Good morning, and welcome to the EMC Third Quarter 2012 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 now like to introduce your host, Mr. Tony Takazawa, Vice President, Global Investor Relations of EMC.

Thank you. Good morning. Welcome to EMC's call to discuss our financial results for the third quarter of 2012. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC President and COO. To kick things off, David will comment on our results and how these tie with the execution of our strategy. He will also discuss our outlook for the rest of 2012. Joe will then spend some time discussing his view of what is happening in the economy and IT, EMC's vision and strategy and how EMC is helping customers navigate the massive transformation happening in IT regarding cloud, Big Data and Trust. After the prepared remarks, we will then open up the lines to take your questions. Please note 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 in today's press release, supplemental schedules and the slides that accompany our presentation. All these are available for download within the Investor Relations section of emc.com. As always, 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. We are also providing you with an update to our projected financial model for 2012. This model lays out all of the key assumptions and discrete financial expectations that are the foundation of our 2012 outlook. We hope that you find this model helpful in understanding our assumptions in context and in ensuring these -- that these expectations are correctly incorporated into your models. This model is available as background in today's slides, available for download in the Investor Relations section of emc.com. With that, it is now my pleasure to introduce David Goulden. David?

Thanks, Tony. Good morning, everyone, and thank you for joining us today. This morning, we reported continued growth in revenue and earnings per share in Q3, with revenue up 6% and non-GAAP EPS up 8% over last year's Q3. Free cash flow grew 16% year-on-year. The environment in Q3 turned out to be more cautious than we had expected. There were several issues weighing on customers' minds, including uncertain global economic growth and the U.S. presidential election. The macro challenges translated into more spending scrutiny, longer deal cycles, additional approval requirements and the resulting delay in IT deals. While the macro factors caused EMC's growth to be less than expected, I'm pleased that we did show growth in this challenging environment. And as tech industry results are reported, I believe EMC will be one of the stronger big companies and that we certainly gained share. We also showed EPS leverage and achieved a number of Q3 quarterly records, including record revenues, record non-GAAP operating income and record non-GAAP EPS. In the face of such headwinds, I believe that our strategy, balanced portfolio, operational model and ability to execute are paying off near term and position us well for the long term. While we need to navigate the short-term economic challenges, the longer-term secular changes offer us an opportunity to be really successful. The shift to cloud, Big Data and Trusted IT bode well for us, as we've been at the forefront of these for some time. These trends are in full force, because they enable companies to capture a better return on dollars invested in IT than ever before. Cloud architectures make the infrastructure more agile and efficient, whilst Big Data enables new insights that could help grow the top line, and all this must be done in a trusted…

Thanks, David, and a warm welcome to everyone attending today's earnings call. We appreciate your interest in EMC. I would like to begin my formal remarks by clearly stating that we were disappointed that we did not quite meet our internal revenue expectations in Q3 and that we interrupted our string of 10 consecutive quarters of double-digit top and bottom line growth. But that said, I do believe that given the significant uncertainties that permeate the global stage right now and its negative impact on IT spending, we more than held our own. In fact, when all the reporting is in, and we're quite sure you'll find that EMC gained share across the major IT markets in which we play. I know how hard my 55,000-plus colleagues at EMC and VMWare worked, how dedicated they are to the success of our customers, how much they believe in our strategy, direction and future prospects. And for this, I want to deeply thank them and let them know how much I appreciate them. I would now like to comment on the uncertainty I just mentioned. First, there's economic uncertainty as demonstrated by the fact that most major markets around the world exhibited at least slightly lower GDP growth rates in Q3. In fact, one is hard pressed to find a major country that grew faster in Q3 2012 than it did last quarter in Q2 or it did in Q3 of 2011. This economic uncertainty has a twin brother called political uncertainty. Confidence in governments around the world that make productive and timely decisions on real pressing issues like deficit reductions and tax policies is at a low point. Collectively, these economic and political uncertainties are affecting business confidence, and this is affecting IT spending rates. In Q3, we found an air…

Thanks, Joe. [Operator Instructions] We thank you all for your cooperation in this matter. Evan, can we open up the lines for the first question, please?

