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 Annual 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. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof.

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

Certain tables may not add due to rounding.

INTRODUCTION

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

EMC Information Infrastructure

Our EMC Information Infrastructure business consists of three of our segments:
Information Storage, Content Management and Archiving and RSA Information Security. Our objective for our EMC Information Infrastructure business is to grow faster than the markets we serve by investing in the business for sustainable advantage.

To further improve the competitiveness and efficiency of our global business in response to a challenging global economy, in the fourth quarter of 2008, we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. We expected the program to reduce costs from our 2008 rate by approximately $350 in 2009, increasing to approximately $500 in 2010. The program's focus is to consolidate back office functions, field and campus offices, rebalance investments towards higher-growth products and markets, reduce management layers, and further reduce indirect spend on contractors, third-party services and travel. The restructuring program will reduce our global Information Infrastructure workforce by approximately 2,400 positions. As part of our ongoing focus on costs, we have identified some additional near-term cost reduction actions that will save approximately another $100, predominately in the second half of 2009 yielding total expected savings in 2009 of approximately $450. These actions consist of temporary reductions in salaries and employee benefits. Given the shorter-term nature of some of these new initiatives, we still expect total cost reductions to be approximately $500 in 2010.

These programs will favorably impact our cost of sales, selling, general & administrative ("SG&A") and research & development ("R&D") expenses. For 2009, we estimate that approximately one-third of these reductions will be to our cost of sales and the remaining two-thirds will be to our other operating expenses.

The programs' expected savings will come from both cost reductions and the transformation of several areas of our operational cost structure. As part of these efforts, we are undertaking several initiatives to transform the structural efficiency of our operations worldwide. These initiatives will include the consolidation and movement of various facilities and processes beginning in 2009 and to be completed by the end of 2010. As part of these transformation efforts, we expect to incur additional non-recurring transition costs of approximately $75 to $100 over this period. These investments are necessary to implement the new, more efficient capabilities ahead of transitioning from the existing cost structure. Through the end of the first quarter of 2009, we have incurred approximately $10 of these incremental costs.

VMware Virtual Infrastructure

The current financial focus of VMware is on long-term revenue growth to generate cash flows to fund expansion of industry segment share and development of virtualization-based products for data centers, desktops and cloud computing. VMware expects to grow its business by broadening its virtualization infrastructure software solutions technology and product portfolio, increasing product awareness, promoting the adoption of virtualization, and building long-term relationships with customers through the adoption of enterprise license agreements. VMware recently announced VMware vSphere 4, the next generation of VMware Infrastructure, its flagship virtual data center operating system product, and it is expected to be generally available during the second quarter of 2009. VMware expects to continue to introduce products that build on the vSphere foundation through 2009 and 2010.

Although VMware is currently the leading provider of virtualization infrastructure software solutions, management believes the use of virtualization infrastructure solutions is at early stages by customers. The business faces competitive threats to its leadership from a number of companies, some of which have significantly greater resources, which could result in increased pressure to reduce prices on its offerings. As a result, management believes it is important to continue to invest in strategic initiatives related to product research and development, market expansion and associated support functions to expand industry leadership. These investments could result in contracting operating margins as VMware invests in its future.

Global Information Technology ("IT") Spending

We expect the global economic situation to continue to have a negative impact on IT spending in 2009. Our best estimate is that 2009 global IT spending will decline as a percentage in the very high single digit to very low double digits range compared with 2008. We also expect that second quarter 2009 global IT spending will probably be flat compared with the first quarter of 2009, and the second half of 2009 will be stronger than the first half of the year.

Due to pressures on IT spending, we anticipate lower gross and operating margins for 2009 compared with 2008. We also believe that operating profitability should show signs of improvement from first quarter 2009 levels in the second half of 2009.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:



                                         For the Three Months
                                                 Ended
                                        March 31,     March 31,       $           %
                                           2009          2008       Change      Change
    Information Storage                $    2,363.3   $  2,711.8   $ (348.5 )    (12.9 )%
    Content Management and Archiving          174.3        185.2      (10.9 )     (5.9 )
    RSA Information Security                  142.7        134.9        7.8        5.8
    VMware Virtual Infrastructure             470.4        438.2       32.2        7.3

    Total revenues                     $    3,150.8   $  3,470.1   $ (319.3 )     (9.2 )%

The Information Storage segment's product revenues declined 17.4% from $1,903.6 for the three months ended March 31, 2008 to $1,572.4 for the three months ended March 31, 2009. The decrease was attributable to decreased demand for our storage product offerings resulting from the challenging global economic environment and resulting negative impact in customers' IT purchases. The Information Storage segment's services revenues declined 2.1% from $808.2 for the three months ended March 31, 2008 to $790.9 for the three months ended March 31, 2009. The decline in services revenues was primarily attributable to lower demand for professional services attributable to the challenging global economic environment and resulting negative impact in our customers' IT purchases. Partially offsetting this decline was an increase in maintenance revenues due to continued demand for support from our installed base.

