Sunday, March 3, 2013

Downgrade to EW on Slowing Storage Growth


Storage world a little uncertain at the moment. One thing is for sure storage keeps growing. Aivars Lode Avantce


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January 10, 2013
EMC Corp.
Downgrade to EW on Slowing Storage Growth
Near-term, weak enterprise demand leads us to cut our 4Q12 EPS by $0.01, which combined with l-t uncertainty from flash and cloud disruptions shave $0.10 off our 2013 EPS. EMC remains our preferred storage vendor with a strong product portfolio and margin expansion, but we see less upside in 2013.
Also reducing multiple expectations. The weak near-term demand and less certainty around the long-term growth of enterprise storage also makes multiple expansion less likely near-term, a key element of our prior OW thesis. Our new base case of $26 (down from $35) applies a 14x P/E multiple, in line with EPS growth, to our lowered CY13 EPS estimate of $1.85 (vs. $1.95 previously and below consensus of $1.91). While there could be further downside to our model if storage growth remains weak throughout 2013, EMC’s software portfolio adds roughly 500bps revenue growth and 200bps gross margin expansion annually, which provides a floor to estimates.
Weak enterprise storage demand. While C4Q turned out to be challenging for hardware in general, our channel checks suggest storage experienced the largest negative change on the margin. Our contacts attributed most of the shortfall to indecision in the face of alternative storage solutions and a tight budget environment. We continue to view EMC as a share gainer, but in a slower growth market.
Evolving storage architectures could slow revenue growth. While EMC is out in front of many of the emerging trends including cloud, flash, and deduplication, in aggregate these could pressure EMC’s legacy product lines which account for over 1/3 of revenue. We discuss this theme in our 2013 annual outlook published today, Sticking with Growth in 2013. We now expect 5% Y/Y storage revenue growth in 2013, down from 9% previously and flat with 5% growth in 2012. EMC’s traditional SAN storage business saw the largest cut where we model 2% growth (down form 7%).
MORGAN STANLEY RESEARCH NORTH AMERICA
Morgan Stanley & Co. LLC
Katy L. Huberty, CFA
Kathryn.Huberty@morganstanley.com +1 212 761 6249
Scott Schmitz
Scott.Schmitz@morganstanley.com +1 617 856 8074
Stock Rating
Equal-weight
Industry View
In-Line
Key Ratios and Statistics Reuters: EMC.N Bloomberg: EMC US
Systems and PC Hardware / United States of America Shr price, close (Jan 9, 2013)
Mkt cap, curr (mm) 52-Week Range
Exhibit 1
EMC Estimate Change Summary
$24.02 $53,156 $30.00-21.74
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Revenue
Revenue Growth % Consensus Growth %

Growth Margin % Operating Margin %
EPS Consensus EPS P/E Multiple BaseCase
$5,916 6.1% 7.3%
64.9%
26.7%
$0.51 $0.52
$6,003 7.7%
65.2% 26.9%
$0.52
$23,307 7.9% 9.2%
64.6%
24.7%
$24,020 10.8%
64.7% 25.2%
$1.95
4Q
New
Old
2013
New
Old
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$1.85 $1.91 14.0x
18.0x $26 $35
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Source: Company data, Morgan Stanley Research
Storage Reseller Conference Call: January 11, 2013 at 11:00 AM EST *Toll-Free Dial-in #: (888) 336-3488 *International Dial-in #: (702) 928-6461 Conference ID #: 86875837
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Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.
For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.
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Risk-Reward Snapshot: EMC Corp. (EMC,
$35 30 25 20 15 10 5
0
Jan-11 Jul-11

