Welcome to the EMC Conference Call and thank you forstanding by. At this time, all participants are in a listen only mode (OperatorInstructions). Today's conference is being recorded. If you have anyobjections, you may disconnect at this time. Now I will turn the meeting over to Mr. Tony Takazawa, VicePresident, Global Investor Relations. Sir, you may begin.

Good morning to everyone. Welcome to EMC's call to discussour financial results for the third quarter of 2007. Today, we are joined byJoe Tucci, EMC Chairman, President and CEO and David Goulden, EMC Executive VicePresident and CFO. David will start things off by walking you through EMC'sactivities and financial results for the quarter. Joe will then spend some timediscussing his market outlook, EMC's execution of the strategy and the progresswe are making toward our annual goals. After the prepared remarks, we will thenopen up the lines to take your questions. Today, we will be providing you with new financial schedulesand disclosures. Our slides contain important information that is necessary tounderstand our results and this new disclosure. I highly recommend that youview these slides in conjunction with the audio portion of the call. The slidesare also available for downloading on EMC's website at emc.com. An archive ofthe audio and slide presentation will also be available following the call. As always, the call this morning will containforward-looking statements. Information concerning factors that could causeactual results to differ can be found in EMC's filings with the U.S. Securitiesand Exchange Commission. In addition, we will be discussing EMC's results on both aGAAP and non-GAAP basis. There are schedules in today's press release thatreconcile our non-GAAP comments to our GAAP financials. With that, it is now my pleasure to introduce David Goulden.David?

Tony, thank you. Good morning and thank you all for joiningus today. We are very pleased with our Q3 operational and financial results. Wedemonstrated crisp execution, delivered strong performance in a number of areasand continue to make great progress towards our goals for the year. On today's call, I will talk about EMC's consolidatedperformance and then spend some time discussing EMC's informationinfrastructure results. EMC information infrastructure is our storage, contentmanagement and security businesses or said another way, everything exceptVMware. I am sure you have all seen VMware's earnings report from last night.So, I'm not going to repeat anything that was covered, but I will make somecomments about VMware's financial results within EMC. As Tony mentioned, we have made some changes to ourfinancial presentation and we've provided new supplementary schedules withtoday's press release. Now turning to the numbers. Q3 consolidated revenues were$3.3 billion, up 17% from Q3 last year and included approximately 200 basispoints from currency. GAAP earnings per share were $0.23. Excluding the gain werealized in the quarter, primarily from EMC's sale of VMware stock to Cisco,earnings per share were $0.17, up 31% over Q3 last year and free cash flow was$475 million, up 124% from Q3 last year. I will now walk you through the consolidated revenue resultsin more detail, starting with our corporate revenue mix. Q3 systems revenueswere up 9% year-on-year driven by strong growth in our midrange products. Year-to-date, systems revenues were up 11%. Q3 storagerevenues were up 25% year-on-year driven primarily by VMware, RSA Security andcontent management. Year-to-date software revenues were up 27%, and Q3 servicesrevenues were up 25% year-on-year driven by strong performance in all of ourbusiness units. Year-to-date, services revenues were up 21%. Now turning to revenue by geography, revenues from NorthAmerica grew 15% over Q3 last year and we continue to experience strong…

Thanks, David. I would also like to welcome everyone totoday's conference call. Thank you very much for joining us. I was quitepleased with EMC's performance in Q3. Our execution and results were strong andvery well balanced across our four businesses, across hardware, software andservices and across our three major geographies. And besides posting solidresults, we gained share in each of the major markets we serve. Looking a little more closely at EMC without VMware,clearly, our information infrastructure strategy powered by our one EMCbusiness model served us well this quarter. We grew revenues, we grew grossmargins and we increased leverage. Which resulted in improved operatingmargins. Also, this past quarter, I was very pleased with our cash flowresults. Storage continues to be the bedrock of our informationinfrastructure business as customers around the world look to EMC forindustry-leading products and services. In Q3, we were pleased with the launchand customer reception of our new Symmetrix DMX-4 product family. Also, this past quarter, our CLARiiON CX3 line continued topost strong results. The market acceptance of our new entry and mid levelmulti-protocol systems, the NS20 and NS40, was nothing short of phenomenal. Performance, reliability, ease-of-use, functionality andversatility of these new multi-protocol systems sets a new bar for the storageindustry. And there is more to come. In the not too distant future, we willannounce a system specifically designed for Web 2.0 data centers and new lowerend, SMB oriented products. Turning to our content management and archiving business, asyou will remember in Q2, we said we were disappointed with the results of ourcontent management and archiving business. We told you we are in the midst ofboth organizational and management changes and that we told you we expected andwould do better in the second half of the year. As you can see by our 27% year-on-year growth in…

Thanks, Joe. We open up the lines for your questions, asusual, we ask you to try to limit yourself to one question, includingclarifications. It will enable us to take as many questions as possible. Thankyou all for your corporation in this matter. Draney, can we open up the linesfor questions, please?

