This Management's Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements and should also be read in conjunction with the risk factors set forth in Item 1A of Part II. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof.

All dollar amounts expressed numerically in this MD&A are in millions.

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, predominantly 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 are favorably impacting 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 worldwide operations. These initiatives, which began in 2009, include the consolidation and movement of various facilities and processes which are expected 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 third quarter of 2009, we have incurred approximately $35 of these incremental transition costs.

VMware Virtual Infrastructure

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

Since mid-2008, VMware has observed that customers have responded to the economic downturn with reductions in their IT spending. As a result, customers are subjecting larger orders, such as ELAs, to a longer review process and in certain cases are purchasing products to meet their immediate needs, foregoing larger discounts offered under ELAs. While the overall macroeconomic environment appears to be improving and customers appear to be moving forward cautiously with their IT spending, VMware remains cautious in planning and is assuming a slow economic recovery, in which IT spending will continue to be tempered into 2010 and perhaps longer.

Although VMware is currently the leading provider of virtualization infrastructure software solutions, they face competitive threats to their leadership position from a number of companies, some of which have significantly greater resources than VMware, which could result in increased pressure to reduce prices on its offerings. As a result, VMware 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 its industry leadership. These investments could result in contracting operating margins as VMware invests in its future. VMware believes that it will be able to continue to meet its product development objectives through continued investment in its business, supplemented with strategic hires and acquisitions, funded through the operating cash flows generated from the sale of existing products and services. VMware believes this is the appropriate priority for the long-term health of its business.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:



                                             For the Three Months Ended
                                          September 30,       September 30,
                                              2009                2008           $ Change         % Change
Information Storage                      $       2,699.0     $       2,908.3     $  (209.3 )          (7.2 )%
Content Management and Archiving                   177.2               188.1         (10.9 )          (5.8 )%
RSA Information Security                           152.5               147.3           5.2             3.5 %
VMware Virtual Infrastructure                      488.9               471.9          17.0             3.6 %

Total revenues                           $       3,517.6     $       3,715.6     $  (198.0 )          (5.3 )%

                                              For the Nine Months Ended
                                          September 30,       September 30,
                                               2009               2008          $ Change        % Change
Information Storage                      $        7,537.2    $       8,493.4    $  (956.2 )        (11.3 )%
Content Management and Archiving                    531.7              577.3        (45.6 )         (7.9 )%
RSA Information Security                            442.3              426.2         16.1            3.8 %
VMware Virtual Infrastructure                     1,414.4            1,362.6         51.8            3.8 %

Total revenues                           $        9,925.7    $      10,859.5    $  (933.8 )         (8.6 )%

Consolidated product revenues declined 11.7% to $2,200.6 for the three months ended September 30, 2009 and 15.4% to $6,175.0 for the nine months ended September 30, 2009. The Information Storage segment's product revenues declined 11.6% to $1,818.2 for the three months ended September 30, 2009 and 16.0% to $5,022.9 for the nine months ended September 30, 2009. The Content Management and Archiving segment's product revenues declined 7.0% to $58.2 for the three months ended September 30, 2009 and 9.8% to $177.7 for the nine months ended September 30, 2009. The RSA Information Security segment's product revenues declined 5.3% to $84.1 for the three months ended September 30, 2009 and 4.1% to $248.8 for the nine months ended September 30, 2009. The VMware Virtual Infrastructure segment's product revenues declined 15.8% to $240.1 for the three months ended September 30, 2009 and 15.7% to $725.5 for the nine months ended September 30, 2009. The decline in product revenues for all segments for the three and nine months ended September 30, 2009 was primarily attributable to lower demand resulting from the challenging global economic environment and resulting negative impact in our customers' IT purchases.

Consolidated services revenues increased 7.7% to $1,317.0 for the three months ended September 30, 2009 and 5.2% to $3,750.8 for the nine months ended September 30, 2009. The Information Storage segment's services revenues increased 3.4% to $880.8 for the three months ended September 30, 2009 and decreased less than 0.1% to $2,514.3 for the nine months ended September 30, 2009. The RSA Information Security segment's services revenue increased 16.8% to $68.4 for the three months

ended September 30, 2009 and 16.1% to $193.5 for the nine months ended September 30, 2009. Services revenues for these segments primarily increased due to an increase in maintenance revenues resulting from continued demand for support from our installed base.

