Good morning, and welcome to the EMC Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. If you have any objections, you may disconnect at this time. I would like to introduce your host, Mr. Tony Takazawa, VP, Global Investor Relations of EMC. Sir, you may begin.

Thank you. Good morning. Welcome to EMC's call to discuss our financial results for the second quarter of 2011. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC Executive Vice President and CFO. David will provide a few comments about the results we released this morning, He will highlight some of EMC's activities this quarter and discuss our outlook for 2011. Joe will then spend some time discussing his view of what is happening in the market, EMC's execution of the strategy and how EMC is positioned to help customers on a journey to the cloud and in their efforts to handle the growth of Big Data. After the prepared remarks, we will then open up the lines to take your questions. I would like to point out that we will be referring to non-GAAP numbers in today's presentation unless otherwise indicated. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today, in our press release, supplemental schedules and the slides that accompany our presentation. I would also like to point out that we are using a new basis of presentation this quarter and while it takes a bit of a different format than the previous schedules, I would like to assure you that all the reconciliation information is still available or calculable for your analysis purposes. All these are available for download within the Investor Relations section of emc.com. As always, we have provided detailed financial tables in our news release and on our corporate website. These schedules include a lot of financial information, so we do encourage you to take a look at them. The call this morning will contain forward-looking statements. And 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. And lastly, I will note that an archive of today's presentation will be available following the call. With that, it's now my pleasure to introduce David Goulden. David?

Thanks, Tony. Good morning, and thank you for joining us today. I'm pleased to report another quarter of record results. We achieved record second quarter revenues of $4.85 billion, up 20% from last year, as revenue growth improved from Q1 across all of our reporting segments. We achieved record Q2 non-GAAP EPS of $0.35, up 25% from Q2 of last year. And we continue to improve both non-GAAP gross margin and non-GAAP operating margin, both quarter-on-quarter and year-on-year. These results are further evidence that our strategy is on target, and we continue to execute on our triple play. We're gaining market share, investing for the future and improving profitability. Our unwavering focus on providing customers with the right technology to transform their IT and get the most from their data is resonating with our customers and winning us new ones. We have innovated and invested to stay in front of these needs and continue to do so day in and day out. It is this focus on innovation that has earned us our market-leading position, which continues to get stronger. There is no other company in IT with our combination of best-of-breed technology for both the virtualization and infrastructure layers that enable cloud computing and for unlocking the value contained within Big Data that surround us. Given that we're still close to the beginning than at the end of this fundamental shift to cloud computing, we continue to invest and innovate in the right areas to ensure we take full advantage of the massive opportunity that lies ahead. Now let's take a closer look at how these opportunities are driving the financial results across our various businesses, starting with Information Storage. Growth in our Information Storage revenue was strong, up 19% to $3.6 billion. Within Information Storage, we saw the…

Thanks, David. I would like to begin by welcoming everyone to today's Q2 earnings call. As always, thank you for your interest in EMC. Overall, I am very pleased with our Q2 results. It is important to note that these results were underpinned by solid growth across all of our major geographies and across the vast majority of our product divisions and business units. Balanced results are critical to sustain success. Also critical to our long-term success is customer acceptance of our strategic vision and our ability to deliver against it. Clearly, our hybrid cloud and Big Data strategies are resonating extremely well with customers, and they see our products and services as relevant and trust us to help them accelerate their journey to the cloud and its massive benefits. I would like to recognize our 50,000 people around the world that are members of the EMC and VMware family and thank them for their many accomplishments, for their innovation, their hard work and their dedication to our customer success. Let me now comment on the global macroeconomic environment in which we operate and talk about our expectations for IT spending in the second half of 2011. Starting with 2011 IT spending trends. We still believe that overall IT spending will be up in the 5% to 7% range this year, and we still firmly believe that the core areas where EMC and VMware have leading technologies, namely, in virtualization and in cloud OS, in information storage, information protection and information security and in Big Data are all technology areas, which will grow substantially faster than a 5% to 7% average. While we believe that IT spending in 2011 will be good, I would like to point that there are several potential macroeconomic risk areas that we continue to watch…

Thanks, Joe. Okay. Apparently, we had some technical difficulties with the con call lines and hopefully we didn't lose anybody. As I mentioned, there will be an archive available later so in case you missed anything. So let's go on with the Q&A. [Operator Instructions] Mary Ann, can we have the first question, please?

Our first question comes from Ittai Kidron of Oppenheimer. Ittai Kidron - Oppenheimer & Co. Inc.: I wanted to dig in a little bit into the VNXe. David, maybe can you give us a little bit of color on the average deal size of this 600 new customers, and how are you working to build that channel? I mean, how should we think about that number as a run rate exiting this year?