(Operator Instructions) Your first question comes from theline of Aaron Rakers, Wachovia Capital Markets.

Thanks, guys and congratulations and also thanks for theclarity on the organic business. I guess my question is around the operatingmargin story, very strong story with 80 basis point improvements here over thelast few quarters. And I guess when you look out going forward, can you give usany type of target around where you would like to manage this business from anoperating margin perspective? And then also on top of that, how much of thisrecent expansion is due to headcount versus just the changing mix of youroverall business? Thank you.

Hi, Good morning. Let me take that for you. First of all, weare not going to give you a target for where we want to try and get the marginsto, but I would point out that our goal is to continue to drive leverage. Actually, in some ways, leverage is a little strongeryear-on-year than it might have looked from the numbers because if you justlooked at Q2 and Q3 versus Q2 and Q3 last year, the leverage would be up 60basis points on the core business on a non-GAAP basis. Because, if you remember in Q1 this year, we had a slightlyunfavorable mix of hardware products so, normalizing that out, the improvementis quite good. You are going to see continued impact of the move towards thesoftware businesses. So, as I said in my comments, as you model going forward weexpect the margins will continue to increase with mix as we move towards contentand security, but also expect that to drive a higher SG&A yield as wellbecause those businesses have higher SG&A profiles. So we are driving forleverage, but we are not going to give you a target.

Your next question comes from Laura Conigliaro, GoldmanSachs. You may ask your question.

Well, I know you are not going to give targets, but giventhe fact that you really are driving for leverage and you have already providedevidence on a number of different fronts about where those cost savings andother kinds of leverage are coming from? Why doesn't that imply that you should be exiting 2006 withoperating margins pretty close to 20%?

Laura, we have made nice progress during the year. Q4 isalways our strongest quarter from an operating margin point of view, so youshould expect improvement from Q3 to Q4, but we do want to try to get away frombeing stuck to specific targets here. Just expect us to drive leverage and wewill give you more a view into what we might see in 2008 as we get into 2008.

Your next question comes from Shebly Seyrafi, of Caris. Youmay ask your question.

Yes, thank you very much. So you mentioned earlier that youhave no plans, current plans to distribute more VMware shares, but I amwondering how firm you are with that statement. Effectively, the stub or you call the EMC informationinfrastructure segment is selling at like single-digit P/E ratios, which Ithink is not appropriate. If this kind of disconnect continues might you changeyour mind over the next year? And if you can frame this in the context of early 2009 whenyou can do this tax-free, I’d appreciate it. Thanks.

The IPO is barely two months old. We have generated, Ibelieve, something close to in that year period, looking back here, about 70%growth in the shareholder value. We are focused. I understand all the movingparts. I would submit that we’ve done a pretty darn good job and wewill continue to work in the best interest of the shareholders and beyond that,I am not going to say anything at this structure.

Thanks. Next question, please.

Your next question comes from Keith Bachman, Bank ofMontreal.

Hi, thank you. Joe, I think this is for you. In terms of ITstorage, IT managers obviously taking a leg from what is going on in theseveral world there is a lot of discussions, increased focused. I think on storage virtualization and the specific agendathat we’ve heard from customers is reducing array spending or storage spending.How should investors think about the role of storage virtualization on yourbusiness as you look out over the next 12 to 18 months?

When I think of storage virtualization, I think of threeareas. One, and I think the most important is what is happening on the fileside of the business. If you look at both growth rates and utilization rates,you look at almost any factor of control. Companies across the globe have done a much better jobinside the data centers on SANs of bringing up high levels of utilization andhigh levels of management and the sharing of that data. Still if you ask -- I have yet to ask a CIO anywhere howmuch data they have around their file systems or how many file systems theyhave around a company that knows the answer. I do think this file virtualization, global namespacetechnology is going to be is a very important space and one we are focusing on.I also think that we call virtual provisioning, some companies call thinprovisioning. We call it virtual provisioning because what we are doing inprovisioning, which we will have that out on all systems first part of next year,it is out on our NS product line today, has tremendously broad capabilitieswhere we can expand and contract loans and provision only when its necessary. So I think virtual provisioning is going to be important.And I think there is a lot of hype around SAN provisioning. SAN utilizationespecially when you apply thin provisioning or virtual provisioning, are goingto get very high. And you are going to see most of that virtualizationobviously used for dynamic movement of data between tiers and we have a greatanswer there with our Invista, which is networked-based virtualization. So, we have all three covered and I actually mentioned whatI think is just about the order of importance so if customers out there want tosave the most money, just focus on what you're doing in your file systemsaround the world in storage. If you want to look at a second thing, I would look at whatvirtual provisioning can bring to you. Then I would look at SAN provisioningfor easier and more effective use of data mobility. It's probably not going toaffect your utilization rates at all. So yes, it is an important set of categories, but it is thatset of categories that are going to make up this broader storage virtualizationthat you talked about.