The Content Management and Archiving segment's services revenues declined 5.2% to $119.0 for the three months ended September 30, 2009 and 6.9% to $354.0 for the nine months ended September 30, 2009. The decline in services revenues was primarily attributable to lower demand for our product offerings and professional services attributable to the challenging global economic environment and resulting negative impact in our customers' IT purchases.

The VMware Virtual Infrastructure segment's services revenues increased 33.2% to $248.8 for the three months ended September 30, 2009 and 37.1% to $688.9 for the nine months ended September 30, 2009. Services revenues increased as a result of customers becoming current on their maintenance agreements in order to receive VMware's new product offerings as part of those arrangements. In addition, the growth in services revenues year-over-year reflects overall strong renewals, the benefit of multi-year software maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with software licenses.

Consolidated revenues by geography were as follows:

                                          For the Three Months Ended
                                       September 30,     September 30,      %
                                            2009              2008        Change
    United States                      $      1,899.9    $      2,025.0     (6.2 )%
    Europe, Middle East and Africa            1,034.5           1,126.2     (8.1 )
    Asia Pacific                                396.4             397.4     (0.3 )
    Latin America, Mexico and Canada            186.8             167.0     11.9




                                          For the Nine Months Ended
                                       September 30,     September 30,      %
                                            2009              2008        Change
    United States                      $      5,219.4    $      5,837.5    (10.6 )%
    Europe, Middle East and Africa            3,019.8           3,325.9     (9.2 )
    Asia Pacific                              1,178.1           1,218.1     (3.3 )
    Latin America, Mexico and Canada            508.5             478.0      6.4

Revenues decreased for the three and nine months ended September 30, 2009 compared to the same periods in 2008 in all of our markets, with the exception of Latin America, Mexico and Canada, due to the challenging global economic environment and resulting negative impact in customers' IT purchases. Revenues improved in Latin America, Mexico and Canada primarily due to increased services revenues. Changes in exchange rates contributed 1.3% and 2.8% to the overall revenue decrease for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 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 tables present our costs and expenses, other income and net income
attributable to EMC Corporation.



                                                For the Three Months Ended
                                          September 30,           September 30,            $             %
                                               2009                    2008              Change        Change
Cost of revenue:
Information Storage                      $        1,306.9        $        1,411.4       $ (104.5 )       (7.4 )%
Content Management and Archiving                     65.9                    74.9           (9.0 )      (12.0 )
RSA Information Security                             46.6                    43.9            2.7          6.2
VMware Virtual Infrastructure                        83.5                    65.0           18.5         28.5
Corporate reconciling items                          74.5                    61.8           12.7         20.6

Total cost of revenue                             1,577.4                 1,656.9          (79.5 )       (4.8 )

Gross margins:
Information Storage                               1,392.2                 1,497.0         (104.8 )       (7.0 )
Content Management and Archiving                    111.3                   113.2           (1.9 )       (1.7 )
RSA Information Security                            105.9                   103.5            2.4          2.3
VMware Virtual Infrastructure                       405.4                   406.9           (1.5 )       (0.4 )
Corporate reconciling items                         (74.5 )                 (61.8 )        (12.7 )      (20.6 )

Total gross margin                                1,940.2                 2,058.7         (118.5 )       (5.8 )

Operating expenses:
Research and development (1)                        422.1                   410.8           11.3          2.8
Selling, general and administrative
(2)                                               1,177.8                 1,172.6            5.2          0.4
Restructuring and acquisition-related
charges                                              34.8                     4.4           30.4        690.9

Total operating expenses                          1,634.6                 1,587.8           46.8          2.9

Operating income                                    305.6                   471.0         (165.4 )      (35.1 )
Investment income, interest expense
and other expense, net                               19.9                    (1.1 )         21.0           NM

Income before income taxes                          325.5                   469.9         (144.4 )      (30.7 )
Income tax provision                                 20.6                    63.3          (42.7 )      (67.5 )