Yes, sure. I mean, perhaps the average deal size, perhaps the way to talk about it is the average transaction size for an individual system because some of these customers are buying multiple systems. VNXe average transaction size is around $10,000, so much smaller than we would historically have got from the VNX line. And it's on track. In terms of when it becomes a meaningful piece to our overall business, that's not until 2012. But you can see that with several hundred new customers, obviously, many more times that new systems during the quarter and the channel ramp-up plan, we're making good progress. We are still, of course, a little bit learning in terms of the SMB spaces and we're signing up many new partners. We have a great feedback system. But all in all, on track and expect to see it making a bigger difference in 2012. Ittai Kidron - Oppenheimer & Co. Inc.: As a follow-up, if I extend that question into the VNX itself, clearly, you're doing a very good job in driving that through in that transition from Celerra and CLARiiON into VNX. But can you tell us how much of the progress you made in VNX is really into your existing installed base versus actually helping you gain new customers? I mean, how do I think about that mix?

Obviously, a little bit of both in the case of VNX. As I mentioned, the 2/3 of the total category, what we call unified, is now VNX. So that's obviously is higher if you include the VNXe as well. But obviously, the initial opportunity for VNX is the fact we have a very large installed base of CLARiiON and Celerra systems. And I would say that the majority of what we're doing with VNX is into the existing customer base. But also we are openings some new customers with VNX. And just to clarify on VNXe, while as we said we had 600 new customers, obviously, we had many more than 600 customers in total for VNXe, so a little bit of that is also going into existing installed base. But obviously, much more new with VNXe, much more existing base focus right now with VNX.

The next question is from Maynard Um of UBS.

Can you just talk about the competitive landscape, any changes either from larger OEMs or other pure plays because it looks like you're gaining share. I'm just curious where you think that continued gain will come from and particularly as it relates to the trend where OEMs are looking to own the entire stack?

I'd say the competition is pretty much where we've seen it, no big change. Obviously, as you say, there's a huge thrust out there from the systems players, if you will, who sell the complete stack. Obviously, that's where we team with Cisco in the VCE and Vblock. But obviously, there's a lot of best-of-breed selling that goes on. That's still a dominant piece and to that extent, the competition has not changed as much as you would think.

Our next question is from Amit Daryanani of RBC Capital Markets.

Guys, when I look at an aggregate, it looks like the gross margins this quarter were actually much better than what we were expecting, but the OpEx is also much higher. I guess when we think of margin expansion going forward, do we think of the lever really being gross margins? Or do you still have room to control OpEx going forward to expand margins?

Amit, I think that what you're seeing is absolutely in line with what we said at the beginning of the year. We said to expect that the leverage we're going to get this year is going to come almost entirely from gross margin with perhaps a little bit from OpEx. And that's what, in fact, you are seeing. But bear in mind, those 2 things go hand in hand, so for example, part of the reason why OpEx is higher the year is because we've got now the OpEx base from Isilon and from DCD inside our OpEx, and that's driving some of the expense. But also -- they're also driving gross margin. So you have to kind of look at the 2 lines hand-in-hand, but it's very much in line with what we expected. And as we go through the balance of the year, you'll continue to expect that trend with the majority of our leverage coming from gross margin.

The next question is Lou Miscioscia of Collins Stewart.

VNX has obviously been doing very well and you pointed out it's now 2/3 of your unified storage. But maybe you could give us a clarification as to how much of that is a percent of the mid-tier revenue where you have a number of other things in that same category.

Let me start, but Joe can add some color. It's the biggest piece of our mid-tier, but we're not breaking that out explicitly because when you look at the portfolio, really we're offering customers choice. And in some customers, a mid-tier platform like unified can do everything for them. In other cases, they might want a more specialized backup device like the DD Archiver. So to a sense, it's a little bit fungible. We are giving you some color. We said that for unified, the non-Dell channel business grew over 40%. And to give you a bit more color, if you took out Dell OEM, unified growth was over 25%, so giving you kind of flavor of how far we're going. But we're deliberately kind of keeping our segmentation down to mid-tier category because there will always be some puts and takes, and I think we got to look at how that overall portfolio is doing relative to the marketplace.

Ben Reitzes of Barclays.

Yes. Could you guys update us on where you are in BRS growth and versus your long-term target, as well as DCD, how big a contribution is that right now and where are you versus your $1 billion plus target there? And when do you think you'll get there in both?

Let me start off with BRS. BRS is still growing at a rate that's above the kind of long-term target rate that we've put in -- I'm sorry, aActually, we have that in the 20% plus category, right? So BRS is actually in that -- is still in that category, the 20% plus range and we're pleased about that. Obviously, there's a lot of competition trying to come into that market place, but despite that competition we're still holding our own, gaining share, winning a lot of new accounts. So we're pleased with how our business is doing. And we still think it's very differentiated compared to anybody else's solution in the marketplace. And Joe, you want to talk about DCD?

