Welcome to today's EMC conference call, the second-quarter earnings conference call. All lines will be in a lesson only fashion until the question-and-answer portion. As a reminder, today's conference is being recorded; if anyone has any objections you may disconnect at this time. I'd now like to turn the call over to today's host, Mr. Tony Takzawa. Sir, you may begin.

Thank you, Lisa. Good morning. Welcome to EMC's call to discuss our financial results for the second quarter of 2007. Today we are joined by Joe Tucci, EMC Chairman, President and CEO, and David Goulden, EMC Executive Vice President and CFO. David will start things off by walking you through EMC's activities and financial results for the quarter. Joe Tucci will then spend some time discussing his market outlook, EMC's execution of the strategy and the progress we are making toward our annual goals. After the prepared remarks we will then open up the lines to take your questions. Today's slides contain important information that is necessary to understand our results and commentary, so we encourage you to view them on EMC's website at EMC.com. An archive of the audio and slide presentation will also be available following the call. As always, the call this morning will contain forward-looking statements. Information concerning factors that could cause actual results to differ can be found in EMC's filings with the U.S. Securities and Exchange Commission. In addition, all the numbers we discuss today will be presented on a GAAP the basis unless otherwise indicated. For those of you interested in analyzing the non-GAAP numbers, we continue to provide a schedule in the press release that will help you adjust the GAAP results for stock option, restricted stock and amortization expenses. Lastly, I do want to point out that given VMware's spending IPO, our commentary on VMware's 2Q results is limited to what is in today's earnings release. In other words, we will not be able to provide additional commentary or color on VMware's business or financial results at this time. With that it is now my pleasure to introduce David Goulden. David?

Thank you, Tony. Good morning and thank you for joining us today. We are pleased with our Q2 operational and financial results. We demonstrated crisp execution, delivered strong performance in a number of key areas and made great progress towards our goals for the year. Turning to the numbers. Q2 revenues were $3.12 billion, up 21% from Q2 of last year; earnings per share were $0.16, up 33% over Q2 of last year; and free cash flow was $422 million, up 123% from Q2 last year. I'll now walk you through the results in a little more detail. Q2 revenue growth of 21% over last year included approximately 200 basis points held from currency. Looking first at our corporate revenue mix compared to a year ago, systems revenues were up 18% with strong midrange growth, software revenues were up 27% led by RSA Security and VMware, and services revenues were up 18% driven by strong double-digit services growth in all four business segments. Now turning to revenue by geography, I'm pleased to report we had 20% plus growth in each of our three largest geographies. Revenues from North America grew 20%; a significant highlight in this region for Q2 and for the first half is the growth in the commercial market segment. EMEA revenues were up 21%; CLARiiON, IP storage and CMA did well in these markets. APJ had another great quarter with revenues up 32% over last year. This is the second quarter of revenue growth over 25% in APJ and demonstrates we're gaining share in this important market. This quarter we continue to strengthen our senior APJ management team and we are pleased that a very seasoned technology executive from Fujitsu, Soshio Marihoshi (ph), recently joined us as our new Country Manager for Japan. The strong leadership and…

Thanks, David. Hello and welcome to all of you participating in our Q2 conference call today and thank you very much for joining us. Overall Q2 represented another solid quarter for EMC. The pace of business throughout the quarter was good. We pretty much stayed on our calendarization plan from both a bookings and revenue flow point of view. And this was true in all three tiers of operations -- the Americas, APJ and Europe-Africa-Middle East. In the Americas I am pleased to report that we saw some pick up in spending in U.S. enterprise accounts over Q1. And I am very happy to report that our Asia-Pac business again produced strong results reflecting the focus and dedication of our new management team in this important high-growth region of the world. In fact, I'm externally proud of how the entire EMC team in all parts of the world and all disciplines has been executing our strategy and driving results. I want to thank everyone at EMC for their hard work and support of our valued customers. Looking quickly at the IT spending outlook for 2007, we see a positive environment in all major geographies and we believe there is opportunity for us to beat our annual financial targets for revenue, earnings per share and cash flow. EMC's positive results and momentum are obviously only possible because customers are embracing our strategy, our leading products, our services and our solution sets at each of our four businesses -- storage, content management and archiving, RSA security and VMware. So let's look forward a bit of touch on each of EMC's four business units and their growth initiatives. I'll start with our storage business. EMC is a technology company and a lifeblood for any technology company is the constant flow of innovative leading…

