This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our interim consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and the MD&A contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 29, 2008. 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 of this Quarterly Report on Form 10-Q. The forward-looking statements do not include the impact of any potential mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof or costs incurred in expense reduction initiatives.

All dollar amounts expressed numerically in the MD&A are in millions, except per share amounts.

Certain tables may not add due to rounding.

INTRODUCTION

We manage our business in two broad categories: EMC Information Infrastructure and VMware Virtual Infrastructure.

EMC Information Infrastructure

Our EMC Information Infrastructure business consists of three of our segments:
Information Storage, Content Management and Archiving and RSA Information Security. Our long-term objective for our EMC Information Infrastructure business is to achieve profitable growth by increasing our operating income, measured on a cash basis, at a rate greater than our revenue growth. Management believes that by providing a combination of systems, software, services and solutions to meet customers' needs, we will be able to profitably increase revenues in the long-term. Our efforts over the past few years have been primarily focused on growing revenues by enhancing and expanding our portfolio of offerings to satisfy our customers' information infrastructure requirements. We have enhanced and expanded our portfolio of offerings through both internal research and development ("R&D") and through acquisitions. We have increased our overall investment in R&D from $863.3 for the nine months ended September 30, 2007 to $902.1 for the nine months ended September 30, 2008. Additionally, we invested $587.6 on acquisitions during the nine months ended September 30, 2008. These R&D expenditures and acquisitions have enabled us and should continue to enable us to introduce new and enhanced offerings. We plan to continue our R&D efforts to enable further innovation so we can continue to introduce new and enhanced offerings. Revenue from new and enhanced product offerings introduced in the last 12 months, including all product revenues from companies acquired during the last 12 months, contributed $746.1 of revenue to the current quarter and $2,399.6 to the nine months ended September 30, 2008.

Concurrent with our objective of growing revenues, we are focusing on controlling costs. Beginning in 2006 and through 2007, we continued our implementation of an integration plan for the EMC Information Infrastructure business, including most of the acquisitions we had made over the prior three years. The objectives of the plan were to improve efficiencies across our EMC Information Infrastructure business and reduce costs, while presenting a more unified "One EMC" to our customers. The plan included a workforce reduction of approximately 1,350 employees worldwide, consolidation of facilities, termination of contracts and abandonment of assets from which we would no longer derive a benefit. Throughout 2008, we have continued our cost control initiatives by carefully managing headcount growth, driving productivity and optimizing our non-people spend across the business. In addition to these programs, we are now planning further expense reductions. We are in the process of reviewing our back office and infrastructure costs, as well as parts of the business with low productivity or high cost. While the current outcome of such plans has not yet been determined, the plans may result in additional costs being incurred as a result of these expense reduction initiatives. Additionally, such actions could result in the impairment of assets should management determine to change any of its operating business model.

VMware Virtual Infrastructure

Our VMware Virtual Infrastructure business has achieved significant revenue growth to date by focusing on delivering new virtual infrastructure software solutions technology and products, expanding its network of technology and distribution partners, increasing product awareness, promoting the adoption of virtualization and building long-term relationships with its customers through the adoption of enterprise license agreements ("ELAs").

The current financial focus of VMware is on revenue growth to generate cash flows to fund its expansion of industry segment share and its virtual infrastructure solutions. VMware expects to continue its revenue growth by broadening its virtual infrastructure software solutions technology and product portfolio for more uses to more users.

Although VMware is currently the leading provider of virtualization solutions, management believes the adoption by customers of virtualization solutions is at very early stages. The business expects to face competitive threats to its leadership position from a number of companies, some of whom may have significantly greater resources. As a result, management believes it is important to continue to invest in strategic initiatives related to research and product development, market expansion and the associated support functions to expand its leadership in providing virtualization solutions. This investment could result in contracting operating margins as VMware invests in its future.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:



                                                  For the Three Months
                                                          Ended
                                            September 30,       September 30,         $            %
                                                 2008               2007           Change        Change
Information Storage                        $        2,908.3    $       2,623.3    $   285.0        10.9 %
Content Management and Archiving                      188.1              189.3         (1.2 )      (0.6 )
RSA Information Security                              147.3              132.9         14.4        10.8
VMware Virtual Infrastructure                         471.9              354.3        117.6        33.2

Total revenues                             $        3,715.6    $       3,299.8    $   415.8        12.6 %