Thanks. Next question, please.

Your next question comes from Toni Sacconaghi, SanfordBernstein. You may ask your question.

Yes, thank you. I wanted to follow-up on your comments, Joe,about the relative weakness in U.S. financial institutions. My estimate is thatU.S. financial institutions perhaps comprises about 10% of EMC's revenues. Canyou confirm that? And then more importantly, it looked as though you hadweakness in storage software licenses. Those were down year-over-year. You alsohad some weakness albeit against a tough compare in the Symmetrix productline.Weakness in high-end systems and in software licenses is consistent with whatIBM saw. Was that particularly concentrated in U.S. financialinstitutions or was that more broad-based and there is a broader explanationfor particularly the software license decline?

Well, first of all, Tony, we don't comment on what anyparticular vertical sector makes up as a percentage of our business, so I willpass on that broad topic. But the answer to your question is really a littlebit of both. Obviously, when you look at conditions around drivinglicensing, financial services in the U.S. is important to us, but it’s morebroad. We have got just tremendous coverage of our software and we use a schemaas you know where you pay for the license and then you get future upgrades forfree as part of your maintenance, so our maintenance revenues on software aregrowing. We don't have as much growth on a Symmetrix especiallybecause of the way we licensed over the past years. But it is still Symmetrix;we think that the high-end industry over the last three years has just hadsingle-digit growth, lower single-digit growth. So this year, we are essentially flat. Last year, we were upa few percent, so I expect that to continue. I mean that business, I’ve said toothers, will look a lot to us as the IBM mainframe business looks to IBM.They’re not going away. Customers' most mission critical data is on that. We really have to have robust business continuity. Thosesystems are chosen. Or we’ve given options now where you can actually tier inthat box and we are just about to release the one terabyte drives to be putinto a different tier of the Symmetrix. So, those things should help or preserve and have slightgrowth in that business. So, it is a great business and one we’re proud tohave. And that does reflect some of our licensing. David, you wanted to add some?

Yes, Tony, I just walked out

Joe, one comment. When you are looking at Q3 year-on-year,which you were doing in those statements, don't forget that Q2 and Q3 lastyear, we had this abnormal distribution due to the backlog we carried out of Q2into Q3. So what you saw is a proportionally higher SIM revenuenumber in Q3 than you would have done in Q2 last year. So you are comparing alittle bit of apples-and-oranges when you are just looking Q3 versus Q3, whichis why I think the year-to-date comparisons I mentioned during my script areperhaps the more meaningful ones. They don't change what Joe said, but it just basicallynormalizes that Q3 phenomenon.

That is why I used the flat, Tony, because if you look atit, we had pretty good Symmetrix growth last quarter, down 3% this quarter. Butthe way to look at it is over the nine months and the nine months was flat. Sothe statements that I made to you still hold in that context.

Next question, please?

Your next question comes from Andrew Neff, Bear Stearns. Youmay ask your question?

Sure, if I could, Joe, just going back to what you weresaying a moment ago about the weakness was primarily in that any weakness yousaw was primarily in U.S. financial. What are other customers telling you? Imean they can all read the same newspapers we all do. What makes them -- why aren't they being more cautious? Andjust, David, going back to your question before, comment before in terms ofcash, can you give us a sense about how much cash could be available for sharerepurchases?