Net income                                          304.9                   406.5         (101.6 )      (25.0 )
Less: Net income attributable to the
non-controlling interest in VMware,
Inc.                                                 (6.7 )                 (13.1 )          6.4         48.9

Net income attributable to EMC
Corporation                              $          298.2        $          393.4       $  (95.2 )      (24.2 )%

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

                      RESULTS OF OPERATIONS - (Continued)



                                                For the Nine Months Ended
                                          September 30,           September 30,           $              %
                                               2009                   2008              Change        Change
Cost of revenue:
Information Storage                      $        3,815.7        $       4,127.9       $ (312.2 )        (7.6 )%
Content Management and Archiving                    206.1                  225.9          (19.8 )        (8.8 )
RSA Information Security                            135.7                  127.3            8.4           6.6
VMware Virtual Infrastructure                       221.0                  205.1           15.9           7.8
Corporate reconciling items                         180.0                  176.6            3.4           1.9

Total cost of revenue                             4,558.5                4,862.8         (304.3 )        (6.3 )

Gross margins:
Information Storage                               3,721.6                4,365.5         (643.9 )       (14.7 )
Content Management and Archiving                    325.7                  351.4          (25.7 )        (7.3 )
RSA Information Security                            306.7                  298.9            7.8           2.6
VMware Virtual Infrastructure                     1,193.4                1,157.5           35.9           3.1
Corporate reconciling items                        (180.0 )               (176.6 )         (3.4 )        (1.9 )

Total gross margin                                5,367.3                5,996.7         (629.4 )       (10.5 )

Operating expenses:
Research and development (3)                      1,203.3                1,286.8          (83.5 )        (6.5 )
Selling, general and administrative
(4)                                               3,253.8                3,390.5         (136.7 )        (4.0 )
In-process research and development                     -                   79.2          (79.2 )      (100.0 )
Restructuring and acquisition-related
charges                                              83.6                    4.0           79.6       1,990.0

Total operating expenses                          4,540.6                4,760.5         (219.9 )        (4.6 )

Operating income                                    826.6                1,236.2         (409.6 )       (33.1 )
Investment income, interest expense
and other expense, net                               (9.4 )                 40.1          (49.5 )      (123.4 )

Income before income taxes                          817.3                1,276.2         (458.9 )       (36.0 )
Income tax provision                                 96.5                  244.1         (147.6 )       (60.5 )

Net income                                          720.8                1,032.2         (311.4 )       (30.2 )
Less: Net income attributable to the
non-controlling interest in VMware,
Inc.                                                (23.3 )                (27.0 )          3.7          13.7

Net income attributable to EMC
Corporation                              $          697.5        $       1,005.2       $ (307.7 )       (30.6 )%

(1) Amount includes corporate reconciling items of $69.0 and $39.5 for the three months ended September 30, 2009 and 2008, respectively.

(2) Amount includes corporate reconciling items of $138.6 and $88.9 for the three months ended September 30, 2009 and 2008, respectively.

(3) Amount includes corporate reconciling items of $162.4 and $123.7 for the nine months ended September 30, 2009 and 2008, respectively.

(4) Amount includes corporate reconciling items of $311.4 and $264.2 for the nine months ended September 30, 2009 and 2008, respectively.

NM - not measurable

Gross Margins

For the three months ended September 30, 2009 and 2008, our gross margin percentages were 55.2% and 55.4%, respectively. The decline in the gross margin percentage in the third quarter of 2009 compared to 2008 was primarily attributable to the VMware Virtual Infrastructure segment, which decreased overall gross margins by 29 basis points and the RSA Information Security segment, which decreased overall gross margins by 1 basis point. These declines were partially offset by a 31 basis points gross margin contribution from the Information Storage segment and a 12 basis points gross margin contribution from the Content Management and Archiving segment. The increase in corporate reconciling items, consisting of stock-based compensation, intangible asset amortization, restructuring charges and transition costs, decreased the consolidated gross margin percentage by 33 basis points.