                                                   For the Nine Months
                                                          Ended
                                            September 30,       September 30,         $            %
                                                 2008               2007           Change        Change
Information Storage                        $        8,493.4    $       7,578.2    $   915.2        12.1 %
Content Management and Archiving                      577.3              535.1         42.2         7.9
RSA Information Security                              426.2              377.7         48.5        12.8
VMware Virtual Infrastructure                       1,362.6              908.4        454.2        50.0

Total revenues                             $       10,859.5    $       9,399.4    $ 1,460.1        15.5 %

The Information Storage segment revenues include systems, software and other services revenues. Systems revenues were $1,578.8 and $1,405.1 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of 12.4% and were $4,535.6 and $4,055.2 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 11.8%. The increases in systems revenues were due to greater demand for these products attributable to increased demand for our Information Technology ("IT") infrastructure offerings and a broadened product portfolio. Software revenues were $776.7 and $767.7 for the third quarter of 2008 and 2007, respectively, representing an increase of 1.2% and were $2,316.3 and $2,244.5 for the first nine months of 2008 and 2007, respectively, representing an increase of 3.2%. The third quarter increase of 1.2% was due to a $46.3 or 18.3% increase in software maintenance revenues, partially offset by a decrease in software license revenues of $37.3 or 7.2%. The nine month increase of 3.2% was due to a $143.4 or 19.6% increase in software maintenance revenues, partially offset by a decrease in software license revenues of $71.6 or 4.7%. Software maintenance revenues increased due to continued demand for support and unspecified upgrades from our installed base. The decline in software license revenues was due to a combination of factors, including existing systems' customers migrating to higher end systems while continuing to utilize their existing software licenses and increased lower-end systems sales which utilize less software. Revenue from new and enhanced product offerings introduced in the last 12 months, including all product revenue from companies acquired during the last 12 months, contributed $692.4 of revenue to the current quarter and $2,240.3 for the nine months ended September 30, 2008. Total other services were $552.9 and $450.5 for the three months ended September 30, 2008 and 2007, respectively, representing an

increase of 22.7% and were $1,641.4 and $1,278.5 for the first nine months ended September 30, 2008 and 2007, respectively, representing an increase of 28.4%. Other services primarily consist of professional services and system maintenance. Professional services increased 24.8% and 32.6% for the three and nine months ended September 30, 2008, respectively, and system maintenance revenues increased 16.7% and 18.1% for the three and nine months ended September 30, 2008, respectively. The increase in professional services was partially attributable to greater demand for our professional services, largely to support and implement information lifecycle management-based solutions and to acquisitions consummated in 2007 and 2008. Total information storage revenue growth was also driven by higher sales volume from our channel partners. Our channel partners accounted for 49.5% and 48.4% of the revenue growth in the three and nine months ended September 30, 2008, respectively.

The Content Management and Archiving segment revenues primarily include software revenues and other services revenues. Total software revenues were $139.4 and $140.8 for the three months ended September 30, 2008 and 2007, respectively, representing a decrease of 1.0% and were $420.7 and $399.1 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 5.4%. The 1.0% decrease in third quarter software revenues was primarily due to a decrease in software license revenues of $16.9 or 21.3% partially offset by an increase in software maintenance revenues of $15.4 or 25.0%. The 5.4% increase in software revenues for the nine months ended September 30, 2008 was due to an increase in software maintenance revenue of $44.1 or 24.2% partially offset by a $22.5 or 10.4% decrease in software license revenue. Software maintenance revenues increased due to continued demand for support and unspecified upgrades from our installed base. The decrease in software license revenues for both the three- and nine-month periods ended September 30, 2008 was attributable to lower demand for application software resulting from the current economic uncertainty. Revenue from new and enhanced product offerings introduced in the last 12 months, including all product revenues from companies acquired during the last 12 months, contributed $49.8 for the quarter ended September 30, 2008 and $144.8 for the nine months ended September 30, 2008. Other services revenues increased $1.5 or 3.2% and $21.0 or 15.8% for the three and nine months ended September 30, 2008, respectively, as a result of increased demand for professional services to support and implement solutions for managing increasing volumes of customers' unstructured data.

The RSA Information Security segment revenues primarily include software revenues and other services revenues. Total software revenues were $114.8 and $108.1 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of 6.2% and were $335.8 and $316.4 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 6.1%. Revenue from new and enhanced product offerings introduced in the last 12 months, including all product revenues from companies acquired during the last 12 months, contributed $3.9 to the quarter ended September 30, 2008 and $14.5 for the nine months ended September 30, 2008. The 6.2% increase in third quarter software revenues was primarily due to an increase in software maintenance revenues of $6.2 or 24.6% and a $0.5 or 0.6% increase in software license revenues. The 6.1% increase in software revenues for the nine months ended September 30, 2008 was primarily due to an increase in software maintenance revenue of $20.0 or 28.6%, partially offset by a $0.6 or 0.2% decrease in software license revenue. Software maintenance revenues increased due to continued demand for support and unspecified upgrades from our installed base. The change in software license revenues for the nine months ended September 30, 2008 was impacted by lower demand in the first quarter of 2008 when compared to the first quarter of 2007. Other services revenues increased $7.2 or 36.2% and $28.3 or 58.6% for the three and nine months ended September 30, 2008, respectively, as a result of increased demand for professional services.