Thanks, Joe. Before we open up the lines for your questions, as usual we ask you to try and limit yourselves to one question; this will enable us to take as many questions as possible. Thank you all for your cooperation in this matter. Lisa, can we open up the lines for questions, please?

(Operator Instructions). Our first question comes from Aaron Rakers with A. G. Edwards.

Thanks, guys, and congratulations on a good quarter. I guess I'll just start by asking, David, how do you look at the cash position of the Company? I know you mentioned half of the cash tied up in terms of foreign jurisdictions and VMware. Can you help us understand about how much you need to manage the business? And what I'm really getting at is the potential for accelerated share repurchases looking into the back half of the year?

Aaron, thank you. I did mention that of the $5.9 billion, assume roughly half of that is either international or in VMware, so it's not readily assessable. Obviously that leaves half of it sitting in the domestic side of the business. And as we mentioned before, we really made about $1 billion of float to run the business domestically. So as we're looking forward amounts over that are of course available for us to either reinvest in the business, do acquisitions or to potentially return to shareholders which, as I mentioned, we're looking at, but nothing more on that front until we've completed the IPO.

Thanks, Aaron. Next question, please.

Thank you. Our next question comes from Laura Conigliaro with Goldman Sachs. Laura Conigliaro – Goldman Sachs: It’s great. You've had issues in the not too distant past with some product resets or refreshes. And you've got a whole bunch of newly announced products which won't be available until August. Can you talk about some of the measures you've put in place to help offset potential stalling, also to ensure good product availability in the back half of that quarter? And does this increase the risk or why doesn't this increase the risk in an already back end loaded quarter?

The major product transition, Laura, is in Symmetrix because if you look at the CLARiiON, the mid tier CX3 has been in place for a while now and, as you just saw, had rather exceptional performance. And the NS40 and NS20 that are sliding in there which we think are really game changing new arrays with these multiprotocol features, I don't think that's going to give us any issues at all. So turning back to Sym, which is probably where your question ties from because be it a year ago Q2 we -- I'll be as blunt as I can -- we blew the transition because we had too many -- we had the orders, we had a good bookings quarter a year ago in Q2, but we blew the transition because we ran out of -- we guessed wrong, we had the DMX-3. So one of the things we're doing is obviously we're being a little more flexible in making sure we have a little bit of inventory. So we'll take some of the heat on the turn side to make sure that we have turn and I'm confident, just like I was last year. We didn't end up with excess inventory of DMX-2 so this will play out quite well. The transition here is not as major. The DMX-3 to DMX-4, while it's got a totally new back end and some really good features, it's not as major because the DMX-3 was a total redo. So that was a more major transition. So the fact that this was kind of a not as major transition in the fact that we are keeping a little extra inventory and learned from our steps, we're pretty confident we've got it.

Thank you, Laura. Next question, please.

Thank you. Our next question comes from Shebly Seyrafi with Caris & Co. Shebly Seyrafi - Caris & Co: Yes. Nice quarter. Your CLARiiON growth, 3% to 4% year-to-year, I translate that to around 12% sequentially. Can you talk about what drove that? Are you gaining share from, for example, Network Appliance which is known to be struggling a little bit this quarter? Talk about the competitive landscape in the midrange? Thanks.