Base Case (Jan-14)
$32.00 (+33%)
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Equal-weight)
page2image5592
$ 24.02 $26.00 (+8%)
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$20.00 (-17%)
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Jan-12 Jul-12 Historical Stock Performance
Jan-13
Jul-13
Current Stock Price WARNINGDONOTEDIT_RRS4RL~EMC.N~
Jan-14
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Bull Case $32
16x P/E on consolidated CY13 non-GAAP EPS of $2.00
14x P/E on consolidated CY13 non-GAAP EPS of $1.85
12x P/E on consolidated CY13 non-GAAP EPS of $1.70
Storage grows in the mid-single digits in 2013 while evolving architectures cloud long-term growth rates. We model 5% storage growth in 2013, inline with the 5% growth in 2012. On a consolidated basis, we model 8% revenue growth and 11% earnings growth in 2013. We apply a 14x P/E multiple to our consolidated CY13 EPS of $1.85. On a sum-of-the-parts basis, this implies an 8x P/E multiple on the core Information Infrastructure business, which is inline with the 6-12x historical range.
Storage grows low-single digits in 2013 as emerging solutions pressure growth sooner than expected. We apply the market multiple of 12x to EMC’s consolidated CY13 non-GAAP EPS (roughly flat Y/Y), to account for in line growth with the overall market.
Investment Thesis
  • Weak enterprise storage demand in the near-term and potential longer-term disruption from evolving storage architectures could pressure storage growth estimates and limit multiple expansion.
  • Withinstorage,EMCremainsrelatively well positioned with a strong product portfolio and leading, high-margin solutions in emerging categories.
    Key Debates
  • Is the recent storage slowdown secular or cyclical? Mostly cyclical, but l-t threats loom. We continue to expect storage will outgrow other hardware sectors, but evolving storage architectures, including flash-based storage and cloud storage, could pressure growth rates l-t. Compression technologies also reduce the required disk storage systems, which make up around 50% of EMC revenue.
  • Can EMC continue to expand gross margins? Modestly. The increasing mix of revenue from VMW, Data Domain, and Isilon (28% of rev) should drive 200 bps of a margin tailwind, which can help offset reduced operating leverage if core growth slows.
    Potential Catalysts
    New product lines and acquired assets drive growth and margin improvement. Product refresh expected in May 2013.
    Expanded distribution.
    Full value of VMW realized.
    Investment Risks
    Macro weakness negatively impacts enterprise IT spending.
    Increased competition pressures pricing and win rates.
    New storage paradigms lower traditional disk system growth. Lower than expected software
    revenues could increase weight of
    lower-margin hardware business. Acquisitions fail to drive growth.
Storage growth returns to double digits as near-term weakness proves to be cyclical. Total operating margins expand 100 bps due to mix and operating leverage. We apply a 16x P/E multiple to our CY13 bull case EPS of $2.00, which implies a PEG of 0.8x. On a sum-of-the parts basis, this implies a 10x multiple on the core Information Infrastructure business, which is inline with the 6-12x historical range.
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Base Case $26
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Bear Case $20
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Source: Thomson Reuters, Company Data, Morgan Stanley Research
2
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Evolving Storage Architectures Cloud the Growth Outlook
Summary & Conclusions
EMC continues to be our preferred name in the storage market, but we see limited upside over the next year due to near-term demand weakness and disruption from evolving cloud, flash, and efficiency solutions. We expect uncertainty around the long-term growth rate of storage to limit multiple expansion. As a result, we see less share price upside and move to an Equal-weight rating.
Weak near-term demand
Storage demand came in below expectations for most of our reseller contacts
due to a broad array of concerns that include budget issues, slow decision-making processes, and indecision due to the number of alternative solutions in the market. Several of our contacts described 4Q as “terrible” and some said they missed their plans by as much as 20%. A few smaller resellers noted a more normal environment, but this view appears skewed by a few larger deals.
Demand weakened across all vendors, but on a relative basis, resellers continue to view EMC more positively because its solutions cater to end users. Projects that solve a specific business need have an easier time gaining CIO approval than general IT purchases. Our reseller contacts continue to highlight EMC as the best vendor at crafting a solutions-oriented message that appeals to customers. We did not pick up much change in the competitive tone between EMC and NetApp and the initial read on demand from NetApp’s recent 3000 series refresh appears only modest.
As expected, our reseller contacts remain optimistic about storage demand next year although most only expect growth rates consistent with 2012, which is in-line with our lowered forecast. Many expect the recent weakness will continue into C1H13, but are hopeful demand picks up in C2H13 as data growth continues at a rapid pace. Enterprise flash continues to gain interest and adoption, but resellers do not believe it’s having a material impact on traditional storage system sales. Though, we’d point out that most of the adoption is in hyperscale data centers (like Facebook) and large enterprise accounts that don’t buy form the channel. While EMC participates in enterprise flash, Fusion-IO is the most commonly referenced vendor by our channel contacts.
Evolving storage architectures and solutions could pressure traditional storage growth rates
The fundamental drivers of data creation remain robust, but evolving storage architectures (cloud and flash) and increasing
adoption of efficiency solutions (de-duplication and compression) are changing the amount of traditional enterprise capacity shipped. Device proliferation, social media, video, machine-generated data (sensor, log, and click-stream), and legal/regulatory requirements are just a few of the primary trends that continue to generate large volumes of data. Yet, enterprise storage capacity is slowly beginning to decelerate with most forecasts calling for ~40% annual growth over the next several years, down from ~50% previously.
Non-traditional storage is making headway. Of particular concern for enterprise storage vendors is the fact that more enterprise storage capacity was consumed through non-traditional storage OEMs (direct HDD purchases, system integrators, and distributors) than traditional enterprise storage systems offerings (like those from EMC and NetApp). What’s more, the non-traditional storage market is growing over 30 points faster, according to IDC (Exhibit 2). For more details see our 2013 annual outlook, Sticking with Growth in 2013, which was also published today.
Exhibit 2
Large data center adoption of flash storage and broader adoption of cloud storage drives demand away from traditional Enterprise-class storage OEMs
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160
140
120
100
80 60 40 20
-
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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2011-2015 CAGR
Enterprise Storage System Capacity: 39 %
Structred: 23%
Unstructured: 47%

Non-OEM Enterprise Storage Capacity: 70%
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Enterprise System Capacity page3image55216Non-OEM Enterprise Capacity
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Note: Forecast is from IDC
Source: IDC, Morgan Stanley Research

Slower storage growth limits multiple expansion
We reduce our C4Q and 2013 revenue and EPS estimates due to the weak near-term demand and uncertainty around the long-term growth of enterprise storage. EMC’s traditional SAN storage business saw the largest cut where we model 2% growth down form 7% previously. In total, we model 5%
3
Exabytes (EB)
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storage growth in 2013, down from 9% previously and flat with 5% growth in 2012. Our new C13 EPS estimate of $1.85 (down from $1.95) implies 11% earnings growth (down from 17%). We expect the reduced growth rate and lower visibility to limit multiple expansion, which we previously assumed in our overweight thesis. We expect EMC to trade towards the low-end of its historical 13-19x range. Our $26 base case applies a 14x P/E multiple to the consolidated EMC forecast in CY13.
Exhibit 3
Estimate revision drives consolidated P/E multiple to low-end of five year range
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Exhibit 4
EMC base case of $26 implies 8x multiple on core EMC business
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1/4/2008 4/4/2008 7/4/2008
10/4/2008 1/4/2009 4/4/2009 7/4/2009
10/4/2009 1/4/2010 4/4/2010 7/4/2010
10/4/2010 1/4/2011 4/4/2011 7/4/2011
10/4/2011 1/4/2012 4/4/2012 7/4/2012
10/4/2012 1/4/2013
Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12
EMC Core Information Infrastructure
VMW
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25 P/E 22
19
16

13 10
Revenue Growth
EPS Growth 30% 20% 10%
0% -10% -20% -30% -40%
16.0x
14.0x
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
100.0x
80.0x
60.0x
40.0x
20.0x
0.0x
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EMC Core P/E NTM
VMW P/E NTM
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Source: Thomson Reuters, Morgan Stanley Research
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Source: Thomson Reuters, Morgan Stanley Research
Where we could be wrong:
Morgan Stanley is acting as financial advisor to Seagate Technology plc ("Seagate") in connection with its exclusive agreement with LaCie Group S.A. ("LaCie") to acquire a controlling interest in LaCie, as announced on May 23,
2012. Following the receipt of the customary approvals and the close of this transaction, Seagate would commence a tender offer to acquire the remaining outstanding shares of LaCie in accordance with the General Regulation of the French Autorité des Marchés Financiers.

This report and the information provided herein is not intended to (i) provide advice with respect to whether to tender LaCie shares, (ii) serve as an endorsement of the proposed transactions, or (iii) result in the procurement or exchange of a security by a security holder.
Seagate has agreed to pay fees to Morgan Stanley for its financial services that are contingent upon the consummation of the proposed transaction. Please refer to the notes at the end of the report.
On a sum of the parts basis, our new $26 EMC base case implies EMC’s core Information Infrastructure business trades at 8x on CY13 EPS, up from 7x currently, assuming no change to VMW (VMW is covered by Adam Holt). EMC’s core Information Infrastructure business has traded between 6-12x since EMC spun out part of VMW over five years ago (Exhibits 4 & 5). If VMW reaches Morgan Stanley software team’s $120 price target, the core EMC business would be valued below the historical range based on our $26 base case. This would likely prove conservative in light of EMC’s strong product portfolio and mix benefit from higher margin assets that could boost earnings growth. In addition, major architecture changes usually happen slower than expected in large enterprise environments.
4
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
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Exhibit 5
EMC Sum of the Parts Analysis
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Revenue Growth CY13 EBIT Margin (non-GAAP) FCF/Revenue
EV/Sales EV/FCF P/E
Current Price
Information Infrastructure
Revenue Growth
EBIT Margin (non-GAAP) FCF/Revenue