The Content Management and Archiving segment's product revenues declined 3.9% from $61.1 for the three months ended March 31, 2008 to $58.7 for the three months ended March 31, 2009. The decrease was attributable to decreased demand for our Content Management and Archiving product offerings resulting from the challenging global economic environment and resulting negative impact in our customers' IT purchases. The Content Management and Archiving segment services revenues declined 6.8% from $124.1 for the three months ended March 31, 2008 to $115.6 for the three months ended March 31, 2009. The decline in services revenues was primarily attributable to lower demand for professional services attributable to the challenging global economic environment and resulting negative impact in our customers' IT purchases. Partially offsetting this decline was an increase in maintenance revenues due to continued demand for support from our installed base.

The RSA Information Security segment's product revenues decreased 1.2% from $81.7 for the three months ended March 31, 2008 to $80.7 for the three months ended March 31, 2009. The decrease was primarily attributable to the challenging global economic environment and resulting negative impact in our customers' IT purchases. The RSA Information Security segment's services revenue increased 16.5% from $53.2 for the three months ended March 31, 2008 to $62.0 for the three months ended March 31, 2009. Services revenues increased due to an increase in maintenance revenues due to continued demand for support from our installed base as well as increased demand for professional consulting advisory services.

The VMware Virtual Infrastructure segment's product revenues declined 12.5% from $294.0 for the three months ended March 31, 2008 to $257.3 for the three months ended March 31, 2009. The decrease was primarily attributable to the challenging global economic environment and resulting negative impact in VMware customers' IT purchases. VMware Virtual Infrastructure services revenues increased 47.8% from $144.2 for the three months ended March 31, 2008 to $213.1 for the three months ended March 31, 2009. Professional services revenues increased as a result of increased demand for the implementation of virtualization solutions. Although VMware continues to serve customers directly, VMware's strategy has been to encourage partners to build their professional services business around VMware's which VMware believes will leverage license sales through this channel. Accordingly, VMware expects the growth rate of professional services revenue to increase modestly in the future. Software maintenance revenues increased primarily due to the benefit from multi-year software maintenance contracts sold in previous periods.

In the second quarter of 2009, VMware announced VMware vSphere 4, its next generation of VMware Infrastructure. While VMware believes the offering can be a significant driver of revenue growth over the longer term, in the near term, there will be some disruption in the sales process that will impact near-term license revenue as VMware moves from one product generations to another, and at the same time VMware changes product pricing and packaging.

Consolidated revenues by geography were as follows:

                                             For the Three Months
                                                     Ended
                                            March 31,     March 31,      %
                                               2009          2008      Change
        United States                      $    1,638.9   $  1,885.4    (13.1 )%
        Europe, Middle East and Africa            986.6      1,052.6     (6.3 )
        Asia Pacific                              374.3        379.8     (1.4 )
        Latin America, Mexico and Canada          150.9        152.2     (0.9 )

Revenues decreased for the three months ended March 31, 2009 compared to the same period in 2008 in all of our markets due to the challenging global economic environment and resulting negative impact in customers' IT purchases. Changes in exchange rates contributed 3.5% to the overall revenue decrease for the three months ended March 31, 2009 compared to the same period in 2008. Changes in exchange rates favorably impacted revenue growth by 2.3% for the three months ended March 31, 2008. The impact of the change in rates 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
attributable to EMC Corporation.



                                                 For the Three Months
                                                         Ended
                                               March 31,       March 31,          $            %
                                                 2009             2008          Change       Change
Cost of revenue:
Information Storage                           $   1,234.5      $  1,320.9      $  (86.4 )      (6.5 )%
Content Management and Archiving                     71.7            74.4          (2.7 )      (3.6 )
RSA Information Security                             43.7            40.3           3.4         8.4
VMware Virtual Infrastructure                        66.3            68.6          (2.3 )      (3.4 )
Corporate reconciling items                          51.4            56.5          (5.1 )      (9.0 )

Total cost of revenue                             1,467.5         1,560.7         (93.2 )      (6.0 )

Gross margins:
Information Storage                               1,128.9         1,390.9        (262.0 )     (18.8 )
Content Management and Archiving                    102.6           110.8          (8.2 )      (7.4 )
RSA Information Security                             99.1            94.5           4.6         4.9
VMware Virtual Infrastructure                       404.1           369.6          34.5         9.3
Corporate reconciling items                         (51.4 )         (56.5 )         5.1        (9.0 )

Total gross margin                                1,683.3         1,909.4        (226.1 )     (11.8 )

