Tony Takazawa - VP, Global IR Joe Tucci - Chairman & CEO David Goulden - EMC Information Infrastructure CEO Zane Rowe - CFO

Aaron Rakers - Stifel Kulbinder Garcha - Credit Suisse Maynard Um - Wells Fargo Amit Daryanani - RBC Capital Markets Keith Bachman - Bank of Montreal Ittai Kidron - Oppenheimer Nehal Chokshi - Maxim Group Brian Alexander - Raymond James Andy Nowinski - Piper Jaffray Katy Huberty - Morgan Stanley Ben Reitzes - Barclays

Good morning and welcome to the EMC Q3 2014 Earnings Conference Call. All participants are in a listen-only mode until the question-and-answer portion of the call. 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. Thank you, sir. You may begin.

Thank you. Good morning. Welcome to EMC's call to discuss our financial results for the third quarter of 2014. Today, we are joined by EMC's Chairman and CEO, Joe Tucci; David Goulden, EMC Information Infrastructure CEO; and Zane Rowe, EMC's CFO. Joe will begin our discussion with his view of the trends happening in IT, EMC's vision and strategy and how the EMC federation is managing the transition to the third platform. For this call, David will still be wearing his two hats, as CEO of Information Infrastructure, and outgoing CFO of EMC. He will comment on our results and provide a bit more detail regarding EMC's operation and success this quarter. He will also discuss our outlook for the remainder of 2014. After the prepared remarks, Joe, David and Zane will be available to take your questions. We are providing you with our projected financial model for 2014. This model lays out all of the key assumptions and discreet financial expectations that are the foundation of our outlook this year. We hope that you find this model helpful in understanding our assumptions in context and in ensuring these expectations are correctly incorporated into your models. This model is available as background in today's slides available for download in Investor Relations section of emc.com. 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. In addition, all financial comparisons will be on a year-over-year basis, unless otherwise indicated. 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. With that, it is now my pleasure to introduce Joe Tucci. Joe?

Thanks, Tony. I would like to welcome everyone to today's call and thank you for joining us. Overall we are pleased with our execution and results in Q3 as our year-over-year revenue and non-GAAP EPS growth accelerated to 9% and 10% respectively. Within across our three major businesses, VMware grew by 17%, Pivotal by 24%, and EMC II at 6% representing very good balance. I believe that when you compare our results with those of our large cap enterprise IT peers, our growth rate will standout. Why? Because our strategy, our product offerings, our portfolio of services and solutions, coupled with crisp execution sets us apart in the minds of our customers. I would like thank my 65,000 plus colleagues from EMC, VMware, and Pivotal, and our valued partners around the world for their professionalism and hard work and their total dedication to our customers' success. Whenever I meet with investors or analysts, I almost always get the question, is the change we are seeing in IT spending patterns secular or cyclical in nature? To that question I always respond that it is primarily secular. The reason for this is that firstly, all businesses and forward thinking governments are embarking on software-defined business strategies. These strategies call for new ways to interact with their customers and core constituencies, suppliers, partners, and employees, in new real time ways, ways that are far more agile, rapid, and yes, disruptive. To free up the ample investment dollars to fund these third platform software-defined business models, CIOs must find ways to constrain spending on their first and second-generation mainframe client server PC based infrastructures. To be clear, this is not easy to do. For the vast majority of the business processes and applications, which an enterprise runs on today, were built on first and second-generation IT platforms. And the majority of these applications are not going to be replaced any time soon. So for an IT organization balancing these two conflicting needs is paramount. But it is a bit like changing the tires on a bus on travelling at 70 miles per hour and thus causes considerable angst and some hesitation in IT spending. Hence, my secular shift answer. That said there is also a political, economic, and social unrest in several areas of the world that does add a cyclical element to IT spending patterns. Some of these cyclical factors have dominated the new cycle in recent days and caused some concern. So while our field forecast support our updated expectations, we continue to closely monitor these factors. To be clear, in time of significant secular change, business as usual is not and will not be a viable option. Major secular IT shift always come with strong disruptive headwinds, but also with massive opportunities. Our job as a leadership team is to try to chart a course that rides you to ways of disruptions and capitalize on the vast opportunity that the third IT platform will present in cloud computing, mobile, Big Data, and security. And this is exactly what EMC family of companies is focused. And as our Q3 results indicate, we are gaining significant traction. With our products, services, and solutions, we help our customers maximize their efficiency and effectiveness in their second-generation IT platforms. We help our customers in their journeys of third-generation hybrid, private, and public cloud datacenter technologies. We help our customers with mobile device management security strategies with their employees, partners, and customers. We help our customers build real time experiences with new agile business models, and we help our customers with their cyber security needs. We are also being bold by investing heavily in new growth vectors. As we discussed last quarter, EMC II, VMware, and Pivotal, had made numerous big bets in advanced technologies that are very disruptive in their nature. With Nicira, NSX we are targeting software-defined networking. With AirWatch, we are capitalizing on a need for mobile device management and security. With Pivotal, we are developing new cloud and data fabrics, along with technologies that build and deploy applications faster. With ViPR, ScaleIO, and ECS, we are leading an heterogeneous software-defined cloud scale storage. With XtremIO, we are offering high performance flash scale-out storage. With DSSD we are developing extremely fast rack scale flash storage for third platform data centers. And in our VCE joint venture, we pioneer the now leading converged infrastructure. To demonstrate the potential and progress of these technology investments, in 2014, we expect combined revenue from NSX, AirWatch, Pivotal, XtremIO, ViPR, and ScaleIO to be approximately $1 billion and growing extremely rapidly. Additionally ECS is just beginning and DSSD is still in development and David will talk about VCE's accomplishments in a bit. Collectively these technology investment bets cost us over $6 billion and are having a negative high-teen cents per share impact to 2014 earnings. We are making these investments because of our conviction that they will pay off handsomely for our shareholders in the years ahead, as each of these six product areas has $1 billion potential for us in annualized revenue. In addition to the investments I just mentioned, I'm pleased to say that today we are announcing the next phase of evolution for VCE, our converged infrastructure joint venture with Cisco. In this next phase, EMC will have a controlling interest in VCE, which will continue to operate with its own mission, charter, and structure, reporting directly to David Goulden. We believe this move will provide VCE with the agility required to continue to lead the competitive converged infrastructure segment, as well as expand the solutions which it can offer to customers. Cisco and VMware will continue to have a strong commitment to and equity interest in VCE. I look forward to place the new trails with the 2000 plus people from VCE and I would like to welcome them to the EMC family. Let me now close with a few additional comments on Q3. This past quarter we have had a lot of interest, meetings, and feedback with and from our investors, and I want you to know that we take this input very seriously. We also received quite a bit of trust coverage on numerous different speculations. Through all this coverage we continue to focus on our mission at hand. I assure you we have great assets and a strong market position and our board and management are very focused on enhancing shareholder value. We plan to complete our $3 billion 2014 buyback before the end of this year. And we are also working on our capital allocation policy for 2015, as always, with a focus on the needs of our business and shareholder returns. You can expect our approach to shareholder returns in 2015 to be aggressive and consistent with our company's need to maintain strategic and financial flexibility. Thank you again for joining us. But before I turn it over to David Goulden for more details on Q3 and 2014, I'd like to introduce you to our new Executive Vice President and CFO, Zane Rowe. Zane was the former CFO of Continental Airlines and United Continental, where he did a fabulous job and built a great reputation with both his colleagues and investors. Zane was recently at Apple, reporting to Tim Cook, running consumer and enterprise sales in North America. We are pleased to welcome Zane back into the CFO fold. I know it will be a great add to the EMC leadership team. Zane, welcome, the mic is yours.