Price Contribution to EMC EV/Sales
EV/FCF
P/E

Virtual Infrastructure
Revenue Growth
EBIT Margin (non-GAAP) FCF/Revenue

Price Contribution to EMC VMW Price
EV/Sales
EV/FCF

P/E
EMC Current
1.9x
8.3x 13.0x
$24.02
EMC Base Case
Peer Comparisons
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EMC Consolidated
IBM NTAP ORCL
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7.9% 24.7% 22.7%
Implied Price
2.0x $25
9.0x $26 14.0x $26
1.6% 22.7% 18.1%
2.3x 12.6x 11.7x
5.2% 5.6%
9.9% 48.3% 17.3% 39.0%
1.2x 3.9x
6.7x 10.0x 13.9x 11.9x
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PT $26
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NTAP TDC
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$9.18 0.9x 4.2x 6.9x
5.2% 22.3% 20.1%
$6.50 0.6x 3.1x 4.9x
5.2% 11.7%
9.9% 25.5% 17.3% 15.9%
1.2x 3.5x
6.7x 22.1x 13.9x 20.3x
CRM CTXS RHT
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$14.84 $94.87
6.9x 17.5x 28.3x
18.2% 32.6% 39.3%
$19.19 $120.00
PT based on 23x CY13 EV/Adj. FCF + $9 cash
28.8% 12.5% 18.0%
6.1x 34.0x NM
13.9% 25.8% 26.1%
4.0x 15.3x 22.3x
16.5% 25.3% 29.0%
6.3x 21.7x 41.1x
Note: VMW, CRM, CTXS, and RHT are covered by Adam Holt
Source: Company data, Thomson Reuters, Morgan Stanley Research. E = Morgan Stanley Research estimates

5
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Exhibit 6
EMC Income Statement
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page6image4952 page6image5112
($ in millions)
2012E
2013E
Fiscal Year
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Mar-13 Jun-13 Sep-13 Dec-13
2009A 2010A 2011A 2012E 2013E
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Revenues
Storage
Content Management & Archiving Security
VMware

Product Revenue Services Revenue
Cost of revenues
Storage
Content Management & Archiving Security
VMware
Corporate Reconciling Items

Gross Profit
Gross Margin % (GAAP)
Storage
Content Management & Archiving Security
VMware
Corporate Reconciling Items

Product Gross Profit
Gross Margin %
Services Gross Profit
Gross Margin %
Operating Expenses
SG&A
Research and Development

Mar-12 Jun-12 Sep-12 Dec-12
page6image17352
5,094.4
3,688.9 145.6 206.5 1,053.4
3,068.9 2,025.5
1,981.2
1,629.0 55.9 73.2 128.2 94.9
5,311.4
3,817.2 152.8 220.8 1,120.6
3,178.7 2,132.7
1,987.8
1,638.1 50.4 65.4 136.6 97.2
5,278.2
3,762.8 158.0 226.9 1,130.5
3,084.4 2,193.7
1,990.6
1,625.9 50.5 81.3 135.6 97.3
5,916.4
4,192.6 189.7 260.5 1,273.6
3,602.2 2,314.2
2,177.9
1,785.2 66.4 85.9 140.5 99.8
5,429.8
3,808.1 141.6 236.3 1,243.9
3,177.6 2,252.3
2,079.9
1,705.5 51.0 80.3 146.6 96.5
5,690.7
3,947.2 154.7 252.6 1,336.2
3,332.6 2,358.0
2,127.2
1,729.4 55.7 85.9 153.6 102.7
5,733.4
4,001.7 160.3 240.1 1,331.4
3,328.0 2,405.4
2,127.0
1,732.3 57.7 79.2 153.9 103.9
6,452.7
4,469.5 192.0 289.1 1,502.1
3,902.4 2,550.3
2,330.6
1,891.4 69.1 95.4 164.6 110.0
14,025.9
10,659.4 739.6 606.0 2,021.0
8,828.1 5,197.8
6,268.5
5,256.7 274.8 186.5 316.3 234.3
17,015.1
12,699.1 735.9 729.4 2,850.7
10,892.9 6,122.3
6,984.1
5,836.4 258.2 221.6 425.2 242.7
20,007.6
14,714.2 702.4 828.2 3,762.9
12,590.7 7,416.8
7,772.3
6,414.3 251.0 291.4 533.3 282.3
21,600.3
15,461.5 646.0 914.7 4,578.1
12,934.2 8,666.1
8,137.4
6,678.3 223.2 305.8 540.9 389.2
23,306.6
16,226.5 648.5 1,018.1 5,413.4
13,740.5 9,566.0
8,664.7
7,058.6 233.5 340.9 618.7 413.1
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3,113.2
61.1%
2,059.9 89.6 133.4 925.2
(94.9)
1,767.3
57.6%
1,345.9
66.4%
2,238.0
1,650.2 587.8
3,323.6
62.6%
2,179.1 102.3 155.4 984.1
(97.2)
1,900.6
59.8%
1,423.0
66.7%
2,372.6
1,716.7 655.9
3,287.5
62.3%
2,136.9 107.5 145.6 994.9
(97.3)
1,791.7
58.1%
1,495.9
68.2%
2,361.7
1,708.8 652.9
3,738.5
63.2%
2,407.4 123.3 174.5 1,133.1
(99.8)
2,522.2
1,871.4 650.8
3,349.9
61.7%
2,102.6 90.6 155.9 1,097.3
(96.5)
2,438.0
1,775.6 662.4
3,563.5
62.6%
2,217.8 99.0 166.7 1,182.6
(102.7)
2,543.7
1,838.1 705.6
3,606.4
62.9%
2,269.4 102.6 160.8 1,177.5
(103.9)
2,568.6
1,851.9 716.7
4,122.1
63.9%
2,578.1 122.9 193.7 1,337.5
(110.0)
2,768.2
2,032.6 735.6
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Income from Operations (PTOP)
PTOP Margin
Total Interest Income (expense), net
Interest and Other Income
Interest Expenses
Other Non-Operating Income/ (Expenses)