I think the two big players in the mid tier are obviously -- that we face are Network Appliance and HP. I think obviously the CX3, as we really have done a lot of work on the iSCSI side, Shebly, that's really I think helped us be much more effective in the marketplace. We came out with the CX3 model 10, so we lowered the entry price, CX3 model 10 effectively can start even a tick below 20,000. So we have a fuller line, a lot more iSCSI support and features. We put more focus on it with our buildouts of our channels. Dell had a good quarter, as David indicated, as did many of our other channels. So it was just good overall performance and it's a good productline. And then of course we see now with these multiprotocol arrays coming out on top of this or in addition to this, we have a really powerful lineup for the mid tier and I feel very bullish. And as I said in my remarks, there's more to come because we're even going to come out with a low-end array in this family. So we're in good shape. Shebly Seyrafi - Caris & Co: Thank you.

Thanks, Shebly. Next question, please.

Thank you. Our next question comes from Keith Bachman with Bank of Montreal.

Good morning. Thank you. My question relates to, David or Joe, on the margin side -- very nice gross margins helped by mix. The other side is operating expenses were also up considerably driven by mix. So your operating expense actually grew on a year-to-year basis at the same rate of revenues. Does this continue -- that your operating expenses continue to grow at the same rate of revenues or do you think you can drive incremental operating margins as we look out over the next few quarters?

Keith, we're focused upon operating margin leverage. And as I said, there are a couple of things happening within the business. As our mix of revenues shifts more towards content security and VMware, those businesses compared to storage are carrying a higher gross margin and a higher operating expense to revenue. Year-on-year I'm not sure where you're getting operating expense increases from. We can maybe handle that off-line or on the call. We're seeing decreases year-on-year in operating expenses. The increases I mentioned were sequential increases, 60 basis points, and that was almost entirely due to the mix shift which we spoke about. Again, the key thing to look at is our operating margin numbers which, as you saw, were up sequentially and year-on-year strongly.

If you break that apart year-on-year, Keith, there certainly was an 80 basis points decline in SG&A and then of course we had a little bit more than that, about a 70 basis points increase on percentage point in R&D. So as we become more -- we're investing a tremendous amount in VMware or say in other properties which you've got growth and has become 41% of our revenues this quarter was software. So as we go that way it drives up our R&D a little bit. And as David can say, we've got to watch all these numbers and there is opportunity there for sure.

Thanks, Keith. Next question, please.

Thank you. Our next question comes from Bill Shope with J.P. Morgan.

I guess related to Keith's question as well, looking at the headcount reductions you announced last year, should we expect that to have more of an impact on OpEx in the second half or is it already starting to flow through the model? And also, can you comment on core EMC OpEx trends ex RSA and VMware as you did last quarter?

Bill, as we said before, the reduction -- the headcount reduction program will happen on a pre flat basis across the year. Which means that you can grow into the expenses -- you grow into the expense reductions as you go through the year and the people come out. In terms of if I look at -- last quarter I did make a comment year-on-year about operating expenses for the business without VMware and without security. And if you look at Q2 without VMware and without security, they're down significantly compared to a year ago. I gave you a number last quarter; I don't want to give you a number each quarter, but they were down a higher number on a percentage basis than they were last quarter.

Okay. Thank you.

Thanks a lot, Bill. We'll take the next question, please.

Our next question comes from Andrew Neff with Bear Stearns.

Sure, this is a more technical question, but after the VMware transaction is completed can you take us through, David, how it will flow through your numbers, how you will reflect different things?

That is a technical question. But basically the short answer is that from a revenue gross margin, OpEx, expenses, everything gets consolidated. There will be a deconsolidation at the equity level on the balance sheet and also before net income for the minority interest that we do not hold. That's the easiest way to think about it. And we'll kind of walk you through all that in much more detail after the IPO when we start publishing that way so you understand exactly what's going on. But simply that's how it's going to work.

You'll show a minority interest line offsetting to reflect that -- what part you don't own essentially?

Exactly, that's right. That will flow through the income statement and it will be reflected on the balance sheet through equity.

But otherwise, from our modeling standpoint, above that it will be the same?

Above that, yes. UP through the operating margin, etc., it will be exactly the same.

