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-K.

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 segments:
Information Storage, Information Intelligence and RSA Information Security. The objective for our EMC Information Infrastructure business is to simultaneously increase our market share, invest in the business and improve our financial returns. During 2011, we continued to innovate and invest in expanding our total addressable market through internal research and development ("R&D") and our recent acquisitions to capitalize on the continued expansion of enterprise data. We have developed a product portfolio with customer's current and future needs in mind which will continue to evolve as the largest transformation in Information Technology ("IT") history is creating enormous opportunities in Cloud Computing and Big Data.

Cloud Computing leverages an on-demand, self-managed, virtualized infrastructure to deliver IT-as-a-Service in a more efficient, flexible and cost-effective manner. While the fundamental transition to Cloud Computing architectures is gaining traction, customers are increasingly recognizing that their ability to compete is tied to the efficiency, flexibility and agility of their IT operations and that transitioning to a cloud-based architecture will be a key component to their success. We believe our offerings are well-suited to capitalize on this trend as it unfolds over the next several years. Big Data, which is a primary contributor to the pace of overall data growth, refers to the large repositories of corporate and external data, including unstructured information created by new applications (e.g. medical, entertainment, energy and geophysical), social media and other web repositories. With the investments we made in 2010 by acquiring Isilon and Greenplum, as well as our internally developed Atmos offering, we believe we are well-positioned in this market to continue assisting our customers in storing, managing and unlocking the value contained within this information.

Our powerful 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, positioned us well during 2011 to help customers transition to Cloud Computing and benefit from Big Data. Additionally, momentum continues to build at VCE Company LLC, our joint venture with Cisco, and other investors VMware and Intel, as it becomes an important element of our go-to-market model, with their Vblock converged infrastructure product for building out cloud data centers.

VMware Virtual Infrastructure

VMware's financial focus is on long-term revenue growth to generate free cash flows to fund its expansion of industry segment share and evolve its virtualization-based products for data centers, desktop computers and cloud computing through a combination of internal development and acquisitions. 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 its customers through the adoption of enterprise license agreements ("ELAs"). Since the introduction of VMware vSphere in 2009, VMware has introduced more products that build on the vSphere foundation including VMware vSphere 5 and a comprehensive suite of cloud infrastructure technologies, as well as VMware View 5. VMware plans to continue to introduce additional products in the future. Additionally, VMware has made, and expects to continue to make, acquisitions designed to strengthen its product offerings and/or extend its strategy to deliver solutions that can be hosted at customer data centers or at service providers.

On a consolidated basis, our vision, strategy and roadmap allowed us to leverage our strengths through 2011 and position us to capitalize on the evolving trends of Cloud Computing and Big Data in 2012. As a result, we believe we will grow faster than the markets we serve in 2012 while simultaneously investing in the business and growing earnings per share at a rate faster than the rate at which we will grow our revenue.

RESULTS OF OPERATIONS

Revenues

The following table presents revenue by our segments:



                                                                                           Percentage Change
                                     2011            2010            2009         2011 vs 2010          2010 vs 2009
Information Storage               $ 14,714.2      $ 12,699.1      $ 10,659.4               15.9 %                19.1 %
Information Intelligence Group         702.4           735.9           739.6               (4.6 )                (0.5 )
RSA Information Security               828.2           729.4           606.0               13.5                  20.4
VMware Virtual Infrastructure        3,762.9         2,850.7         2,021.0               32.0                  41.1

Total revenues                    $ 20,007.6      $ 17,015.1      $ 14,025.9               17.6 %                21.3 %

Consolidated product revenues increased 15.6% to $12,590.7 in 2011. The consolidated product revenues increase was primarily driven by the Information Storage and the VMware Virtual Infrastructure segments' product revenues. The overall growth in product revenue in 2011 was due to a continued higher demand for our IT infrastructure offerings to address the storage and virtualization needs for continued information growth, particularly as customers continue to build out their own data centers to develop and support their private or public cloud infrastructures.