Operating expenses:
Research and development (1)                        383.3           433.5         (50.2 )     (11.6 )
Selling, general and administrative (2)           1,024.8         1,082.2         (57.4 )      (5.3 )
In-process research and development                     -            79.2         (79.2 )        NM
Restructuring charge (credit)                        15.6            (0.4 )        16.0          NM

Total operating expenses                          1,423.6         1,594.6        (171.0 )     (10.7 )

Operating income                                    259.6           314.8         (55.2 )     (17.5 )
Investment income, interest expense and
other
expense, net                                        (16.5 )          29.3         (45.8 )    (156.3 )

Income before income taxes                          243.2           344.1        (100.9 )     (29.3 )
Income tax provision                                 37.8            86.3         (48.5 )     (56.2 )

Net income                                          205.3           257.8         (52.5 )     (20.4 )
Less: Net Income attributable to the
non-controlling interests
in VMware, Inc.                                     (11.3 )          (6.2 )        (5.1 )      82.3

Net income attributable to EMC Corporation    $     194.1      $    251.6      $  (57.5 )     (22.9 )%

(1) Amount includes reconciling items of $44.8 and $41.8 for the three months ended March 31, 2009 and 2008, respectively.

(2) Amount includes reconciling items of $85.2 and $86.7 for the three months ended March 31, 2009 and 2008, respectively.

NM - not measurable

Gross Margins

Overall, our gross margin percentages were 53.4% and 55.0% for the three months ended March 31, 2009 and 2008, respectively. The decline in the gross margin percentage in the first quarter of 2009 compared to 2008 was primarily attributable to the Information Storage segment, which decreased overall gross margins by 220 basis points, and the Content Management and Archiving segment, which decreased overall gross margins by 7 basis points. These declines were partially offset by gross margin improvements in the VMware Virtual Infrastructure segment, which contributed 51 basis points, and the RSA Information Security segment, which contributed 1 basis point. The decrease in corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization and transition costs, increased the consolidated gross margin percentage by 15 basis points.

For segment reporting purposes, stock-based compensation, acquisition-related intangible asset amortization and transition costs are recognized as corporate expenses and are not allocated among our various operating segments. The decrease of $5.1 in the

corporate reconciling items for the quarter ended March 31, 2009 was attributable to a $7.6 decrease in intangible asset amortization expense associated with acquisitions consummated in prior years, partially offset by a $1.6 increase in stock-based compensation expense and a $0.9 increase in transition costs. The transition costs represent the incremental costs incurred to transform our current cost structure to a more streamlined cost structure.

The gross margin percentages for the Information Storage segment were 47.8% and 51.3% for the three months ended March 31, 2009 and 2008, respectively. The decrease in gross margin percentage was primarily attributable to lower sales volume and the acquisition of Iomega in June 2008. Iomega operates within the consumer and small marketplace which historically has had lower gross margins than our traditional Information Storage segment.

The gross margin percentages for the Content Management and Archiving segment were 58.9% and 59.9% for the three months ended March 31, 2009 and 2008, respectively. The decrease in the gross margin percentage was primarily attributable to a decline in the professional service margins attributable to decreased volume, partially offset by an increase in the mix of software license revenues as a percentage of total segment revenues. Software license revenues as a percentage of total revenues increased to 33.7% for the three months ended March 31, 2009 from 31.6% for the three months ended March 31, 2008.

The gross margin percentages for the RSA Information Security segment were 69.4% and 70.1% for the three months ended March 31, 2009 and 2008, respectively. The decrease in the gross margin percentage was primarily attributable to the reduction in the mix of software license revenues as a percentage of total segment revenues. Software license revenues as a percentage of total revenues decreased to 52.5% for the three months ended March 31, 2009 from 57.3% for the three months ended March 31, 2008.

The gross margin percentages for VMware Virtual Infrastructure were 85.9% and 84.3% for the three months ended March 31, 2009 and 2008, respectively. The increase in the gross margin percentage was primarily attributable to improved margins earned on both professional services and maintenance services.

Research and Development

As a percentage of revenues, R&D expenses were 12.2% and 12.5% for the first quarters of 2009 and 2008, respectively. R&D expenses decreased $50.2 for the three months ended March 31, 2009 compared to the same period in 2008, primarily due to a reduction in personnel-related costs, including salaries, benefits, recruiting, contract labor and consulting, facilities costs and materials costs. Personnel-related costs decreased by $39.7, the cost of facilities decreased by $5.5 and the cost of materials to support new product development decreased by $2.7 for the three months ended March 31, 2009 compared to the same period in 2008. Personnel-related costs declined primarily due to an increase in capitalized software development costs of $33.3, which reduce R&D expense. We expect capitalized software development costs to decrease for the remainder of 2009 due to VMware's vSphere 4 reaching general availability.