Okay, great. Thanks.

Thanks, Andy. Next question, please.

Thank you. Our next question comes from Katy Huberty with Morgan Stanley.

Thanks. Good morning. Joe, can you comment more on the strength you saw in the U.S. segment? Was it linear through the quarter or more front-end loaded as deals slip from March into April? And then perhaps touch on enterprise versus SMB segments in the U.S.

Yes, we have found that the SMB and the commercial segments have continued to be robust through (inaudible) -- we didn't see any kind of slowdown at all say last quarter for instance. It's been good for several years for us and continues to be very strong and opportunity rich for us. In the enterprise segment, as I said, we did see a bit of softness in Q1 and this quarter I'm glad to say that as we set out our linearity plan, which means we saw no -- it was pretty linear throughout the quarter. We saw a renewed strength in enterprise in the U.S. throughout the quarter and it was very linear, it wasn't spiky at all.

Thanks, Katie. Next question, please.

Thank you. Our next question comes from Dan Renouard with Robert W. Baird.

Thanks. Can you give us a little bit more detail on these new low-end products? More specifically, how you think about potential for cannibalization in the channel? And then also with Dell, is Dell out of the gate going to be selling those products? I'm talking about the 20 and the 40? Thanks.

I don't really care about cannibalization. It doesn't matter to me whether we sell CX or the multiprotocol, they're both our technology. Margins will be at the same level, so we're very benign on which of the products we sell. It's what fits the customer environment better and I think this is going to be a real strength of us. So the cannibalization issue is a non-factor. You asked about Dell and I'll let Dell speak for themselves, but I think you can count that they will resell some of the multiprotocol products.

Thanks, Dan. Next question, please.

Thank you. Our next question comes from Harry Blount with Lehman Brothers.

Thanks. David, you had indicated in your prepared remarks that you would reevaluate the capital structure post VMware. I was hoping you could put a little more color on that in terms of things that you might consider, things that you would definitely not consider in terms of what the capital structure will look like.

I'm going to stick where David did, Harry, I'm not going to duck it. I assure you at a Board level there is nothing that is off the table; we are looking at every option to make sure that we are committed to return some cash to shareholders from this transaction, we will. As you know, there are several ways of doing that and the Board will evaluate each of those and I'm sure we'll pick the absolute best one. But we don't want to get there until after this IPO closes which David said we will start the roadshow as soon as we get the final approval from the SEC.

Thanks, Harry. Next question, please.

Thank you. Our next question comes from Bill Fearnley with FTN Midwest.

Yes, I wanted to ask if -- could you guys give some more color on trends you see in CLARiiON, Symmetrix regarding mix, deal size and near-term growth prospects? Thanks.

Growth prospects, the high-end market is a growth market that over the last several years has been in the mid single-digits and I really don't expect that to change. Now of course in 2005-2006 we were the clear leader. This first half of this year we slowed down. So this is very product cycle -- product cycles affect this significantly. Customers know when these product cycles are going to come. As I said, we have been a share gainer if you look back over the last two plus years. We think -- we know that DMX-4 is very well-positioned. But that being said, that's where the growth in this market is, it's in the mid single-digits and it gets affected very much in terms of which player is growing or not growing at a particular point by product cycles. And as I said, we're now going into a very favorable product cycle, so obviously we would expect to take share. But that's just the texture and tenure of the market, Bill. Great market, great cash flow. CLARiiON, this is a double-digit growth market and we want to considerably outpace the market growth and we think that with the CLARiiON and of course the multiprotocol is built on CLARiiON technology underneath it. So we expect these broader mid-tier platforms, CLARiiON or NS, we will considerably outpace the market and, as I said, with the NS I think we're incredibly well-positioned to really take on some of the tougher mid-tier competitors, maybe the toughest mid-tier competitor even. And of course incredibly well-positioned, I mean incredibly well-positioned against the startups.

Thanks, Bill. Next question, please.