The Information Storage segment's product revenues increased 14.3% to $10,090.3 in 2011. Within the high-end of the Information Storage segment, our Symmetrix product revenues increased 14.5%, primarily due to VMAX system sales and upgrades as customers continue to purchase VMAX for mission critical data sets and business applications as well as for new use cases. Within the mid-tier of the Information Storage segment, which includes Unified products, Backup and Recovery Systems, EMC Isilon and EMC Atmos, product revenues increased 24.7% in 2011 due to strong performance across each of our mid-tier product groups. Within Unified products, our VNX family, which includes VNX and VNXe, was launched in the first quarter of 2011 and has been well received by the market, bringing in almost 2,000 new customers in the fourth quarter of 2011 alone. Our Backup and Recovery Systems products have become an essential part of our strategic offerings as Data Domain product growth continued to benefit from being owned by EMC which in turn helped drive growth in our Avamar and NetWorker products. EMC Isilon, which was acquired at the end of 2010, contributed to our mid-tier product growth as its revenues were included in our results for a full year in 2011 as compared to 2010. Finally, our Big Data storage and data analytics products continued to grow faster than the market with EMC Isilon revenue more than doubling in 2011 as compared to 2010 as an independent company, and EMC Greenplum expanding its offerings from a single product to a portfolio of products which includes a unified solution for Big Data analytics.

The VMware Virtual Infrastructure segment's product revenues increased 31.5% to $1,840.1 in 2011. VMware's license revenues increased in 2011 primarily due to strong global demand for vSphere. VMware observed an increase in the volume of ELAs in 2011 as compared to 2010 due to growing customer interest as well as strong renewals from existing ELA customers.

The Information Intelligence Group segment's product revenues declined 18.5% to $219.5 in 2011. The decrease in product revenues was primarily attributable to changing customer demand. The Information Intelligence Group segment continues to evolve to meet the buying preferences of today's content management customers by transitioning to lighter-weight, content-enabled applications using modern virtualized frameworks. The RSA Information Security segment's product revenues increased 10.2% to $440.8 in 2011. The increase in product revenues was primarily due to increased demand for our Security Management and Compliance products.

Consolidated product revenues increased 23.4% to $10,892.9 in 2010. The consolidated product revenues increase was primarily driven by the Information Storage and the VMware Virtual Infrastructure segments' product revenues. The Information Storage segment's product revenues increased 22.6% to $8,824.3 in 2010. The VMware Virtual Infrastructure segment's product revenues increased 36.0% to $1,399.3 in 2010. The Information Intelligence Group segment's product revenues increased 3.2% to $269.1 in 2010. The RSA Information Security segment's product revenues increased 17.6% to $400.2 in 2010. The increase in product revenues across all segments in 2010 was primarily attributable to continued higher demand for our IT infrastructure offerings to address the storage and virtualization needs for continued information growth, particularly as customers continue to build out their own data centers to develop and support their private or public cloud infrastructures.

Consolidated services revenues increased 21.1% to $7,416.8 in 2011. The consolidated services revenues increase was primarily driven by the Information Storage and the VMware Virtual Infrastructure segments' services revenues where we continue to provide expertise to customers on the most effective ways to enable Cloud Computing and to leverage their Big Data assets.

The Information Storage segment's services revenues increased 19.3% to $4,623.8 in 2011. The increase in services revenues was primarily attributable to higher demand for maintenance-related services, which correlates to the increased sales in storage products. In addition, a growing demand for professional services also contributed to the increase in services revenues.

The VMware Virtual Infrastructure segment's services revenues increased 32.5% to $1,922.7 in 2011. The increase in services revenues was primarily attributable to growth in VMware's software maintenance revenues. In 2011, services revenues benefited from strong renewals, multi-year software maintenance contracts sold in previous periods and additional maintenance contracts sold in conjunction with new software license sales. Additionally, VMware experienced increased demand in their professional services driven by the growth in their license sales and installed base.

The Information Intelligence Group segment's services revenues increased 3.5% to $482.9 in 2011. The increase in services revenues was primarily attributable to higher sales of software maintenance contracts. The RSA Information Security segment's services revenues increased 17.7% to $387.4 in 2011. Services revenues increased due to an increase in professional services and maintenance revenues resulting from continued demand for support from our installed base.