Operating Income Before Taxes
GAAP Income Tax Provision Recurring Tax Provision
Effective Tax Rate
Minority Interest
Operating Net Income
Operating Net Income Margin
Add Interest on dilutive Convertible debt Numerator for Diluted EPS
Reported Income Before Taxes
GAAP Net Income
Non-GAAP Net Income
Fully-diluted EPS
EPS - GAAP (Adjusted)
EPS - Reported
EPS - excl. ESO and Amort. Of Intangibles
Period Ending Outstanding Shares Avg Shares (Basic)
Avg Shares (Fully Diluted)

875.2 951.0 925.8 1,216.4
17.2% 17.9% 17.5% 20.6%
(32.4)
29.5 18.2 (43.7)
842.8
190.9
197.0
23.4%
(35.7)
26.0 18.5 (43.1)
915.4
214.3
229.3
25.0%
(54.7)
29.9 21.5 (63.1)
871.2
185.4
188.0
21.6%
(67.6)
29.0 21.4 (75.2)
1,148.7
229.7 232.5 20.2%
911.9 1,019.7 1,037.8 1,353.9
16.8% 17.9% 18.1% 21.0%
(42.4)
29.2 22.0 (49.7)
869.5
173.9 179.3 20.6%
(41.6)
31.7 22.0 (51.4)
978.1
195.6 201.0 20.6%
(50.8)
34.7 19.8 (65.7)
987.0
197.4 202.8 20.5%
(63.6)
37.7 19.8 (81.6)
1,290.3
258.1 263.5 20.4%
1,591.8 2,767.7 3,606.1 3,968.4 4,323.4
11.3% 16.3% 18.0% 18.4% 18.6%
page6image100000 page6image100424 page6image100584 page6image100744 page6image100904 page6image101064 page6image101224
39.1 40.2 32.7 38.7
606.7 645.8 650.5 877.6
11.9% 12.2% 12.3% 14.8%
----
586.8 649.5
777.8 863.8
586.8 649.5 818.0 866.7
$0.28 0.29 $0.27 0.29 $0.37 0.39
2,099.7 2,098.7 2,067.8 2,096.4 2,201.9 2,207.7
626.3
811.8
626.3 881.3
$0.29 $0.28 $0.40
2,106.7 2,104.2 2,210.4
853.3
1,083.0
853.3 1,121.9
$0.40 $0.39 $0.51
2,103.7 2,105.2 2,204.1
40.8 43.8 44.4 48.3
(65.5)
140.4 182.5 (23.5)
1,526.2
252.8 233.1 15.3%
33.0
1,260.1
9.0%
(75.3)
142.5 178.3 (39.5)
2,692.4
638.3 565.7 21.0%
71.3
2,055.4
12.1%
(241.7)
129.2 170.5 (200.5)
3,364.4
640.4 646.8 19.2%
148.0
2,569.6
12.8%
(190.4)
114.2 79.6 (225.1)
3,778.0
820.3 846.6 22.4%
150.7
2,780.7
12.9%
(198.4)
133.4 83.4 (248.4)
4,125.0
825.0 846.6 20.5%
177.3
3,101.0
13.3%
page6image122920 page6image123080 page6image123240
649.4 733.3 739.8 978.5
12.0% 12.9% 12.9% 15.2%
----
627.8 711.6
801.7 907.2
627.8 711.6 884.8 972.4
$0.29 $0.33 $0.28 $0.32 $0.40 $0.44
2,101.9 2,100.2 2,102.8 2,101.1 2,204.3 2,203.7
718.1
915.5
718.1 980.2
$0.34 $0.33 $0.45
2,098.4 2,099.3 2,202.1
956.9
1,214.9
956.9 1,225.5
$0.44 $0.43 $0.56
2,096.4 2,097.4 2,200.3
1,088.1
1,495.3
1,088.1 1,858.4
$0.61 $0.53 $0.90
2,052.4
2,022.4 2,055.1
1,900.0
2,690.7
1,900.0 2,715.4
$0.96 $0.88 $1.26
2,069.1
2,056.0 2,147.9
2,461.3
3,101.7
2,461.3 3,380.5
$1.15 $1.10 $1.52
2,048.9
2,055.5 2,229.1
2,716.0
3,536.3
2,716.0 3,689.6
$1.26 $1.23 $1.67
2,103.7 2,093.4 2,206.0
3,014.4
3,839.4
3,014.4 4,080.1
$1.41 $1.37 $1.85
2,096.4 2,100.2 2,202.6
-----
page6image142744 page6image142904 page6image143064 page6image143224 page6image143384 page6image143544 page6image143704 page6image143864 page6image144024
page6image145776 page6image146784 page6image146944 page6image147104 page6image147264 page6image147424 page6image147584 page6image148224 page6image148384 page6image148704 page6image148864 page6image149024 page6image149344 page6image149504 page6image149664 page6image149824 page6image149984 page6image150144 page6image150304 page6image150464 page6image150624 page6image151880
7,757.4
55.3%
5,402.7 464.8 419.5 1,704.7
(234.3)
6,165.6
4,538.1 1,627.5
10,031.0
59.0%
6,862.7 477.7 507.8 2,425.5
(242.7)
7,263.3
5,375.3 1,888.0