Thank you. Our next question comes from Clay Sumner with FBR.

Thanks very much. Within the storage group software license growth of 4% was a good bit less than systems growth. Can you just provide some color around the dynamics, the puts and takes within that storage software license number?

Yes, Clay, certainly. There are a couple of things happening there. As we said to you before, within that storage number there is platform software and there's software which is off the platform -- that would be resource management backup recovery software. And as we said going forward expect platform software to grow a little less than platform hardware because the move towards large end systems with a higher capacity, lower cost per megabyte and also towards lower-end systems which have less software content on them. Having said that, offsetting that you'll see the relatively faster growth of resource management backup recovery software. So as the mix in storage software moves towards those second two categories more you'll start seeing those two lines get closer together from an overall growth point of view. And those are the basic dynamics happening in there.

You've got to remember, Clay, we have tremendous penetration of these software products specifically and mostly in our high-end storage arrays with Symmetrix. So customers have bought those licensed, they're expensible because the way we do it you pay a license and then you pay maintenance support which gives you additional upgrades. So what happens is we've got such a great footprint in proliferation that it's hard to grow the license side of that. But if you looked at the support side of that, it's growing more than twice as fast as the license side. So if you look at it in total, it's a tremendously good cash flow business and one we're proud to have and one we use to fuel other things that we do. So if you look at the storage business as a whole, we will outpace the market.

Thanks, Clay. Next question, please.

Thank you. Our next question comes from Ben Reitzes with UBS.

Good morning. Thanks. You've generated about $1 billion in free cash flow already in six months and last year you did about $1.2 billion. Could you talk about what your free cash flow may look like for the year if you exceed your EPS targets like you're talking about? And also where you are on your free cash flow targets in terms of your compensation metrics which I believe now include quite a bit on free cash flow generation?

When you say quite a bit, the majority is still on EPS just so that you know that.

Well, there should be something.

There is something, yes; it's meaningful. What I would give you too much insight here that could be harmful in the market. That is the metric we're the most ahead on as a management team. So our key free cash flow we're doing very well on. And obviously you know our metrics for EPS and revenue, we publish them.

I guess the question is do you typically generate more free cash flow in the second half than the first half?

It depends upon a number of things including the timing of tax payments and things. Q1 is typically our strongest if you look historically because that's when you're collecting your Q4 receivables.

All right, thank you.

Thanks, Ben. Next question, please.

Thank you. Our next question comes from David Cahill with RBC Capital Markets.

Hi, it's Tom Curlin dialing in with Dave. A question on VMware and just longer-term M&A thoughts. There's been some comments in public forums about potentially fully spinning out VMware and it also seems like VMware can be a vehicle for some M&A activity for you guys over the next few years. How do you balance the conflict of a VMware that may be fully independent in a few years with respect to M&A ideas? What might be strategic to AMC on a stand-alone basis could also be strategic to VMware on a stand-alone basis?

Well, Tom, we have a very, very good Board, a very dedicated Board that is in place at VMware that we are going to continue to add world-class members to. And we will make sure that you stated it well, but I don't believe this is mutually exclusive at all. I think that we can have both companies and will have both companies prosper significantly. When we think of VMware we will take a long-term view of VMware. This is a phenomenal property with great potential and we want to make sure that we don't play this for just the short-term; we want to make sure this is set up for long-term success.

Do you agree that there may be some targets that are more appropriate for VMware to acquire versus EMC just given overall --?

Tom, look at it on (inaudible). If you own 87.5% of something or you own 100%, would you really think that differently.

It just depends on the direction of that mix in three or four years, right? If that's down to zero, right?

But we're here in the benefit of all our shareholders, the EMC shareholders own by definition 87.5% of VMware. And of course as the shares get distributed some of that will also end up in our shareholder base. So that common base will be pretty darn high and we're going to do the right things and we have the team in place to do that and the dedication to do that. We will think long-term for VMware and if it's best for VMware we'll make sure we do it there.

Okay, thank you.