Consolidated services revenues increased 17.8% to $6,122.3 in 2010. The consolidated services revenues increase was primarily driven by the Information Storage and the VMware Virtual Infrastructure segments' services revenues. The Information Storage segment's services revenues increased 11.9% to $3,874.8 in 2010. The VMware Virtual Infrastructure segment's services revenues increased 46.3% to $1,451.5 in 2010. The RSA Information Security segment's services revenues increased 23.9% to $329.2 in 2010. The Information Intelligence Group segment's services revenues declined 2.5% to $466.8 in 2010. Services revenues increased across all segments, excluding the Information Intelligence Group segment, in 2010 due to an increase in professional services and maintenance revenues resulting from continued demand for support from our installed base.

Consolidated revenues by geography were as follows:

                                                                                           Percentage Change
                                       2011           2010           2009          2011 vs 2010          2010 vs 2009
United States                       $ 10,549.6      $ 9,152.4      $ 7,384.3                15.3 %                23.9 %
Europe, Middle East and Africa         5,667.6        4,942.1        4,290.3                14.7                  15.2
Asia Pacific                           2,639.4        1,965.2        1,603.1                34.3                  22.6
Latin America, Mexico and Canada       1,151.0          955.5          748.2                20.5                  27.7

Revenues increased in 2011 compared to 2010 and in 2010 compared to 2009 in all of our markets due to greater demand for our products and services offerings.

Changes in exchange rates contributed 1.5% to the overall revenue increase in 2011 compared to 2010. The impact of the change in rates was most significant in the Euro zone and Asia Pacific markets, primarily Australia and Japan. Changes in exchange rates contributed 0.2% to the overall revenue increase in 2010 compared to 2009. The impact of the change in rates was most significant in the Asia Pacific markets, primarily Australia and Japan, Canada and Brazil, partially offset by the Euro and the pound sterling.

Costs and Expenses

The following table presents our costs and expenses, other income and net income
attributable to EMC Corporation.



                                                                                               Percentage Change
                                       2011              2010            2009          2011 vs 2010        2010 vs 2009
Cost of revenue:
Information Storage                  $  6,414.3       $  5,836.4       $ 5,256.7                 9.9 %              11.0 %
Information Intelligence Group            251.0            258.2           274.8                (2.8 )              (6.0 )
RSA Information Security                  357.7            221.6           186.5                61.4                18.8
VMware Virtual Infrastructure             533.3            425.3           316.3                25.4                34.5
Corporate reconciling items               282.3            242.7           246.8                16.3                (1.7 )

Total cost of revenue                   7,838.6          6,984.1         6,281.0                12.2                11.2
Gross margins:
Information Storage                     8,299.9          6,862.7         5,402.7                20.9                27.0
Information Intelligence Group            451.4            477.7           464.8                (5.5 )               2.8
RSA Information Security                  470.5            507.8           419.5                (7.3 )              21.0
VMware Virtual Infrastructure           3,229.5          2,425.5         1,704.7                33.1                42.3
Corporate reconciling items              (282.3 )         (242.7 )        (246.8 )              16.3                (1.7 )

Total gross margin                     12,168.9         10,031.0         7,744.9                21.3                29.5
Operating expenses:
Research and development(1)             2,149.8          1,888.0         1,627.5                13.9                16.0
Selling, general and
administrative(2)                       6,479.4          5,375.3         4,595.6                20.5                17.0
Restructuring and
acquisition-related charges                97.3             84.4           107.5                15.3               (21.5 )

Total operating expenses                8,726.5          7,347.7         6,330.6                18.8                16.1

Operating income                        3,442.4          2,683.3         1,414.3                28.3                89.7
Investment income, interest
expense and other expenses, net          (193.2 )          (75.3 )         (39.7 )             156.6                89.7

Income before income taxes              3,249.3          2,608.0         1,374.6                24.6                89.7
Income tax provision                      640.4            638.3           252.8                 0.3               152.5

Net income                              2,608.9          1,969.7         1,121.8                32.5                75.6
Less: Net income attributable to
the non-controlling interest in
VMware, Inc.                             (147.5 )          (69.7 )         (33.7 )             111.6               106.8

Net income attributable to EMC
Corporation                          $  2,461.3       $  1,900.0       $ 1,088.1                29.5 %              74.6 %

(1) Amount includes corporate reconciling items of $322.6, $287.4 and $235.8 for the years ended December 31, 2011, 2010 and 2009, respectively.