Yes, sir. Our first question today comes from Aaron Rakers with Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Quick question on just the outlook and kind of some of -- I guess, on the outlook or tying to the outlook, the midrange business you referenced, obviously, some late quarter channel dynamics that were unable to ship, if we look at that relative to your guidance, x VMWare, you're really guiding more or less a 12%, 13% sequential growth, which I think, historically, would be a little bit below seasonal. Can you try and triangulate those 2 data points on a like-to-like basis? Are you assuming a below-seasonal quarter, if some of those deals actually do ship in the current quarter?

All right. Aaron, let me take this. So first of all, yes, you're right, we highlighted the fact that in the mid-tier, we saw a higher-than-expected level of late orders, which means that we will have those orders shipping in early Q4. And actually, to pick up on your point, when we look at our outlook, when you take into account those late Q3 orders that will ship in Q4, and if you then, from Q3, assume a fairly normal seasonal progression of spend into Q4, that gets to the higher end of the outlook looking at all the averages over the last 6 to 7 years. And obviously, if the caution that we saw right at the very end of Q4 -- sorry, Q3 continues into Q4, that's how we get to the lower end of the outlook. So to answer your question, it really is the shipments of those late Q3 orders, plus a seasonal normal gets us to the higher end.

Our next question comes from Ittai Kidron with Oppenheimer. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: What I wanted to talk about was your geographical mix, as you laid it out, the year-over-year growth rates. Can you talk about Asia Pacific? I mean, 5% seems like a low growth rate for that region. I would have expected that to do a little bit better. And on the flip side, Latin America, clearly, very strong. Any color on what's driving that will be greatly appreciated.

All right, so let me start again. So just a couple of pieces to understand the kind of color of what happened and how the different geos were impacted. So we mentioned that we had some orders that we were expecting to close that got pushed out, again principally focused on the mid-tier, and those occurred principally in North America and Asia-Pac, so that impacted a little bit of our growth rates in Asia-Pac relative to our expectations. And then relative to Latin America, just a small market, but a strong bounce back. We had not quite such a strong growth quarter in Q2 and then a big bounce back in Q3. And relative to the countries in Asia-Pac, Joe, do you want to comment on those?

Yes, we saw good strength in China, had very good growth there, but we saw a slowdown in Australia, New Zealand, a slowdown in Japan and slowdown in India and the rest of the countries were okay. So stronger in China, and then I gave you the ones that are weaker, so it's kind of color across those countries.

Our next question comes from Shebly Seyrafi with FBN Securities.

Yes. Can you elaborate on the high-end growth? It was up only 5%. You just had this VMAX refresh just recently. And my own tracks [ph] indicated your 40K -- VMAX 40K, was selling quite briskly. Can you talk about why up only 5%? And were you down, actually, sequentially? And maybe you can touch on the competitive dynamics versus HDS and IBM?

Sure. So relative to the 5%, I think in this environment, we actually feel quite good about that. The VMAX transition is happening nicely. Over 50% of the new systems we sold in the quarter were actually the new family. We expect that transition to be essentially complete by the end of the year. A phenomenon that we're seeing in the high end is particularly when customers are kind of scrutinizing their budgets, they're really looking for TCO and cost savings, we do see a phenomena of consolidation in multiple mid-tier systems into the high end, so that helps as well. In terms of sequentially -- yes, you're right, but it wasn't the only part of the business that was down sequentially from a product point of view. The macro and the factors we talked about impacted basically most parts of the business, so there's nothing really unique about the high end in terms of being down sequentially. Typically, we would be more like flat sequentially in the product arena from a Q2 to a Q3.

Our next question comes from Brian Marshall with ISI Group.

We've been following 3 trends, kind of what we view as some of the best secular growth trends in enterprise infrastructure, namely, SDN, Hadoop as well as enterprise cloud storage. And at the end of the day, I think a lot of these trends are actually deflationary in technology for sort of the large incumbents. Some of these use x86 commodity servers or JBODs and off-the-shelf NFS file systems. So I guess the question is, if you subscribe to that line of theory, how does EMC plan to grow with some of these sort of secular growth trends and offset what is somewhat deflationary for some of the tech incumbents.