Corporate reconciling items within R&D, which consist of stock-based compensation, intangible asset amortization and transition costs, increased $3.0 to $44.8 for the three months ended March 31, 2009 when compared to the same period in 2008. Stock-based compensation expense increased $2.4, intangible asset amortization increased $0.2 and transition costs were $0.4 for the three months ended March 31, 2009. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

R&D expenses within EMC's Information Infrastructure business, as a percentage of EMC's Information Infrastructure business revenues, were 9.6% and 9.7% for the three months ended March 31, 2009 and 2008, respectively. R&D expenses decreased $36.9 primarily due to a reduction in personnel-related costs, facilities costs and materials costs. Personnel-related costs decreased by $24.4, the cost of facilities decreased by $7.7 and the cost of materials decreased by $2.7 for the three months ended March 31, 2009 compared to the same period in 2008. Capitalized software development costs increased $7.5, which favorably impacted R&D expenses.

R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware's revenues, were 17.2% and 22.2% for the three months ended March 31, 2009 and 2008, respectively. R&D expenses decreased $16.3 for the three months ended March 31, 2009 compared to the same period in 2008, primarily due to a reduction in personnel-related costs, including salaries, benefits, recruiting, contract labor and consulting, which decreased $17.7. Capitalized software development costs increased $25.8, which favorably impacted R&D expense.

Selling, General and Administrative

As a percentage of revenues, SG&A expenses were 32.5% and 31.2% for the three months ended March 31, 2009 and 2008, respectively. SG&A expenses decreased by $57.4 for the three months ended March 31, 2009 compared to the same period in 2008, primarily due to a reduction in personnel-related costs and travel costs. Personnel-related costs decreased by $39.5 and travel decreased by $16.5 for the three months ended March 31, 2009 compared to the same period in 2008. Partially offsetting these decreases was an $8.0 increase in depreciation expense primarily associated with 2008 acquisitions.

Corporate reconciling items within SG&A, which consist of stock-based compensation, intangible asset amortization and transition costs decreased $1.5 to $85.2 for the three months ended March 31, 2009 when compared to the same period in 2008. Stock-based compensation decreased $10.4, partially offset by an increase in transition costs of $8.4 and intangible asset amortization of $0.5. The decrease in stock-based compensation expense was primarily attributable to the vesting of contingent performance awards being deemed not probable. For segment reporting purposes, corporate reconciling items are not allocated to our various operating segments.

SG&A expenses within EMC's Information Infrastructure business, as a percentage of EMC's Information Infrastructure business revenues were 28.4% and 27.1% for the three months ended March 31, 2009 and 2008, respectively. SG&A expenses decreased by $62.3 in the first quarter of 2009 when compared to the same period of 2008, primarily due to a reduction in personnel-related and travel costs. Personnel-related costs decreased by $46.7 and travel costs decreased by $13.3. Partially offsetting these decreases was an increase in depreciation expense of $5.3 primarily associated with 2008 acquisitions.

SG&A expenses within the VMware Virtual Infrastructure business as a percentage of VMware's revenues were 38.0% and 39.4% for the three months ended March 31, 2009 and 2008, respectively. SG&A expenses increased $6.4 for the three months ended March 31, 2009 compared with the same period in 2008. The increase in SG&A expenses in the first quarter of 2009 was primarily the result of higher salaries and benefits costs due to increases in sales, marketing and administrative personnel.

In-Process Research and Development

In-process research and development ("IPR&D") was $0.0 and $79.2 for the three months ended March 31, 2009 and March 31, 2008, respectively. There were no acquisitions consummated during the three months ended March 31, 2009.

For the quarter ended March 31, 2008, two IPR&D projects related to the acquisition of Pi Corporation ("Pi") and one IPR&D project related to the acquisition of Infra Corporation Pty Limited ("Infra") were identified and written off at the time of the respective date of each acquisition because they had no alternative uses and had not reached technological feasibility. The value assigned to the IPR&D was determined utilizing the income approach by determining cash flow projections relating to the identified IPR&D projects. The stage of completion of each in-process project was estimated to determine the discount rates to be applied to the valuation of the in-process technology. Based upon the level of completion and the risk associated with the in-process technology, we applied a discount rate of 50% for the Pi IPR&D projects and 20% for the Infra IPR&D project.

Restructuring Charges and Impairment

For the three months ended March 31, 2009, we incurred restructuring charges of $15.6 compared to $0.4 of restructuring credits for the three months ended March 31, 2008.

In December of 2008, we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. The plan includes the following components:

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

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

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

In addition to this plan, we also recognized an asset impairment charge for certain assets for which the forecasted cash flows from the assets are less than the assets' net book value.

. . .