(2) Amount includes corporate reconciling items of $606.4, $477.5 and $495.5 for the years ended December 31, 2011, 2010 and 2009, respectively.

Gross Margins

Our gross margin percentages were 60.8%, 59.0% and 55.2% in 2011, 2010 and 2009, respectively. The increase in the gross margin percentage in 2011 compared to 2010 was attributable to the VMware Virtual Infrastructure segment, which increased overall gross margins by 140 basis points, and the Information Storage segment, which increased overall gross margins by 124 basis points, partially offset by the RSA Information Security segment, which decreased overall gross margins by 53 basis points, and the Information Intelligence Group segment, which decreased overall gross margins by 3 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 22 basis points. Transition costs represent the incremental costs incurred to streamline our current cost structure. The increase in the gross margin percentage in 2010 compared to 2009 was attributable to the Information Storage segment, which increased overall gross margins by 189 basis points, the VMware Virtual Infrastructure segment, which increased overall gross margins by 161 basis points, the RSA Information Security segment, which increased overall gross margins by 11 basis points and the Information Intelligence Group segment, which increased overall gross margins by 10 basis points. Also contributing to the increased overall gross margin percentage was the decrease of corporate reconciling items, consisting of stock-based compensation, acquisition-related intangible asset amortization, restructuring charges and transition costs, which increased the consolidated gross margin percentage by 3 basis points.

For segment reporting purposes, stock-based compensation, restructuring and acquisition-related charges, acquisition-related intangible asset amortization and transition costs are recognized as corporate expenses and are not allocated among our various operating segments. The increase of $39.7 in the corporate reconciling items in 2011 was attributable to a $25.4 increase in intangible asset amortization expense and a $15.0 increase in stock-based compensation expense, partially offset by a $0.7 decrease in transition costs. The $15.0 increase in stock-based compensation expense was primarily attributable to the incremental expense associated with VMware's equity grants and the full-year impact of options exchanged in the acquisition of Isilon, which was acquired in the fourth quarter of 2010. The decrease of $4.1 in the corporate reconciling items in 2010 was attributable to a $12.5 decrease in restructuring charges and a $0.9 decrease in transition costs, partially offset by a $9.3 increase in stock-based compensation expense. Acquisition-related intangible asset amortization expense was flat. The $9.3 increase in stock-based compensation expense was primarily attributable to the incremental expense associated with VMware's equity grants and the full-year impact of options exchanged in the acquisition of Data Domain, which was acquired in the third quarter of 2009.

The gross margin percentages for the Information Storage segment were 56.4%, 54.0% and 50.7% in 2011, 2010 and 2009, respectively. The increase in gross margin percentage in 2011 compared to 2010 and in 2010 compared to 2009 was primarily attributable to improved product gross margins, driven by a shift in product mix towards higher margin products, higher sales volume and an improved cost structure.

The gross margin percentages for the RSA Information Security segment were 56.8%, 69.6% and 69.2% in 2011, 2010 and 2009, respectively. The decrease in the gross margin percentage in 2011 compared to 2010 was due to a decrease in product margins. The decrease in product margins was caused by costs accrued associated with working with our customers to implement remediation programs in the first quarter of 2011 and to the $66.3 charge related to the expansion of the customer remediation programs that we recorded in the second quarter of 2011. We expanded our customer remediation programs in the second quarter of 2011 as a result of the heightened customer concerns resulting from press coverage related to an unsuccessful cyber attack on one of our defense sector customers, as well as broad media coverage of cyber attacks on other high profile organizations. The slight increase in the gross margin percentage in 2010 compared to 2009 was due to an increase in product margins partially offset by a decrease in services margins.

The gross margin percentages for the Information Intelligence Group segment were 64.3%, 64.9% and 62.8% in 2011, 2010 and 2009, respectively. The slight decrease in gross margin percentage in 2011 compared to 2010 was attributable to an increase in the mix of service revenue as a percentage of total revenue, slightly offset by an increase in service gross margins. The increase in gross margin percentage in 2010 compared to 2009 related to an increase in the product margins due to a decrease in the royalties paid for third party software embedded into the products in 2010 compared to 2009.