12,235.2
61.2%
8,299.9 451.4 536.8 3,229.5
(282.3)
8,629.2
6,479.4 2,149.8
13,462.9
62.3%
8,783.2 422.8 608.9 4,037.3
(389.2)
14,641.9
62.8%
9,167.9 415.1 677.2 4,794.8
(413.1)
page6image161864 page6image162024 page6image162184 page6image162344 page6image162504 page6image162664 page6image163088 page6image163672 page6image163832 page6image163992 page6image164152 page6image164312 page6image164472 page6image164632
9,494.5 10,318.5
6,947.0 7,498.1 2,547.5 2,820.4
page6image165760 page6image166080 page6image166240 page6image166400 page6image166560 page6image166720 page6image166880 page6image167040 page6image167632 page6image167792 page6image167952 page6image168112 page6image168272 page6image168432 page6image168592 page6image168752 page6image168912 page6image169072 page6image169232 page6image169392
Source: Company data, Morgan Stanley Research
6
page7image1072
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Exhibit 7
EMC Income Statement Analysis
page7image3744
page7image5336 page7image5496
($ in millions)
Security VMware
Security VMware
Operating Expenses PTOP Margin
Net Income ModelWare EPS
Security VMware
Net Income ModelWare EPS
61.1% 62.6%
55.8% 57.1% 61.6% 67.0% 64.6% 70.4% 87.8% 87.8%
57.6% 59.8% 66.4% 66.7%
32.4% 32.3% 11.5% 12.3% 43.9% 44.7% 30.0% 30.2% 17.2% 17.9% 16.5% 17.2% 11.9% 12.2%
63.0% 64.4% 23.2% 24.0%
56.5% 58.1% 20.8% 22.1%
87.8% 87.8% 32.5% 31.2%
100.0% 100.0%
72.4% 71.9% 2.9% 2.9% 4.1% 4.2%
20.7% 21.1%
62.3% 63.2%
56.8% 57.4% 68.1% 65.0% 64.2% 67.0% 88.0% 89.0%
58.1% 68.2%
32.4% 31.6% 12.4% 11.0% 44.7% 42.6% 27.4% 31.0% 17.5% 20.6% 16.5% 19.4% 12.3% 14.8%
64.1% 64.9% 24.3% 26.7%
57.6% 58.2% 22.2% 25.2%
88.0% 89.0% 31.9% 32.0%
100.0% 100.0%
71.3% 70.9% 3.0% 3.2% 4.3% 4.4%
21.4% 21.5%
10.6% 9.6%
7.5% 7.3% -9.2% -9.8%
6.0% 6.1%
3.0% 3.0% -7.8% -5.7%
2012E
18.5% 12.6% 5.6% 7.2% 25.0% 21.7% 20.2% 20.3%
15.3%
10.8% -9.4% 41.4% 29.3%
10.3% 17.1% 12.0% 24.8% 29.4% 22.1% 25.2%
12.8%
9.7% -3.8% 15.8% 24.8%
8.9% 21.7% 12.2% 14.3% 13.9%
9.0% 11.9%
7.2% 6.1%
3.1% 1.1% -0.8% -10.4% 0.3% 7.0% 22.8% 23.8%
5.9% 4.3% 19.1% 16.1% 9.3% 7.1% 2.3% 4.2% 4.5% 6.7% 4.4% 2.4% 4.2% 1.4%
-8.6% 4.3% -0.6% 12.1%
-9.4% 3.5% -1.4% 11.4% -27.7% 5.0% 3.4% 20.1%
-15.0% 6.9% 2.8% 14.8% -0.5% 6.4% 0.9% 12.7%
-11.6% 6.8% -13.5% 5.8% -34.8% 14.2% -18.2% 16.5%
1.0% 6.4%
-8.1% 4.0% 4.8% 11.6% -5.0% 6.0% -25.1% 8.7% -21.7% 8.6% -29.2% 6.5% -29.8% 6.2%
72.4% 71.9% 2.9% 2.9%
-1.1%
-1.9% 5.1% -6.3% 1.1%
-0.5% -0.5% -0.5% -2.6% -4.8% 0.7% 0.6%
71.3% 3.0%
13.7%
12.7% 14.7% 19.8% 13.9%
9.5% -0.3% 6.8% 31.4% 31.9% 34.9% 35.3%
70.9% 3.2%
4.1% 4.2% 4.3% 4.4% 20.7% 21.1% 21.4% 21.5%
61.7% 62.6%
55.2% 56.2% 64.0% 64.0% 66.0% 66.0% 88.2% 88.5%
32.7% 32.3%
12.2% 12.4% 44.9% 44.7% 28.6% 31.3% 16.8% 17.9% 16.0% 17.2% 12.0% 12.9%
63.5% 64.4% 23.3% 24.2%
56.2% 56.9% 20.4% 21.6%
88.2% 88.5% 33.0% 32.6%
100.0% 100.0%
70.1% 69.4% 2.6% 2.7% 4.4% 4.4%
22.9% 23.5%
62.9% 63.9%
56.7% 57.7% 64.0% 64.0% 67.0% 67.0% 88.4% 89.0%
32.3% 31.5%
12.5% 11.4% 44.8% 42.9% 34.1% 37.4% 18.1% 21.0% 17.2% 20.0% 12.9% 15.2%
64.7% 65.6% 24.4% 26.7%
57.4% 58.3% 21.9% 25.0%
88.4% 89.0% 32.7% 32.1%
100.0% 100.0%
69.8% 69.3% 2.8% 3.0% 4.2% 4.5%
23.2% 23.3%
2013E
Fiscal Year
page7image55504 page7image55664 page7image55824
Mar-13 Jun-13 Sep-13 Dec-13
2009A 2010A 2011A 2012E 2013E
Margin Analysis
Gross Margin (GAAP)