For the nine months ended September 30, 2009 and 2008, our gross margin percentages were 54.1% and 55.2%, respectively. The decline in the gross margin percentage for the nine months ended September 30, 2009 compared to 2008 was primarily attributable to the Information Storage segment, which decreased overall gross margins by 114 basis points, the Content Management and Archiving segment, which decreased overall gross margins by 1 basis point and the RSA Information Security segment, which decreased overall gross margins by 1 basis point. These declines were partially offset by gross margin improvements in the VMware Virtual Infrastructure segment, which contributed 8 basis points. The increase in corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization, restructuring charges and transition costs, decreased the consolidated gross margin percentage by 2 basis points.

For segment reporting purposes, stock-based compensation, intangible asset amortization, restructuring charges and transition costs are recognized as corporate expenses and are not allocated among our various operating segments. The increase of $12.7 in the corporate reconciling items for the three months ended September 30, 2009 was attributable to a $12.5 increase in restructuring charges, a $6.0 increase in stock-based compensation expense and a $0.8 increase in transition costs, partially offset by a $6.6 decrease in intangible asset amortization expense. The transition costs represent the incremental costs incurred to transform our current cost structure to a more streamlined cost structure. The increase of $3.4 in the corporate reconciling items for the nine months ended September 30, 2009 was attributable to a $12.5 increase in restructuring charges, a $10.8 increase in stock-based compensation expense and a $3.0 increase in transition costs, partially offset by a $22.9 decrease in intangible asset amortization expense. The increase in restructuring charges for the three and nine months ended September 30, 2009 was attributable to a loss recognized on a contractual obligation with a minimum purchase obligation that is not expected to be fulfilled. The decrease in intangible asset amortization expense for the three and nine months ended September 30, 2009 was attributable to intangible assets acquired in acquisitions becoming fully amortized.

The gross margin percentages for the Information Storage segment were 51.6% and 51.5% for the third quarters of 2009 and 2008, respectively, and 49.4% and 51.4% for the nine months ended September 30, 2009 and 2008, respectively. The decrease in gross margin percentage for the nine months ended September 30, 2009 compared to the same period in 2008 was primarily attributable to lower sales volume and a greater mix of lower margin Iomega revenue. Iomega operates within the consumer and small business marketplace which historically has had lower gross margins than marketplaces typically served by our Information Storage segment.

The gross margin percentages for the Content Management and Archiving segment were 62.8% and 60.2% for the third quarters of 2009 and 2008, respectively, and 61.2% and 60.9% for the nine months ended September 30, 2009 and 2008, respectively. The increase in gross margin percentage for both the three and nine months ended September 30, 2009 compared to the same periods in 2008 was primarily attributable to a change in the mix of services revenues with a higher proportion of maintenance revenues and a lower proportion of professional services revenues to total services revenues.

The gross margin percentages for the RSA Information Security segment were 69.4% and 70.2% for the third quarters of 2009 and 2008, respectively, and 69.3% and 70.1% for the nine months ended September 30, 2009 and 2008, respectively. The decrease in gross margin percentage for both the three and nine months ended September 30, 2009 compared to the same periods in 2008 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 51.6% and 52.4% for the three and nine months ended September 30, 2009, respectively, from 56.6% and 57.6% for the three and nine months ended September 30, 2008, respectively.

The gross margin percentages for VMware Virtual Infrastructure were 82.9% and 86.2% for the third quarters of 2009 and 2008, respectively, and 84.4% and 84.9% for the nine months ended September 30, 2009 and 2008, respectively. The decrease in gross margin percentage for both the three and nine months ended September 30, 2009 compared to the same periods in 2008 was primarily attributable to an increase in the amortization of software development costs as a percentage of total segment revenues. The amortization of software development costs as a percentage of total revenues increased to 4.5% and 3.2% for the three and nine months ended September 30, 2009, respectively, from 1.9% and 2.4% for the three and nine months ended September 30, 2008, respectively.

Research and Development

As a percentage of revenues, R&D expenses were 12.0% and 11.1% for the three months ended September 30, 2009 and 2008, respectively, and 12.1% and 11.8% for the nine months ended September 30, 2009 and 2008, respectively. R&D expenses increased $11.3 for the three months ended September 30, 2009 compared to the . . .