The gross margin percentages for the VMware Virtual Infrastructure segment were 85.8% in 2011, 85.1% in 2010 and 84.4% in 2009. The increase in gross margin percentage in 2011 compared to 2010 was primarily attributable to improvements in license gross margins resulting from decreased software capitalization amortization expense. The increase in gross margin percentage in 2010 compared to 2009 was primarily attributable to improved services margins.

Research and Development

As a percentage of revenues, R&D expenses were 10.7%, 11.1% and 11.6% in 2011, 2010 and 2009, respectively. R&D expenses increased $261.8 in 2011 primarily due to an increase in personnel-related costs, including stock-based compensation, cost of facilities, depreciation expense and travel costs, partially offset by greater levels of software capitalization. Personnel-related costs increased by $274.0, cost of facilities increased by $20.5, depreciation expense increased by $13.0 and travel costs increased by $10.0. Capitalized software development costs, which reduce R&D expense, increased by $73.6. R&D expenses increased $260.5 in 2010 primarily due to an increase in personnel-related costs, including stock-based compensation, depreciation expense, cost of facilities and travel costs, partially offset by greater levels of software capitalization. Personnel-related costs increased by $250.6, depreciation expense increased by $23.4, cost of facilities increased by $19.4 and travel costs increased by $9.4. Capitalized software development costs, which reduce R&D expense, increased by $62.2.

Corporate reconciling items within R&D, which consist of stock-based compensation, acquisition-related intangible asset amortization and transition costs increased $35.2 and $51.6 to $322.6 and $287.4 in 2011 and 2010, respectively. Stock-based compensation expense increased $40.5 and $44.2 in 2011 and 2010, respectively. Acquisition-related intangible asset amortization decreased $7.1 in 2011 and increased $10.7 in 2010 and transition costs increased $1.8 and decreased $3.3 in 2011 and 2010, respectively. Intangible asset amortization increased in 2011 primarily due to the Isilon acquisition, which was consummated in the fourth quarter of 2010. Intangible asset amortization increased in 2010 primarily due to VMware acquisitions and to the Data Domain acquisition, which was consummated in the third quarter of 2009. The increase in stock-based compensation expense in 2011 was primarily due to options exchanged in the Isilon acquisition, which was consummated in the fourth quarter of 2010. The increase in stock-based compensation expense in 2010 was attributable to the incremental expense associated with VMware's equity grants and the full year impact of options exchanged in the acquisition of Data Domain.

R&D expenses within EMC's Information Infrastructure business, as a percentage of EMC's Information Infrastructure business revenues, were 7.6%, 7.9% and 8.5% in 2011, 2010 and 2009, respectively. R&D expenses increased $116.5 in 2011 primarily due to increases in personnel-related costs, including stock-based compensation, cost of facilities, depreciation expense and travel costs. Personnel-related costs increased by $124.8, cost of facilities increased by $4.2, depreciation expense increased by $17.8 and travel costs increased by $6.1. Partially offsetting these increased costs was an increase in capitalized software development costs of $60.4. R&D expenses increased $100.7 in 2010 primarily due to increases in personnel-related costs, depreciation expense, cost of facilities and travel costs. Personnel-related costs increased by $122.4, depreciation expense increased by $14.7, cost of facilities increased by $14.3 and travel costs increased by $6.1. Partially offsetting these increased costs was an increase in capitalized software development costs of $70.1.

R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware's revenues, were 15.6%, 16.8% and 18.3% in 2011, 2010 and 2009, respectively. R&D expenses increased $110.1 in 2011 largely due to increases in personnel-related costs of $106.9. This increase was partially offset by increases in VMware's capitalized software development costs of approximately $13.3 in 2011, primarily due to the timing of products reaching technological feasibility. Following the release of vSphere 5 and the comprehensive suite of cloud infrastructure technologies in the third quarter of 2011, VMware determined that its go-to-market strategy had changed from single solutions to product suite solutions. As a result of this change in strategy, and the related increased importance of interoperability between VMware's products, the length of time between achieving technological feasibility and general release to customers significantly decreased. For future releases, VMware expects its products to be available for general release soon after technological . . .