All right, this is Joe, and David can add a little color also. I think one of the things you'd be missing in those trends is how big the private cloud is going to be. And as David said, there are probably less than a handful of companies that are truly capable of having the resources to take components and build their own private cloud, like a Google could for instance. So obviously, what we're doing with the journey of virtualization into the software-defined data center is we're building that technology, and that's going to be a great -- I think, a great driver for us. Also, our highest growth area, if you looked at it kind of on a vertical basis, would have been in the service providers. You heard on the VMWare call yesterday, where they said second time is on Web services, there's the most number of apps running by far, and whoever's third is way, way, way behind that, running on the VMWare infrastructure. Most of those infrastructures also run EMC's infrastructures, those service provider companies. So again, we are riding well on those 2 trends. Big Data is a big growth area for us, and we don't see that that's disruptive. A lot of these data mining applications did not run on our technology yesterday, so we think we could be a net winner there. And when you look at some of the things that are happening on private clouds -- or excuse me, public clouds and on the service provider front, a lot of what they're attacking there is kind of shadow IT, and that was never a big win for -- in some test and dev. So test and dev impacts us a little bit, but again, we're picking that up with our service provider partners, and we never were a big winner with shadow IT. So I think we're in pretty good shape going forward here. I think we're in very good shape going forward. And if you looked at the 6 strategic areas that I outlined, which again, we'll talk to you more about next quarter in real depth, our future is incredibly bright, in my opinion.

Our next question comes from Kulbinder Garcha with Crédit Suisse. Kulbinder Garcha - Crédit Suisse AG, Research Division: Just a question on the mid-range slowdown. I understand there's been a macro impact maybe there as well. But could you comment on what -- was there misexecution with the channel? Or was it just late orders? And then, I guess, just in terms of the deceleration you've seen here, what confidence can you give that just maybe this market, this end segment, isn't decelerating? Or that your ability to gain share at the pace you once did has slightly changed because of the competitive dynamic. Any insight there would be helpful.

Sure, Kulbinder, let me take that question. So I wouldn't say that it was our execution impact on mid-tier. It really was the macro. They were relative to our expectations. And the mid-tier product growth sector, there were 2 things that happened. One is that we had more late orders than we expected, which means there are more orders that we couldn't ship in the quarter than we expected, that's going to help us in the fourth quarter. Similarly, but a little different, we had orders that we were expecting to win that got pushed out to the fourth quarter, because customers pulling the extra decision cycle, pushed those orders out. So again, now as those orders close and some of them already have, particularly in the BRS area, will also help us a little bit in the mid-tier. So it's really the macro, more than a execution issue. And for some of the factors that I just mentioned, we do think we're going to have a rebound in the mid-tier in the fourth quarter as a sector. And then relative to the overall market, we feel good at the top level. When we look at our 6% growth versus IT spending, we absolutely gained market share. Relative to the storage business, we think that from what we saw in the field with our win rates, both the high-end and the mid-tier, we think that we'll still be a net share gainer there. And you look at our network storage product revenues, against those that others have either reported or have out there for consensus, and we feel pretty good about that aspect of our growth. So every way we look at it, we think we're a net share gainer and it's the macro here as opposed to any micro issues.

Our next question comes from Alex Kurtz with Sterne Agee. Alex Kurtz - Sterne Agee & Leach Inc., Research Division: Joe, just when you exclude the channel mix on VNX and you look at different verticals in different customer segments, enterprise versus channel, was there anything that really stood out from you from a -- when you talk about misexecution this quarter that you could give a little more color on?

I think on a plus side, well, well north of the average, we showed, as I said, really good strength in service providers, and we also -- which is I think a little bit counter to some of our competitors -- but we also showed a strong quarter in federal. But on the weaker side, weaker than average, we did see a pause in financial services, and that's a -- that is our biggest vertical. We had pretty good balance across our verticals. We play in every vertical. Matter of fact, almost every vertical, we have a double-digit share in, more than 10% of our revenues, I should say. So we got good balance, but financial services is the biggest, and we did see that occur weaker this quarter.