Let me do it a little bit different way. We've been saying that there is massive opportunity at the intersection where cloud meets Big Data. So obviously, you've seen the VMware results. We've talked about the VMAX results. And now all of a sudden, if you look at the newer products we have, the Greenplum, Atmos, Isilon, I can tell you that each of those products, quarter-on-quarter, year-on-year, Q2 of 2011 over Q2 2010, more than doubled. All 3 of them. So we have tremendous momentum. And I have no doubt that we will get both the DCD, Greenplum side and Isilon to $1 billion. But this will take -- this will be measured for Greenplum in years, not -- because it's a small company when we bought it. It was $20-something million in revenues last year. So obviously, that's not going to happen overnight. The others, the DCD or BRS is already there. The combination of Atmos and way over, as a matter of fact, the combination of the Data Domain and Avamar is already there. So we'll get down those other 2 for sure. I'm very confident of that.

Deepak Sitaraman of Credit Suisse. Deepak Sitaraman - Crédit Suisse AG: David, can you comment on the pricing environment in the mid range, particularly as you ramp VNX? And Joe, maybe can you just speak about what surprised you either positively or negatively in this process of building out the channel to support the VNX ramp? And maybe just remind us of what inning you think we're in?

Yes, Deepak. The pricing environment, not surprisingly, is competitive but we expected that. I think the good news is if you go back to our launch in January, we said we expected margins for the VNX to be slightly higher than the CLARiiON and Celerra combined. And we expect the VNXe margins to be slightly below. And that's exactly what we're seeing out in the marketplace. So even though we're getting a more competitive price environment, we've also got a more competitive build, and the margin profile is exactly in line with what we expected with a full quarter behind us. It's good to be able to report on that.

You asked me to comment a little bit on what surprised me in building up the channel. I think the good news is I wasn't surprised. We put some aggressive plans in place to grow our channel, both in terms of numbers, but much, much more importantly, in terms of impact. And obviously, we had to offset the dilution of Dell going away and we've done that, I think, extremely well. And so it wasn't a surprise. It was the plan. And our guys have done a really good job and we're very, very committed to our channel partners and they've given us very high marks.

Aaron Rakers with Stifel, Nicolaus. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: If I could delve a little bit into what you said about the mid-tier business. Correct me if I'm wrong, I think you said that the Isilon revenue was up double that of what it was on a stand-alone basis a year ago, which would basically imply about $90 million in revenue. If we take that into the mid-tier business, would that seem to imply kind of a mid or high single-digit growth rate x Isilon for this quarter? Just trying to gauge the impact of Isilon here as we think about the model.

I think if you normalize for Isilon revenues, perhaps the way to look at it best of all is to kind of include Isilon in both sides, so apples to apples. If you include -- if you normalize the growth rate for Isilon revenues, the 27% is still well into the 20s. So that would be the kind of apples-to-apples run rate for mid-tier storage product growth rate. X Isilon is still going to be way above the mid single-digit number, which you spoke about.

Brian Freed of Wunderlich Securities.

Could you give a little bit more detail about your plans to ignite growth in your Information Intelligence Group? And also can you talk a little bit about your view of whether this is still a strategic business given that you embedded a tremendous amount of content intelligence in your storage systems?

Yes, it's definitely still strategic to us. I mean, the big change we're going through here, as we think said at our Analyst Day -- Investor Day is that in kind of past times, you saw the complete platform and to a customer, a big, big platform sale. And then the customer would build apps on top of that. So for the insurance company, they could build apps to do claims processing, to do policy management and to do time and expense reporting, so they buy the platform. And that's not just way things are going down today. Much more lighter weight, much more semi-finished, semi-customed where the customer just put a finishing touch and they're buying these for a specific business purpose. So we've come with this xCP technology. It's working very well. But the transition from when used to do big, big buys and via a platform to buying these point products -- a lot of these point products more and more will be bought on a SAS basis, I am positive, is proving to be a bigger transition than we originally think. But it is still very, very strategic to our customers. When I'm out there with our customers, the applications that they have in our Content Management using our Content Management products is very, very strategic to our customers. And when done right, this could be a growth area for us for sure. It's just taken us a while, but we're going to stick with it. We're convinced that by the end of this year or early next year, we'll return this business to growth.

Alex Kurtz of Sterne Agee. Alex Kurtz - Sterne Agee & Leach Inc.: David, as Flash becomes a bigger part of the overall strategy in the high end and midrange, how do you think about the supply chain around Flash considering some of the dynamics in pricing across vendors and sort of how that fits your bond costs?