Storage
Content Management & Archiving Security
VMware

Product Services
SG&A
Research and Development Operating Expenses EBITDA Margin
PTOP Margin
Pretax Margin
Net Income

Consolidated EMC Non-GAAP Gross Margin Non-GAAP PTOP Margin
Information Infrastructure Non-GAAP Gross Margin Non-GAAP PTOP Margin
VWM
Non-GAAP Gross Margin Non-GAAP PTOP Margin

Revenue
Storage
Content Management & Archiving Security
VMware

Year-Over-Year Growth (%)
Revenue
Storage
Content Management & Archiving

Gross Margin
Storage
Content Management & Archiving

SG&A
Research and Development

Pretax Margin
Sequential Growth (%)
Revenue
Storage
Content Management & Archiving

Gross Margin
Storage
Content Management & Archiving Security
VMware

SG&A
Research and Development Operating Expenses
PTOP Margin
Pretax Margin

Revenue Mix
Storage
Content Management & Archiving Security
VMware

Mar-12 Jun-12 Sep-12 Dec-12
page7image72440 page7image72600 page7image72760 page7image72920 page7image73080 page7image73240 page7image73400 page7image73560 page7image73720 page7image73880 page7image74040 page7image74200 page7image74360 page7image74520 page7image74680 page7image74840 page7image75000 page7image75160 page7image75320 page7image75480 page7image75640 page7image75800 page7image75960 page7image76120 page7image76280 page7image78048 page7image78208
6.6% 7.1%
3.2% 3.4% -2.7% 1.3%
8.6% 9.1%
6.3% 6.6% 1.4% 1.2%
page7image80208 page7image80368
14.4% 14.4% 5.8% 11.0% 18.1% 19.2% 17.8% 17.9%
page7image81360 page7image81520
7.6% 7.2%
2.1% 1.8%
1.1% -3.3% 16.9% 7.3% 18.6% 20.2%
7.6% 7.1%
12.7% 7.6% 8.9% 7.2% 4.2% 7.2% 3.2% 6.9% 7.0% 13.5% 6.9% 13.7%
9.7%
6.2% -4.6% 10.5% 18.4%
8.4%
9.8%
8.8% 12.1% 13.3% 13.7% 14.2%
10.3%
7.1% -0.4% 11.0% 18.0%
8.6%
13.0% 9.8% 11.3% 12.3% 11.5% 11.7%
page7image89296 page7image89456 page7image89616 page7image89776 page7image89936 page7image90096 page7image90256 page7image90416 page7image90576 page7image90736 page7image90896 page7image91056 page7image91216
-8.2% 4.8% 0.8% 12.5%
page7image91944
-9.2% 3.7% 1.4% 11.7% -25.4% 9.2% 3.6% 19.8%
-9.3% 6.9% -5.0% 20.4% -2.3% 7.4% -0.4% 12.8%
page7image93768 page7image93928
-10.4%
-12.7% -26.5% -10.6%
-3.2%
-5.1% 1.8% -3.3% -25.0% -24.3% -26.0% -26.0%
70.1% 2.6%
6.4% 1.2%
5.5% 2.3% 9.2% 3.6% 6.9% -3.5% 7.8% -0.4%
3.5% 0.8%
6.5% 1.6%
4.3% 1.0% 11.8% 1.8% 12.5% 0.9% 12.9% 0.9% 12.9% 1.0%
69.4% 69.8% 2.7% 2.8%
14.3%
13.6% 19.8% 20.4% 13.6%
9.8%
2.6%
7.8% 30.4% 30.7% 32.3% 32.4%
69.3% 3.0%
page7image102984 page7image103144 page7image103304 page7image103464 page7image103624 page7image103784 page7image103944 page7image104104 page7image104264 page7image104424 page7image104584 page7image104744 page7image104904 page7image105064 page7image105224 page7image105384 page7image105544
4.4% 4.4% 4.2% 4.5% 22.9% 23.5% 23.2% 23.3%
55.3% 59.0%
50.7% 54.0% 62.8% 64.9% 69.2% 69.6% 84.4% 85.1%
32.4% 31.6% 11.6% 11.1% 44.0% 42.7% 19.0% 23.1% 11.3% 16.3% 10.9% 15.8%
9.0% 12.1%
57.0% 60.4% 17.4% 22.0%
52.3% 55.4% 16.3% 20.9%
84.4% 85.1% 24.3% 27.5%
100.0% 100.0%
76.0% 74.6% 5.3% 4.3% 4.3% 4.3%
14.4% 16.8%
61.2% 62.3%
56.4% 56.8% 64.3% 65.4% 64.8% 66.6% 85.8% 88.2%
32.4% 32.2% 10.7% 11.8% 43.1% 44.0% 25.1% 25.3% 18.0% 18.4% 16.8% 17.5% 12.8% 12.9%
62.6% 64.1% 23.9% 24.6%
57.2% 57.6% 22.3% 22.7%
85.8% 88.2% 30.8% 31.9%
100.0% 100.0%
73.5% 71.6% 3.5% 3.0% 4.1% 4.2%
18.8% 21.2%
62.8%
56.5% 64.0% 66.5% 88.6%
32.2% 12.1% 44.3% 25.3% 18.6% 17.7% 13.3%
64.6% 24.7%
57.2% 22.3%
88.6% 32.6%
100.0%
69.6% 2.8% 4.4%
23.2%
-5.7%
-8.4% -5.9%
21.3%
19.1% -0.5%
17.6%
15.9% -4.6%
8.0% 7.9%
5.1% 4.9% -8.0% 0.4%
4.2% 20.4% 13.5% 10.4% 11.3% 7.7% 41.1% 32.0% 21.7% 18.2%
-5.7% 29.3%
-9.4% 27.0% -3.2% 2.8% 2.1% 21.0% 6.0% 42.3%
-1.4% 18.4% -5.5% 16.0% -2.5% 17.8%
-16.2% 73.9% -21.2% 76.4% -18.2% 63.1% -17.2% 56.1%
22.0%
20.9% -5.5% 5.7% 33.1%
20.5% 13.9% 18.8% 30.3% 25.0% 25.0% 20.5%
10.0% 8.8%
5.8% 4.4% -6.3% -1.8% 13.4% 11.2% 25.0% 18.8%
7.2% 7.9% 18.5% 10.7% 10.0% 8.7% 10.0% 8.9% 12.3% 9.2%
8.2% 11.5% 9.3% 11.7%
76.0% 74.6% 73.5% 71.6% 69.6% 5.3% 4.3% 3.5% 3.0% 2.8%
4.3% 4.3% 4.1% 4.2% 4.4% 14.4% 16.8% 18.8% 21.2% 23.2%
page7image136936 page7image138376 page7image138536 page7image139336 page7image139656 page7image139816page7image140616 page7image140776 page7image140936 page7image141096 page7image141256 page7image141416 page7image141576 page7image141736 page7image141896 page7image142056 page7image142216 page7image142376 page7image142536 page7image142696 page7image142856 page7image143016 page7image143176 page7image143336 page7image143496 page7image143816 page7image144136 page7image144296 page7image144616 page7image144776 page7image144936 page7image145096 page7image145256 page7image145416 page7image145576 page7image145896
Source: Company data, Morgan Stanley Research
7
page8image672 page8image832
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Exhibit 8
EMC Balance Sheet
page8image3312
page8image4728
($ in millions)
2012E
2013E
page8image6312
Mar-12 Jun-12 Sep-12 Dec-12
Mar-13 Jun-13 Sep-13 Dec-13
2009A 2010A 2011A 2012E 2013E
page8image8816 page8image9240
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, less allowance for doubtful Inventories
Deferred income taxes
Other current assets

Total Current Assets
Long-term investments
Property, plant and equipment, gross Less: Accumulated depreciation Property, plant and equipment, net Intangible and other assets, net Goodwill, net
Deferred income taxes

Total Assets
Liabilities
Current Liabilities:

Notes payable and current portion of long-term obligation Accounts payable
Accrued expenses
Income taxes payable

Deferred revenue
Total Current Liabilities
Long Term Liabilities
Deferred revenue
Deferred income taxes Long-term obligations:
Other liabilities
Total Long Term Liabilities