I did use in my comments the words air of caution. You askeda question on U.S. financial services. When I talked -- and maybe constructionwould be the industry or industries affected by construction might be in thatsame camp, but other than that, when I talk to CIOs across the U.S., not toomany or any for that matter told me that, okay, my boss just significantly cutmy budget for this year and going into next year. But everybody is alwaysasking -- everybody is a little bit worried worried. There is an air of caution out there, what is going tohappen, are interest rates going to be lower? How is the economy going to havesoft and long and how are we going to get through this credit crunch? And sothere is an air of caution and there is a lot of unknown and I think we haveall got to stay tuned. But as I said, right now, set of products and solutions thatwe have that our customers, even in financial services. As I said, we hadslight growth. Nothing to write home about, but we did have growth year-on-yearin financial services. So, if you have the right solutions, customers are goingto pay, are going to invest in those kinds of opportunities and soconsolidations helped them save money for the future. So, data center consolidation, server consolidation, storageconsolidation are hot, virtualization is hot in a lot of areas. Customers needto make sure their businesses continue, so to back up the tape paradigm is justnot a good way to recover information. So backup to disk is hot, de-duplicationtechnologies are hot. So, as long as we have two bits of nothing in the SMB space,two bits of nothing in the Web 2.0 space where big money is being spent in bothof those. So, we have got to focus on opportunities and the opportunities areout there broadly and that is what we do as a company.

Thank you.

David, you wanted to focus on Andy's part two, which wascash.

Cash, yes. Obviously, I gave you the math to quickly figureout. We have $3.8 billion of cash in our U.S. business, excluding VMware. So, the way to think about that consistent with what we saidbefore, we need $1billion of that to run the business, we need $1 billion ofthat as a cushion because you wouldn't want to run the business without anycushion, so in theory, you have got $1.8 billion extra, which we could investin projects or other programs. And we basically committed this morning toreturn close to $1 billion of that to shareholders over the next few months. So that is the way to think about the cash position.

Thank you,

Andy. Next question.

Your next question comes from Kevin Hunt, Thomas WeiselPartners. You may ask your question.

Hi, thank you. I had a mechanical question. Maybe David cananswer it. In terms of the minority interest, what’s the -- I was trying tofigure out how that is calculated here. But can you help us out there a littlebit?

Yes, sure, Kevin. Its, first of all, this quarter, it is apartial quarter because we only had a minority interest in VMware for basicallya little less than half a quarter. The minority interest this quarter wasapproximately 7%. If you look on a basic share count basis and what it wouldbe next year, next quarter rather, it would be 14% next quarter. So, basicallywhat you are doing is you are just taking the VMware GAAP net income and thenyou are deducting the minority that we don't own before we consolidate into ournumbers.

Okay. Thanks, David. The half-quarter is what threw me off.Thanks.

Your next question comes from Katie Huberty, Morgan Stanley.You may ask your question.

Yes, did we see the full impact of the new midrange andentry-level systems this quarter or should we see more of a ramp in December?

Katie, from the new systems, the only one that would kind ofcategorize as low-end would-be the NS20, so we actually expect that to continueto ramp and do well and I categorize that kind of market acceptance as prettyclose to phenomenal. I mean it is a tremendously hot product. We do have otherproducts coming out that will be more towards the first of the year. So I thinkyou will see some better news in Q4 and some better, better news in Q1.

And in terms of the new midrange products that were launchedin July, how much of an impact did those have this quarter and do they rampinto December as well?

Oh yes, they should continue to ramp. The CX3 is doing verywell. The new multi-critical NS40 is what I would categorize as midrange andthat is doing very well. So between the CX3 and the NS40 products, we could --still lots of runway for ramp.

Thanks, next question, please.

Your next question comes from Kaushik Roy, Pacific Growth.You may ask your question.

Thank you. Overall, Q3 demand was pretty good for EMC, sowhy aren't you raising your full-year guidance? You will only have to generateflat revenues to get to your target.

You, got to basically take a position and the position wetook was that we are going to give annual guidance and we did that and we didthat, we said we hoped to, I think meet or exceed or more than I think we saidor at least okay, thank you, David. We said at least $0.64 and we said at least $12.7 billion.As you know, those were the goals. The goals actually as you saw that the Boardgave us was $12.75 billion and $0.64.We then got into the midyear and said wechanged, we were very bold and said more than we changed at least to more thanand now we said we would definitely exceed. So I grant you that’s not much, but you have got to take theposition that you're going to do quarterly guidance or you're going to doannual guidance. We took the position for annual guidance. We are doing prettywell, so I will stay with the definitely exceed. I strongly believe it willdefinitely exceed $0.64 and $12.7 billion.

Can you comment on the competitive environment at the highend and mid range and some of these startups are coming out going public, fouror five of them. Are you seeing them in the market?

