omitted by the Executive in bad faith and without reasonable belief that the Executive's act or failure to act was in, or not opposed to, the best interest of the Company. It is also expressly understood that the Executive’s attention to matters not directly related to the business of the Employer shall not provide a basis for termination for Cause so long as the Board has approved the Executive’s engagement in such activities. No termination of the Executive’s employment shall be a termination for Cause hereunder unless it is effected in accordance with Section 7.1.

16.8 A “Change in Control” shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall have occurred:

(A)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 25% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in Section 16.8(C)(i);

(B)the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended;

(C)there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no

Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding securities; or

(D)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in the Executive, or a group of Persons which includes the Executive, acquiring, directly or indirectly, 25% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities.

16.9 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

16.10 “Company” shall mean EMC Corporation and, except in determining under Section 16.8 whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

16.11 “Date of Termination” shall have the meaning set forth in Section 7.2.

16.12 “Disability” shall be deemed the reason for the termination of the Executive's employment, if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full‑time performance of the Executive's duties with the Employer for a period of one hundred twenty (120) days, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full‑time performance of the Executive's duties. Any question as to the existence of the Executive's Disability upon which the Executive and the Company cannot agree shall be determined by a qualified independent physician selected by the Executive (or, if the Executive is unable to make such selection, it shall be made by any adult member of the Executive's immediate family), and approved by the Company. The determination of such physician made in writing to the Company and to the Executive shall be final and conclusive for all purposes of this Agreement, absent fraud.

16.13 “Employer”shall mean the Company in instances where the Executive is an employee of the Company and shall mean the applicable subsidiary of the Company in instances where the Executive is employed by a subsidiary of the Company and the Board (or its

delegate) has authorized the entry into a Change in Control Severance Agreement with the Executive in his capacity as an employee of such subsidiary.

16.14 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

16.15 “Excise Tax” shall mean any excise tax imposed under Section 4999 of the Code.

16.16 “Executive” shall mean the individual named in the first paragraph of this Agreement.

16.17 “Good Reason”for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) after any Change in Control, or prior to a Change in Control under the circumstances described in the second sentence of Section 6.1 (treating all references in subsections (A), (B), (C) and (D) to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company or the Employer, or failures by the Company or the Employer to act, unless such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

(A) A significant adverse change in the Executive's role as in effect immediately prior to the Change in Control, including, without limitation, any significant adverse change in the Executive's role as a result of a diminution of the Executive's duties or responsibilities (other than, if applicable, any such change directly and solely attributable to the fact that the Company is no longer publicly owned) or the assignment to the Executive of any duties or responsibilities which are inconsistent with such role;

(B) a reduction in the Executive's total annual target compensation (as compared to the Executive's total annual target compensation immediately prior to the Change in Control), other than pursuant to a broad-based reduction in total annual target compensation which applies to all similarly situated executives of the Company or any acquirer, as applicable (and defining total annual target compensation for purposes of this Section 16.17(B) as Base Salary and annual target cash incentive compensation (and not including equity or equity-based compensation));

(C) the failure by the Company or the Employer to continue in effect any material Plan in which the Executive is participating at the time of the Change in Control (or Plans providing the Executive with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Company or the Employer which would have a material adverse effect on the Executive's continued participation in any of such Plans following the date of the Change in Control or which would materially reduce the Executive's benefits in the future under any of such Plans or deprive the Executive of any material benefit enjoyed by the Executive under a Plan at the time of the Change in Control;

(D) the Company or the Employer requiring the Executive to be based at an office that is greater than 50 miles from where the Executive's office is located immediately prior to the Change in Control except for required travel on the Employer's business to an extent substantially consistent with the business travel obligations which the Executive undertook on behalf of the Employer prior to the Change in Control; or

(E) a breach by the Company of its obligations under Section 9.1 hereof.

The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. In order for Good Reason to exist hereunder, the Executive must provide notice to the Company of the existence of the condition or circumstance described above within 90 days of the initial existence of the condition or circumstance (or, if later, within 90 days of the Executive's becoming aware of such condition or circumstance), and the Company must have failed to cure such condition within 30 days of the receipt of such notice. Subject to the preceding sentence, the Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

For purposes of any determination regarding the existence of Good Reason, any good faith claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that Good Reason does not exist.

16.18 “Notice of Termination” shall have the meaning set forth in Section 7.1.

16.19 “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

16.20 “Plan” shall mean any compensation plan such as an incentive plan, or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation or vacation plan or policy or any other plan, program or policy of the Company or the Employer intended to benefit employees, but excluding following a Change in Control (but not during a Potential Change in Control Period) any stock option, restricted stock or other stock-based plan or benefit except with respect to any awards outstanding under any such plan as of the date of the Change in Control.

16.21 “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following subsections shall have occurred:

(A) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(B) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

(C) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or

(D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

16.22 “Potential Change in Control Period” shall commence upon the occurrence of a Potential Change in Control and shall lapse upon the occurrence of a Change in Control or, if earlier (i) with respect to a Potential Change in Control occurring pursuant to Section 16.21(A), immediately upon the abandonment or termination of the applicable agreement, (ii) with respect to a Potential Change in Control occurring pursuant to Section 16.21(B), immediately upon a public announcement by the applicable party that such party has abandoned its intention to take or consider taking actions which if consummated would result in a Change in Control, or (iii) with respect to a Potential Change in Control occurring pursuant to Section 16.21(C) or (D), upon the one year anniversary of the occurrence of a Potential Change in Control (or such earlier date as may be determined by the Board).

16.23 “Release Deadline” shall have the meaning set forth in Section 15.

16.24 “Retirement” shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Employer’s retirement policy, including early retirement, generally applicable to its salaried employees.

16.25 “Severance Payments” shall have the meaning set forth in Section 6.1.

16.26 “Tax Counsel” shall have the meaning set forth in Section 6.2.

16.27 “Term” shall mean the period of time described in Section 2 (including any extension, continuation or termination described therein).

16.28 “Total Payments” shall mean those payments so described in Section 6.2.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

EMC CORPORATION

By:___________________________________

Name:

Title:

___________________________________

[EXECUTIVE]

Schedule of Change in Control Severance Agreements



Name	Date of Agreement/ Commencement of Term
McSweeney, Erin	2-Sept-2015
Yoran, Amit	2-Sept-2015

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

I, Joseph M. Tucci, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of EMC Corporation (“the Registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;


4.	The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and


5.	The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.


Date: November 9, 2015	/s/ Joseph M. Tucci

Joseph M. Tucci

Chairman and Chief Executive Officer

Exhibit 31.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, Zane C. Rowe, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of EMC Corporation (“the Registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;


4.	The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and


5.	The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.


Date: November 9, 2015	/s/ Zane C. Rowe

Zane C. Rowe

Executive Vice President and

Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph M. Tucci, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:


(1)	The Quarterly Report on Form 10-Q of EMC Corporation for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of EMC Corporation.

/s/ Joseph M. Tucci

Joseph M. Tucci

Chairman and Chief Executive Officer

November 9, 2015

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. This certification shall not be deemed incorporated by reference in any filing under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Zane C. Rowe, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:


(1)	The Quarterly Report on Form 10-Q of EMC Corporation for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of EMC Corporation.

/s/ Zane C. Rowe

Zane C. Rowe

Executive Vice President and

Chief Financial Officer

November 9, 2015

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