Minority interest
Stockholder's Equity:
Common shares, par value $.01 Additional paid-in capital Deferred compensation Retained earnings
Accumulated other comprehensive loss, net Treasury stock, at cost
Total Stockholder's Equity
Total Liabilities and Stockholder's Equity

page8image20544 page8image20704
4,671 1,668 2,662 1,034
750
515
11,300
4,540
7,069
(4,190)
2,879
1,714 12,217 1,336 33,985
1,621 923 2,246 24 4,073 8,887
2,723 839 104 297 3,963 1,080
21 3,513
3,993 1,660 2,974 1,029
792
486
10,935
5,253
7,241
(4,299)
2,942
1,758 12,655 1,416 34,959
1,622 880 2,321 188 4,183 9,193
2,875 467 89 296 3,726 1,102
21 3,763
4,161 1,285 3,164 1,158
802
541
11,111
5,134
7,437
(4,454)
2,983
2,053 13,728 1,495 36,506
1,637 1,074 2,318
287 4,353 9,669
2,884 717 73 307 3,982 1,152
21 3,855
5,276 1,285 3,344 1,113
802
544
12,364
5,134 8,562 (4,707) 3,855 1,190 13,728 1,495 37,766
1,637 1,065 2,388
331 4,094 9,515
3,313 717 119 307 4,457 1,190
21 4,178
6,270 1,285 3,043 1,120
802
521
13,042
5,134 8,779 (4,968) 3,811 1,177 13,728 1,495 38,387
1,637 1,006 2,259
278 4,235 9,415
3,258 717 119 307 4,401 1,231
21 4,493
7,448 1,285 3,127 1,169
802
546
14,377
5,134 9,007 (5,244) 3,763 1,170 13,728 1,495 39,667
1,637 1,075 2,335
300 4,325 9,672
3,414 717 119 307 4,558 1,275
21 4,816
8,680 1,285 2,991 1,087
802
550
15,395
5,134 9,236 (5,529) 3,707 1,161 13,728 1,495 40,620
1,637 1,087 2,348
302 4,357 9,730
3,440 717 119 307 4,584 1,319
21 5,143
9,991 1,285 3,296 1,191
802
619
17,185
5,134 9,494 (5,823) 3,671 1,157 13,728 1,495 42,370
1,637 1,191 2,488
362 4,388 10,066
3,743 717 119 307 4,886 1,368
21 5,475
6,302 393 2,109 886 559 284 10,533
2,692 5,318 (3,093) 2,224 1,186 9,210 961 26,807
4,119 1,256 2,570
856 610 372
9,783
4,116 6,072 (3,543) 2,528 1,624 11,773 1,009 30,833
4,531 1,787 2,937 1,010
733
584
11,583
4,525 6,873 (4,040) 2,833 1,766 12,155 1,406 34,268
5,276 1,285 3,344 1,113
802
544
12,364
5,134 8,562 (4,707) 3,855 1,190 13,728 1,495 37,766
9,991 1,285 3,296 1,191
802
619
17,185
5,134 9,494 (5,823) 3,671 1,157 13,728 1,495 42,370
page8image78144 page8image78304 page8image78464 page8image78624 page8image78784 page8image79208 page8image79368 page8image79528 page8image79688 page8image79848 page8image80272 page8image80432 page8image80592 page8image81016 page8image81176 page8image81336 page8image81496 page8image81656 page8image81816 page8image81976 page8image82136 page8image82296 page8image82456 page8image82616 page8image82776 page8image82936 page8image83096 page8image83256 page8image83416 page8image83576 page8image83736 page8image83896 page8image84056 page8image84216 page8image84376 page8image84536 page8image84696 page8image84856 page8image85016 page8image85176 page8image85336 page8image85496
---- 16,707 17,357 17,983 18,837 (186) (203) (155) (155)
- - - (276) 20,055 20,937 21,704 22,604 33,985 34,959 36,505.718 37,766
----
page8image87984
19,464 (155) (483)
23,340 38,387
20,176 (155) (696)
24,162 39,667
20,894 (155) (915)
24,987 40,620
21,851 (155) (1,140)
26,051 42,370
- 899
1,887 58 2,263 5,107
1,374 944 3,100 185 5,603 511
21 3,875
3,215 1,063 2,090
200 2,811 9,378
1,853 983 235 217 3,288 763
21 3,817
3,305 1,102 2,355
156 3,459 10,376
2,715 842 119 288 3,965 968
20 3,053
1,637 1,065 2,388
331 4,094 9,515
3,313 717 119 307 4,457 1,190
21 4,178
1,637 1,191 2,488
362 4,388 10,066
3,743 717 119 307 4,886 1,368
21 5,475
page8image105296 page8image105456 page8image105616 page8image105776 page8image105936 page8image106528 page8image106688 page8image106848 page8image107008 page8image107168 page8image107592 page8image107752 page8image107912 page8image108072
-----
page8image108680
11,795 (105)
-
15,586 26,807
13,659 (93)
-
17,404 30,833
16,121 (235)
-
18,959 34,268
18,837 (155) (276)
22,604 37,766
21,851 (155) (1,140)
26,051 42,370
page8image114472 page8image114632 page8image114792 page8image114952 page8image115112 page8image115272 page8image115432 page8image115592
page8image117032 page8image117192 page8image117352 page8image117512 page8image117672 page8image118472 page8image118632 page8image118792 page8image118952 page8image119112 page8image119272 page8image119432 page8image119592 page8image119752 page8image119912 page8image120072 page8image120232
Source: Company data, Morgan Stanley Research
8
page9image720
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Exhibit 9
EMC Cash Flow Statement
page9image3392
page9image4232
($ in millions)
2012E
2013E
page9image6832 page9image7256
page9image8016 page9image8176 page9image8336 page9image8656
Cash Flow Statement (Non Cumulative)
Mar-12 Jun-12 Sep-12 Dec-12
Mar-13 Jun-13 Sep-13 Dec-13
page9image11088
2009A 2010A 2011A 2012E 2013E
page9image13216
1,158 1,970 2,609 2,827 3,014 1,073 1,168 1,422 1,500 1,584 25 7 (1) 9 - ----- 108 106 103 34 - ----- 14 19 20 21 - 32 (50) (19) (73) - -----
601 668 823 915 1,014 (46) (282) (362) (212) -
- - - 39 177

(40) (21)
241 (406) (158) (114) 4 (54)
140 154 (138) 4 (75) 456 366 957
29 (32)
3,334 4,549
(412) (745) -----
(305) (5,410) 5,171
(363) (6,322) 3,625
(442) (7,180) 5,121
5
(392) (393) (62)
35 158 337 1,509 (121) 5,669
(20) -
(387) 48 (291) (78) 60 (75)
110 125 (156) 101 417 31 1,228 723 (0) - 6,021 6,664
(801)
(754) (932)
(420) (435) (5,012) - 4,154 - 844 - ----- -----
705
- - (300)

(2,664) (182) (3,095)
366 228
(3,195) (537) 86 (534) (6,476) (3,544)
781 673
431 338 (1,000) (2,000)
- - (1,878) - (199) -
(3,265) (1,367)
456 283 214 -
437
1,130
- ----- - - (141) (1,700) -
(387) 282 (27) (15) - 5-34-
- (738) (565) (297)
212 (244) (1,719) (1,993)
8 (12) 5 (18) 459 (2,183) 412 745 5,844 6,302 4,119 4,531
-
(581)
- 4,715 5,276
-----
6,302 4,119 4,531 5,276 9,991
(656)
(864)
Operating activities:
Net income (loss)
Depreciation and amortization
Non-cash restructuring, inventory and other special ch Other than temporary declines in equity investments Net gain on investments, including gain on sale of VM Amortization of deferred compensation
Provision for doubtful accounts
Deferred income taxes, net
Net loss on disposal of property, plant and equipment Stock based compensation expense
Tax benefit from stock options exercised
Minority interest
Others
Changes in Operating Assets and Liabilities: Accounts and notes receivable
Inventories
Other assets
Accounts payable
Accrued expenses
Income taxes payable
Deferred revenue
Other liabilities