Thanks. Next question, please.

Thank you. Our next question comes from Glenn Hanus with Needham & Co. Glenn Hanus - Needham & Co.: I'm getting some field reports of a little more aggressive pricing out in the core storage market, sort of the midmarket. Are you seeing that? Are you pricing a little more aggressively against Net Ap and some others or how would you sort of characterize the pricing environment and your strategies there going forward?

I've been in this industry now for seven years and it's always been aggressive. So I don't see any significant sea change here in the pricing environment. It's always been a tough environment, we have to always watch our cost, our supply chain and our margins. And I think if you look at our results, I think we're doing a fair job on all three and we will continue to do that. But I don't see any significant huge sea change out there. Is what I call the pricing environment competitive? I sure would. And has it been competitive for a long time? Absolutely. Glenn Hanus - Needham & Co.: Thank you.

Thanks, Glenn. We have time for one more question and then Joe will have a couple of closing comments.

Thank you. Our final question comes from Tony Sacconaghi with Sanford Bernstein.

Yes, thank you. I was wondering if you could comment on strength and profitability of the commercial space. Dell was 14% of revenues last quarter, 15.6 this quarter, that means its growth rate accelerated about 10 percentage points sequentially. I think you had mentioned that the real strength was in the commercial space. So could you give us a relative growth rate for your commercial channel including Dell? And then, could you give us a sense for relative profitability? Because I think you said on a sequential basis margins went up because of the mix in hardware which I presume was a mix shift to CLARiiON because CLARiiON did so well this quarter. Obviously a lot of CLARiiON is through the commercial channel. So can you talk about each of those things, please?

I'll give you a little overall color, Tony. Certainly CLARiiON grew at 33%. We don't break this out, but for sure CLARiiON in the commercial segments grew faster than it did in the enterprise segment. So going down market has been a real success for EMC and of course our drive now is to go take that success we have in commercial and drive it. And the way we kind of broke up the market; the way -- everyone has their different way of doing it, but I've just got to take different cuts at the market. So below commercial we have cut an SME, small and medium enterprises below SME. We've cut out small and medium businesses and we're driving down and so we're building out our channels and our support organization for both those SME, SMB markets as we speak. We're seeing great success, it's great opportunity ahead of us for EMC and I think for a long, long time. Whatever number we tell you about or talk about or achieve for mid-tier growth, the commercial space will be somewhat faster, we just don't do that breakout, Tony, but I gave you a little color. And you're correct, at our average growth of 33% for CLARiiON, Dell was faster than that and other than that -- and David told you, it was mid-30s for growth. So year-on-year growth -- year-on-year, excuse me, percentage -- year-on-year growth was faster than the market average of 33%. So that's kind of all the color I want to give. I think you can draw your own conclusions from that. I think that's one of our great areas of potential as we go down market and we are very focused on that. And while we do that we're not going to take our eye off the ball in the high-end market either.

In the margin side, can you comment on that?

What we've found is actually as we go into the commercial markets we are certainly -- I think there's actually opportunities to get higher margins. But we certainly don't see any difference in margins or any considerable difference between enterprise even though we do more channel. That would tell you at the customer level the margins are higher. Obviously in the enterprise we do almost all the selling ourselves. And of course we rely more through channels. But when you go look through the whole thing, I think there's more -- actually there's more margin opportunity the further down market we go, but right now they're both pretty good.

Thank you.

I'd like to thank everybody for joining today and I'll kind of close with where the beat of my presentation was, that a company like EMC that views itself, and we are, a technology company. As you see now, we're spending over 12% of our revenues on research and development, that's the hallmark of technology companies. We're buying additional small, as I promised, tuck-in technology companies this year. So that's our investment and of course the fruits of that investment come in a really innovative good flow of products. And when I look at where we're positioned there for the second half of the year I am bullish on our future and I thank you very much for being with us today and see you in the future.

Thank you. This concludes today's teleconference. Thank you for your participation; you may disconnect at this time. Thank you.