Then I -- let me just add a point relative to the mid-tier, because that's where you started, I think, your question. Remember, we made this comment last call that when you look at our geographic mix, Europe is more heavily weighted towards the mid-tier market just as a market and, of course, in terms of our profile there as well. So slowness, in general, in Europe impacts the mid-tier disproportionately highly, which is a factor we mentioned to you last quarter as well.

Next in queue is Bill Shope with Goldman Sachs.

Okay. Now that you're mid-cycle in the Symmetrix refresh, can you give us some color on what you're seeing in terms of the margin dynamics for the new products, and what kind of services and software attach rates are you seeing versus past cycles? And, I guess, extending that, how should we think about what all of that means as we exit the year and, hopefully, get into a better spending environment overall?

Yes, Bill, we're actually very pleased with, first of all, how the business did in the quarter from a gross margin point of view generally, given the macro environment. Relative to the high-end transition, we see a software and services attach rate that's comparable to prior high-end systems on the 40K, if anything, a little higher because of the kind of hyper consolidation opportunities we're looking at, at that side of the marketplace. So the kind of secular trends, the new product lines tend to carry a richer software content and the larger systems carry richer software content, those are all still working in our favor.

I think the other thing that I would add to that, Bill, is, if you looked at some of the things David alluded to that are common, he talked about Mavericks for Isilon being introduced at the very end of this year, which means its kind of impact will be next year. He talked about real terrific enhancements to VFCache. He talked about a new line we call Project Thunder. He got a new line of all-Flash called Project X. We have major extensions to our mid-tier line. All of those products kind of get reported in mid-tier. So when you look at our kind of cycle of refresh and you look at next year, that also bodes very well for us. And we'll lay more of that out for you when we see you next month.

Our next question comes from Maynard Um with Wells Fargo.

I was hoping you could talk a little bit about these new products and product cycles. For Isilon, you talked about the expanding opportunities into new verticals, I presume from the improvement and the right capability within Mavericks. But more generally, can you talk about the qualification process for a lot of the new products, where we are. I'm just curious when we should expect some of these to start ramping. Is it 1 quarter after the launch, is it 2? If you can just shed a little bit of color on that. And then just what you have embedded into your guidance, I guess, for some of these new product ramps in the mid-tier.

Maynard, if we did that, we wouldn't need a meeting next quarter, so that's going to be a lot of the firepower. We're going to give you great detail, and give you some hands-on, and show you real in depth what we're doing. And we are excited about it, but it really is a next-year event. And I know you want to know when next year and which exact features, and that's what we're going to tell you soon.

Okay. Then can I try a different question then just on the OpEx side?

Yes, I kind of stole your question, so you get 2.

Can you just talk about what leverage you have there to potentially offset if one environment were to get weaker? What areas you would cut the spend? I know you talked about staying committed to the R&D spend, but just sort of the leverage you have there.

I'll let David -- let me just -- I just want to emphasize what you said. I mean, I do not, will not cut R&D. It's just what we're working on is too exciting. With that said, there's -- there is always ways we could tighten our belt, and I'll let David handle that.

Yes, Maynard, you actually saw us doing some of that in Q3. So if you look, for example, our SG&A expenses, excluding VMWare, are kind of flattish year-on-year and a couple of factors -- clearly, there was some FX benefit from an expense point of view. But also going into the quarter, we recognized it was an uncertain environment, and we were more cautious with our discretionary spending, areas that we've looked at before, things like travel. We also had some favorable benefits in the quarter of fringe vacation, things like that, but we do recognize it's a more cautionary spending environment. We're being more careful with the investments in OpEx, but particularly in the discretionary areas, which we've demonstrated before, we do a good job in when we focus and pull them back.

Next in queue is Scott Craig with Bank of America Merrill Lynch.

David, can you talk about the gross margin, but more from a quarter-over-quarter perspective? It went down a little bit, but I would have thought with the high-end ramp and sort of the hard disk drive pricing getting better, and then mix with VMWare especially, that gross margin might have gone up. So could you talk about it on a quarter-to-quarter basis?