I'll start and perhaps Joe can add a little bit of color. Obviously, we've -- since we're very early into Flash -- as you know, we started off with a single Flash provider. That has now changed. That's multiple sourced. We're still by far, by far, the largest enterprise storage supplier of Flash, but we do have a couple of different hedges. We have some investments in emerging Flash companies. We have a whole Flash agenda. So we're pretty comfortable about how we've been able to drive costs down to us, but also to drive pricing down to the customer since we introduced Flash. The premium between Flash and private channels has come down by orders of magnitude and it's much more attractive. And of course, with FAST on top of that, we can use it much more intelligently. So all in all, I think we're very pleased with our position in Flash and we do think that a lot of the value there is going to basically go to the foundry providers. We don't need to -- in terms of the manufacturing costs, we will take benefit from that as more people get into the Flash business and Flash component prices come down.

Yes, and I think that's a substantially right. We have done a lot to help make sure we assure availability from the Flash developers. We've made sure that we've done things to help make sure we're getting good costs and price competitive, and we've done a lot of investments and a lot of R&D internally on the technology side. So we feel very, very good with our Flash position.

Toni Sacconaghi of Sanford Bernstein. Toni Sacconaghi - Sanford C. Bernstein & Co., Inc.: I was wondering if you could comment on the sequential gross margin improvement between Q1 and Q2. It certainly doesn't look like mix, alone, could account for that. My hypothesis is that RSA margins rebounded significantly sequentially, but I'm wondering on whether you can comment explicitly on RSA gross margins in Q2 versus Q1? And also on other forces sequentially that impacted gross margins?

Yes, Toni, you're absolutely right. In terms of our non-GAAP numbers, yes, to RSA. We, as I mentioned in my comments on RSA, we included some remediation costs in the non-GAAP results in RSA in the first quarter. And if you kind of look at what RSA margins would be normally compared to what we reported in Q1, you can just about estimate what the size of that charge was. It wasn't a small number. Obviously, smaller than the charge that we took in Q2. So that is a factor and actually accounts for a reasonable amount. We also saw a nice pickup in our services gross margin, particularly in the storage business. And then we do, as we go forward, year-on-year and quarter-on-quarter, we're seeing improved mix from higher-margin products. I mentioned the pickup in VNX compared to its predecessor, and also we're actually getting better gross margin on the products themselves. But those are factors. You're right, the RSA is a big one.

We have time for a one more question, and then Joe will have a few concluding comments.

Mark Moskowitz, JPMorgan. Mark Moskowitz - JP Morgan Chase & Co: Real quickly here on the high end. Joe or David, could you talk a little about your expectations around the high-end growth in terms of 2Q results? Was that deceleration kind of expected due to tougher compares? Or are other factors here in terms of maybe your mid-tier cannibalizing some of the high end?

Yes, Mark, as I mentioned in my remarks, I mean, if you remember, in Q1, our high-end growth was remarkably high 25%. And as I mentioned, that was really driven by a lot of pent-up demand for FAST VP. We've been talking to our customers about it for quite some time. It started shipping and that drove a lot of new systems. It drove a lot of upgrades as well. Now we also mentioned that in Q1, we have relatively weaker results in the mid-tier because we only announced VNX towards the end of the quarter. We saw those growth rates kind of swap over in the second quarter, so we expected the 25% to come down to 15%. The good news is 15% is still higher than the longer-term growth range we have for Symmetrix, which in our modeling is in that single-digit growth range. So we do expect it to probably continue to trend back towards that single digit, but there are a lot of good things going on in the high end with Sym being used in new used cases and the VMAXe, of course, also giving us a kicker as well. But that explains the trends and the changes between Q1 and Q2.

Yes, I think David hit on it. A major thing to consider is that lines between mid-tier and high end are glaring somewhat. If you think of the absolute tenants of the cloud is Big Data centers, big scale, and of course, if you look at what we're doing with infusing Flash technology and SATA technology, into SAS technology, into the Symmetrix product line, VMAX and then having FAST VP manage that and tier that -- put that information at the right price point and the right tiered storage to get to the proper SLA and performance, this VMAX is going to continue to be strong for us and it does have one of the major tenants that cloud computing implies. So we feel very good about it. So let me to close up here. In summary, we believe we have a well thought-out cloud and Big Data strategies. Customers are receiving these strategies in our products and services very openly, very well. We a partner ecosystem in place to be successful. We have terrific people here at EMC and VMware who believe and are committed to our future, and they believe it's going to be and I believe it's going to be a future of success. So I want to thank you again for joining us today. And I wish you all a great day. And we'll be talking with you. Thank you.

This does conclude today's conference call. You may disconnect your phones at this time.