The VMware Virtual Infrastructure segment includes software license revenues and services revenues. Total revenues were $471.9 and $354.3 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of 33.2% and were $1,362.6 and $908.4 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 50.0%. Software license revenues were $285.1 and $244.2 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of 16.7% and were $860.2 and $619.0 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 39.0%. A significant majority of the revenue growth for the three and nine months ended September 30, 2008 compared to the prior year comparable periods is the result of greater demand for VMware's virtualization product offerings attributable to wider industry acceptance of virtualization as part of organizations' IT infrastructure, a broadened product portfolio and expansion of VMware's network of indirect channel partners. VMware expects the rate of growth to decelerate due primarily to the size and scale of its business and lengthened sales cycles attributable to challenges its customers may face in the current uncertain economic environment, such as decreases in IT budgets and difficulties in obtaining financing. ELAs continue to be a significant component of VMware's revenue growth. Under a typical ELA, a portion of the revenue is attributed to the license and recognized immediately, but the majority is deferred and recognized as services revenue in future periods. Although license revenue grew in the third quarter of 2008 when compared to the third quarter of 2007, license revenue remained relatively flat from the second quarter of 2008. At the end of the third quarter of 2008, VMware continued to observe the

lengthening of the sales cycle on ELAs that VMware believes is primarily correlated to economic uncertainty, especially in the United States. In addition, some customers purchased VMware solutions in smaller quantities often through the channel to meet their immediate needs, forgoing larger discounts offered under ELAs. VMware believes this had a negative impact on its revenues and deferred revenue in the third quarter. VMware expects this trend to continue throughout 2008 and perhaps longer term.

VMware software maintenance and services revenues were $186.8 and $110.1 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of 69.7% and were $502.4 and $289.4 for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of 73.6%. Software maintenance and services revenues primarily consist of software maintenance and professional services revenues. This growth reflects the increase in VMware's license revenues, as software maintenance services are generally purchased with licenses, the benefit from multi-year software maintenance contracts sold in previous periods and renewals of existing customer software maintenance contracts. Professional services revenue growth reflects increased demand for design and implementation services and training programs, as end-user organizations deployed virtualization across their organizations. Given the reasons cited previously, VMware expects that services revenue will compose a larger proportion of its revenue mix and revenue growth in 2008.

Consolidated revenues by geography were as follows:

                                              For the Three Months
                                                      Ended
                                         September 30,     September 30,      %
                                             2008              2007         Change
     United States                      $       2,025.0   $       1,884.3      7.5 %
     Europe, Middle East and Africa             1,126.2             940.8     19.7
     Asia Pacific                                 397.4             334.4     18.8
     Latin America, Mexico and Canada             167.0             140.2     19.1

                                               For the Nine Months
                                                      Ended
                                         September 30,     September 30,      %
                                             2008              2007         Change
     United States                      $       5,837.5   $       5,311.9      9.9 %
     Europe, Middle East and Africa             3,325.9           2,715.1     22.5
     Asia Pacific                               1,218.1           1,001.9     21.6
     Latin America, Mexico and Canada             478.0             370.6     29.0

Revenue increased for the three and nine months ended September 30, 2008 compared to the same periods in 2007 in all of our markets due to greater demand for our products and services. Changes in exchange rates favorably impacted revenue growth by 1.2% and 2.0% for the three and nine months ended September 30, 2008, respectively. The impact of the change in rates in both periods was most significant in the European market, primarily Germany, France, Italy and the United Kingdom.