Yes, sure, Scott. And we saw a 30% reduction, as you know, in gross margin quarter-on-quarter. All that was due to EMC x VMWare, which was down 50 bps sequentially. So let me explain to you what was going on there. So from a competitive point of view, I'd say the pricing pressures were consistent with normal, so no massive difference in the landscape on a competitive point of view. What we did see is, we saw some incremental impact from our customers, as they applied extra scrutiny and kind of worked their transactions harder, so there was additional customer pressure, and we did see continuing benefits from mix, as you mentioned. Specifically, relative to quarter-to-quarter, there were 2 factors that drove the reduction. One is that, if you remember back in Q2, we had some benefits as we have closed out the RSA situation and reversed what was left of the charge. Some of that went to operating margins -- to gross margins, sorry, that gave us about 20 bps improvement. And also quarter-on-quarter, there were some additional amortization in capitalized software. You factor those out, and gross margins would have been flat quarter-on-quarter. And then if volumes had been kind of where we thought they would be at the start of the quarter, you'd have seen an increase in gross margin sequentially, so that's the story, what's going on there.

Our next question comes from Amit Daryanani with RBC Capital Markets.

I was just wondering, guys, if you could just talk about if Isilon and Avamar combined are still on track to achieve a $1 billion run rate back end of the year. And then very specific, you'd maybe talk about, on Isilon, did you -- are you starting to see some slowdown ahead of the OneFS Mavericks refresh that should happen next, well, I guess, in the next quarter?

Well, actually, it's at the end of this quarter, the quarter which we're currently in. So we do expect Isilon and Atmos to be at the $1 billion rate, or if not, exceptionally close to it. So we feel good about that. And no, we don't see a slowdown in anticipation of Mavericks, because Mavericks is a software release, so customers can -- with a valid maintenance agreement, will be able to upgrade to Mavericks. So obviously, if they're waiting for the functionality, well, they wouldn't be buying the product in the first place. So in today's use case, Isilon is still very competitive, the use case expands with Maverick. Existing customers get it, so we don't see that being a factor. We just see that being a factor that will enable us to kind of open the aperture a little wider for where we can play with Isilon.

Thank you. We have time for one more question, and then we'll have some closing comments from Joe.

Our final question comes from Abhey Lamba with Mizuho Securities.

David, you talked a little bit about Isilon and its impact. You're not expecting any slowdown ahead of it, but can you talk about what are the other industry verticals outside of its traditional verticals that you expected to gain traction? And what was the spending environment in Q3 for those? How should it trend over the next couple of quarters?

Okay. So again, relative to Isilon, there are many new capabilities in the Mavericks release, and we'll tell you much more about them when we get together when the product's actually in the marketplace. Today, a lot of Isilon sales is in the media, entertainment, life sciences verticals. One of the areas that you'll see us enhancing the solution with Mavericks is adding many more audit and compliance features. So in more regulated industries, financial services sector, public sector, the scale-out file opportunities that we can't go after with Mavericks today -- sorry, with Isilon today, we'll be able to go after them with Mavericks. So that's one area that you'll see enhancements. And Joe mentioned already what's going to happen in those verticals. The other area mentioned before is more performance enhancements, so it'll be a better general-purpose file system, but I'll still tell you that the primary use of Isilon across all these verticals is still going to be in the larger scale-out, Big Data type of file-oriented applications.

This is Joe again. And in summary -- first of all, I'd like to thank you for being with us again. And in summary, I'm sure you got a real sense today that we deeply believe in our strategic direction. We have strategies that are laser focused on key high-growth IT market opportunities. Our customers and our prospective customers are more and more inviting us in and doing us as a key source of innovation to help them plot their future to private and public cloud computing and IT as a Service. I could tell you our people inside of EMC and VMWare are very excited about our future, and they are charged up and ready to succeed. And again, we look very forward to sharing our vision, our products and our go-to-market prowess with you at our upcoming strategic forum. So I wish you all the best, and thank you again, and see you soon.

This concludes today's conference. You may disconnect at this time.