Net cash provided by operating activities
Investing activities:
Additions to property, plant and equipment
Proceeds from sales of property, plant and equipment Capitalized software development costs
Purchases of short and long-term available for sale secu Sales of short and long-term available for sale securities Maturities of short and long-term available for sale secur Purchases of short and long-term held-to-maturity secur Maturity of short and long-term held-to-maturity securitie Purchase of other assets
Business acquisitions, net of cash acquired
Others
Net cash used in investing activities

Financing activities:
Issuance of common stock
Issuance of subsidiary stock
Purchase of treasury stock
Cash portion of McData Corporation spinoff dividend Redemption of convertible subordinated notes Payment of long-term and short-term obligations Issuance of long-term and short-term obligations VMware spinoff proceeds
Net cash (used in) provided by financing activities

page9image55504 page9image55664
626 689 659 853 367 375 385 372 432-
---- 9 11 14 - ---- 9 15 (3) - (52) (64) 44 - ----
201 223 235 256 (106) (49) (57) -
- - - 39
(9)
(168)
620 25 1,688
(29) 18
-
300 (96) (20) (29)
(180) 46 (3)
(106) (1,586) 1,439
(101) (2,004) 1,016
(324) (184)
(76) (164)
48 35
(41) 189
10 (68)
6 208 159 44

260 179 170 (22) (3) -
1,237 1,438 1,658
(154) ----
(179) (191)
(1,421) - 1,698 - 262 - ---- ---- ---- (102) (522) (1,254) - 15 (84) (130) -
274
(219) (1,565) (1,146)
309
180 119 88 68 111 34 70 -
- (260) (120) (276) ----
(1,700) - - (0) (14)
- (0) - 311-
66 (209)
(1,340) (329)
11 (21) 140 (678) 4,531 4,671
(154) - (116) (209)
----
4,671 3,993 4,161 5,276
(231) (109) (104)
(8) 168 3,993
-
1,115
4,161
(9) 70
(335)
628 712 718 957 379 392 402 411
---- ---- ---- ---- ---- ---- ----
245 251 255 262
----
41 44 44 48
----
301 (7)
23 (60) (129)
(84) 135 (305) (49) 82 (104) (25) (4) (69) 70 11 104 77 12 140
(53) 22 2 61 86 246 58 333
----
1,453 1,655 1,717 1,838
(217) (228) (229) (258)
----
(104) (109) (108) (114)
---- ---- ---- ---- ---- ---- ---- ----
(321) (337) (337) (372)
70 72 72 70
----
(207) (213) (219) (225)
---- ---- ---- ---- ----
(137) (141) (147) (155)
----
994 1,177 1,232 1,311 5,276 6,270 7,448 8,680
----
6,270 7,448 8,680 9,991
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalent
Cash and cash equivalents at beginning of the year Adjustment for Restatement
Cash and cash equivalents at end of year

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Source: Company data, Morgan Stanley Research
9
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
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Morgan Stanley ModelWare is a proprietary analytic framework that helps clients uncover value, adjusting for distortions and ambiguities created by local accounting regulations. For example, ModelWare EPS adjusts for one-time events, capitalizes operating leases (where their use is significant), and converts inventory from LIFO costing to a FIFO basis. ModelWare also emphasizes the separation of operating performance of a company from its financing for a more complete view of how a company generates earnings.
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Disclosure Section
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Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Katy Huberty.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.

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In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Accenture Plc, Apple, Inc., Brocade Communications Systems, Cognizant Technology Solutions Corp, DELL, EMC Corp., Fusion-io, Inc., Hewlett-Packard, IBM, Lexmark International, NCR Corp., NetApp Inc, QLogic Corporation, SMART Technologies, Teradata.
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Global Stock Ratings Distribution
(as of December 31, 2012)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative
10
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weightings (see definitions below). To satisfy regulatory requirements, we co
page11image1760
MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
rrespond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively.
page11image4248
Coverage Universe % of
Investment Banking Clients (IBC) % of% of Rating
page11image5816 page11image5976
Stock Rating Category Count Total Count
Overweight/Buy 1103 37% 436 Equal-weight/Hold 1301 44% 497 Not-Rated/Hold 108 4% 27 Underweight/Sell 478 16% 111 Total 2,990 1071
Total IBC Category
41% 40% 46% 38% 3% 25% 10% 23%
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Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

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Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.
Analyst Industry Views
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Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.

.
Stock Price, Price Target and Rating History (See Rating Definitions)
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
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14
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MORGAN STANLEY RESEARCH
January 10, 2013 EMC Corp.
Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel.
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15
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MORGAN STANLEY RESEARCH
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Industry Coverage:Systems and PC Hardware
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Company (Ticker)
Katy L. Huberty, CFA
Accenture Plc (ACN.N)
Apple, Inc. (AAPL.O)
Cognizant Technology Solutions Corp (CTSH.O)
DELL (DELL.O)
EMC Corp. (EMC.N)
Fusion-io, Inc. (FIO.N) Hewlett-Packard (HPQ.N)
IBM (IBM.N)
Lexmark International (LXK.N) NCR Corp. (NCR.N)
NetApp Inc (NTAP.O)
QLogic Corporation (QLGC.O) SMART Technologies (SMT.O) Seagate Technology (STX.O) Teradata (TDC.N)
Western Digital (WDC.O)
Scott Schmitz
Brocade Communications Systems (BRCD.O)

Rating (as of)Price* (01/09/2013)
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O (07/10/2012) O (05/26/2009) E (07/10/2012)
E (09/30/2012) E (01/10/2013) O (01/03/2012) E (05/23/2011) E (09/08/2009) U (07/14/2010) E (09/25/2011) E (07/27/2009) U (05/23/2011) E (02/14/2012) E (01/03/2012) O (05/23/2011) E (04/28/2011)
E (09/26/2011)
$69.78 $517.1 $74.41
$10.93 $24.02 $19.26 $15.85
$192.32 $25.49 $26.6 $32.21 $9.76 $1.91 $33.48 $63.81 $43.8
$5.37
page16image21936
Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted.
© 2013 Morgan Stanley

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