Costs and Expenses

The following table presents our costs and expenses, other income and net
income:



                                                   For the Three Months
                                                           Ended
                                            September 30,         September 30,          $            %
                                                 2008                 2007             Change       Change
Cost of revenue:
Information Storage                        $        1,411.4      $       1,277.5      $  133.9        10.5 %
Content Management and Archiving                       74.9                 65.7           9.2        14.0
RSA Information Security                               43.9                 38.6           5.3        13.7
VMware Virtual Infrastructure                          65.0                 50.9          14.1        27.7
Corporate reconciling items                            61.8                 45.4          16.4        36.1

Total cost of revenue                               1,656.9              1,478.1         178.8        12.1

Gross margins:
Information Storage                                 1,497.0              1,345.8         151.2        11.2
Content Management and Archiving                      113.2                123.6         (10.4 )      (8.4 )
RSA Information Security                              103.5                 94.3           9.2         9.8
VMware Virtual Infrastructure                         406.9                303.4         103.5        34.1
Corporate reconciling items                           (61.8 )              (45.4 )       (16.4 )      36.1

Total gross margin                                  2,058.7              1,821.6         237.1        13.0

Operating expenses:
Research and development (1)                          410.8                383.6          27.2         7.1
Selling, general and administrative (2)             1,172.6                983.8         188.8        19.2
In-process research and development                       -                  0.8          (0.8 )        NM
Restructuring charges (credits)                         4.4                 (0.6 )         5.0          NM

Total operating expenses                            1,587.8              1,367.6         220.2        16.1

Operating income                                      471.0                454.0          17.0         3.7
Investment income, interest expense and
other income, net (3)                                  24.9                179.7        (154.8 )     (86.1 )

Income before income taxes                            495.9                633.8        (137.9 )     (21.8 )
Provision for income taxes                             71.5                136.4         (64.9 )     (47.6 )
Minority interest, net of taxes                       (13.1 )               (4.5 )        (8.6 )     191.1

Net income                                 $          411.3      $         492.9      $  (81.6 )     (16.6 )%

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

                      RESULTS OF OPERATIONS - (Continued)



                                                   For the Nine Months
                                                          Ended
                                           September 30,         September 30,          $             %
                                                2008                 2007             Change       Change
Cost of revenue:
Information Storage                       $        4,127.9      $       3,747.9      $  380.0         10.1 %
Content Management and Archiving                     225.9                193.7          32.2         16.6
RSA Information Security                             127.3                103.8          23.5         22.6
VMware Virtual Infrastructure                        205.1                130.9          74.2         56.7
Corporate reconciling items                          176.6                130.6          46.0         35.2

Total cost of revenue                              4,862.8              4,307.0         555.8         12.9

Gross margins:
Information Storage                                4,365.5              3,830.3         535.2         14.0
Content Management and Archiving                     351.4                341.4          10.0          2.9
RSA Information Security                             298.9                273.9          25.0          9.1
VMware Virtual Infrastructure                      1,157.5                777.5         380.0         48.9
Corporate reconciling items                         (176.6 )             (130.6 )       (46.0 )       35.2

Total gross margin                                 5,996.7              5,092.4         904.3         17.8

Operating expenses:
Research and development (4)                       1,286.8              1,124.0         162.8         14.5
Selling, general and administrative
(5)                                                3,390.5              2,783.8         606.7         21.8
In-process research and development                   79.2                  0.8          78.4      9,800.0
Restructuring charges (credits)                        4.0                 (3.2 )         7.2           NM

Total operating expenses                           4,760.5              3,905.3         855.2         21.9

Operating income                                   1,236.2              1,187.1          49.1          4.1
Investment income, interest expense
and other income, net (6)                            116.4                254.1        (137.7 )      (54.2 )

Income before income taxes                         1,352.5              1,441.2         (88.7 )       (6.2 )
Provision for income taxes                           267.9                296.8         (28.9 )       (9.7 )
Minority interest, net of taxes                      (27.0 )               (4.5 )       (22.5 )      500.0

Net income                                $        1,057.6      $       1,139.9      $  (82.3 )       (7.2 )%

(1) Amount includes reconciling items of $39.5 and $31.2 for the three months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

(2) Amount includes reconciling items of $88.9 and $74.9 for the three months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

(3) Amount includes reconciling items of $0.0 and $137.3 for the three months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

(4) Amount includes reconciling items of $123.7 and $83.7 for the nine months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

(5) Amount includes reconciling items of $264.2 and $204.6 for the nine months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

(6) Amount includes reconciling items of $0.0 and $137.3 for the nine months ended September 30, 2008 and 2007, respectively. See footnote 11 for additional information regarding corporate reconciling items.

NM - not measurable

Gross Margins

Overall, our gross margin percentages were 55.4% and 55.2% for the third quarters of 2008 and 2007, respectively. The improvement in the gross margin percentage in the third quarter of 2008 compared to 2007 was attributable to the VMware Virtual Infrastructure segment, which contributed 110 basis points, and the RSA Information Security segment, which contributed 3 basis points. These . . .