Yes, sure. I mean, of course we see them. It’s reallyinteresting. When I look at those startups, most of those startups, and to givethem credit, have come up with a fairly innovative and good technology in aparticular area So one startup is basically hypes the heck out of thinprovisioning. Another one says, hey, I invented for iSCSI, another one says Ibuilt it for Web 2.0, another one says I do spin down, etcetera. And what I am telling you is that every single one of thosetechnologies, every single one of those technologies with the exception of Web2.0, we will build into all of our products. So we will be able to outperformanyone in terms of the port for say thin provisioning. We are calling it virtual provisioning because we think wedo it better. David, talked to you about the tremendous successes. We have doneiSCSI and iSCSI replication both into our NS product line and our low-endCLARiiON product line or all the CLARiiON product line. We will come out early next year with spin down for on ourdisk libraries. I told you, we’ve built a specific system, which will be outvery, very shortly, for Web 2.0. So again customers love all the functionality,the 11,000 people we have in support and every one of those technologies we arebuilding in and when we build it in, we know, okay, we compete very well and aswe come out with these technologies, as we compete with those customers, ourwin rates go way up by these new companies. So I think, give them credit, they have done some innovativethings, but we have been noticing those too and of course we have got to buildthem in a more robust way because we are EMC and we are the leader and when wedo that, our win rates are terrific.

Thank you. That's helpful.

Next question, please.

Your next question comes from Paul Mansky, Citigroup. Youmay ask your question.

I had one question, but the prior question was a littleinteresting. I actually wanted to follow up on that. As we kind of look backpre-bubble, I mean we have had, I think about, four or five hardware relatedIPOs come out in the last year or set to come out and that is exactly four orfive more since pre-bubble. What do you think it is that has changed from a buyingdynamic that has allowed these companies to emerge? I know you mentioned thetechnology, but technology differentiation has always been there. There hasalways been the opportunity to differentiate. So what is it from a purchasing or a decision making processor a fundamental system requirement process that you think has enabled thesecompanies to kind of mushroom out of nowhere?

I think, what has happened, Paul, is by focusing and doingkind of one thing well and just one thing that customers have been asking for.That’s why we have been building these into our systems. But obviously when youhave all the other feature functions and benefits that we have to build thesethings in a very robust way. Because one of the things I could tell you after acquiring aheck of a lot of companies, it just strikes me as before you bought company X,you call around to a bunch of my non public company obviously, a bunch of myfriends that were CIOs and said, what do you think of this technology? Andeveryone said, it's great, it's great, it's great. We'd love to see you haveit. All of a sudden, you buy it and then two weeks later, theyare calling you and saying, hey, this technology is not up to EMC standards interms of quality, in terms of service, etcetera. And I said what do you expectme to do in the two weeks I have owned it? But on the other side, there is an expectation that when wecome out with a product, it is what I call is EMC standard and rock solid. Sowhat happens is these companies get cut a little bit of break and thensecondly, they are doing some really good innovative things and they arebringing it to market quickly and customers are saying, hey, let's bring it inand try it and then of course we will go put pressure on the EMCs of the worldto go build these things into their current products so that we don't have topay extra for them. Because if you did go out there and say, okay, let me buythis product because I like spin down, let me buy this product because I likethin provisioning, let me buy this product because I like iSCSI, you are goingto cost yourself a fortune in your data center supporting all those disparateproducts. So what they really want is us to bring it, to have thesefunctions in there, meet those price points and have the quality and that’sexactly what we are doing. Obviously to do that, I can't snap my fingers and doit quickly, so what they are beating us with is time to market. They are getting there quickly. They are showing that thistype of little technology or technology point works and it has value. And thenof course we are parallel building it in and as I said, with every one ofthese, by the end of Q1 we will have it built into all our systems.

Thank you for that color. I appreciate it.

Thanks, Paul. We have time for one more question and thenJoe will have some comments.

Your last question comes from the Clay Sumner, FBR. You mayask your question.

Thanks very much. David, you talked a lot, you gave a lot ofdifferent ways to look at the numbers, but can you just tell us what revenuegrowth, what the growth rate would have been if we had assumed you had ownedall of your acquisitions throughout the third quarter of '06, or quasi organicrate?

We’ve not broken that out though. I think, what we have doneis we've given you how big the storage how fast the storage business grew. Weshowed you CMA. I think we have given you enough views of the business to breakit all out. So hopefully you can work that through and, if not, we will talklater on.

Okay. Thanks.

Thanks, everybody, for joining us today. We really doappreciate it. I look forward to following up with you. Clearly, there is morewe can do around what we call the one EMC initiative, which creates leverageacross our products. There is more we can do with the one EMC initiative wherewe can hopefully take as we have acquired over 30 little companies now of somesize over the past three to four years. There is obviously some management layers we can reduce andsome efficiencies we can create on the people side and we will continue todrive that.