Thank you, Joe, and thank you to everyone at EMC for the warm welcome I've received so far and good morning to all of you on the call. I'm looking forward to getting to know many of you over time. I'm excited to be joining the team right now for a number of reasons. EMC has a proven ability to foresee change, invest wisely, and execute successfully. As a result, we are very well-positioned and are taking advantage of some of the massive changes that are occurring right now in cloud, in mobile, and in Big Data. With the leadership position we've built in the data center, I believe we have the kind of opportunity that just doesn't come along every day. The results this quarter strengthened my view. Obviously, our continued share gains and storage and ongoing market leadership and virtualization are highlights. The success we are seeing in our investment areas such as ViPR, XtremIO, ECE, AirWatch, and Pivotal is encouraging evidence of our ability to position ourselves for future growth, and I believe the best is yet to come. We had industry-leading assets and talent, combined with the sound strategy, a flexible business model, and an ability to execute that is second to none. As David will discuss, it was a solid Q3, and the team that I have met with are working hard driving results in Q4. I'm thrilled to join them and I'm looking forward to helping EMC continue to create and grow value for shareholders, customers, and employees. Thanks again, Joe. Back to you.

Thank you, Zane, and again, welcome. It's a truly great to have you on the team. As I turn the call over to David for his formal remarks, I'd like to personally thank him for doing double duty as EMC's CFO and leaving EMC II. David, you have been and are a pure pleasure to work with. Thank you for everything you do. The floor is yours.

Thanks, Joe. I'd also like to welcome Zane; it's great to have you on board. I'm sure you realize by now that you're inheriting a world class finance organization. So I know you'll fit right in. Zane has worked closely with me and our team over the last few weeks as we prepared for today's call and I look forward to transitioning more of the lead to him in future calls. So good morning everyone and thanks for joining us today to discuss a strong Q3 that was on track and in line with our expectations. We believe our success in the quarter was in no small part due to the value proposition we've created with our strategically realigned businesses as customers seek to take advantage of cloud, mobile, Big Data, and security technologies. We believe we've anticipated and invested for the changes in IT better than our peers and as a result we're outgrowing them. This was evidenced by our Q3 results. We grew consolidated revenue to a third quarter record of $6 billion or 9% year-on-year. Our non-GAAP EPS grew 10% to $0.44. We saw strength across the business with Pivotal revenues up 24%, revenue from VMware up 17%, and EMC Information Infrastructure revenue up 6%. Within our major geographies, revenue grew 8% in North America, 15% in EMEA, 4% in APJ, and 1% in Latin America. Our BRIC+ 13 markets also grew at a healthy 9%. Looking at line items driving our earnings growth, consolidated gross margin in Q3 was 63.7%, down 10 bps sequentially and 20 bps compared with Q3 of last year. Within these results, gross margin at Pivotal and VMware declined reflecting the impact of the growth initiatives, as well as the continuing shift to subscription based revenues at Pivotal. EMC II gross margins was approximately flat both sequentially and year-on-year. We saw good improvements in margins for mixed flash pricing and leverage from lower fixed costs. However, these improvements were masked this quarter by difficult comparison with some variable cost benefits we recognized in Q3 of last year. Normalizing for these benefits we would have shown solid year-on-year gross margin improvements for EMC II. The increasing mix of VMware was helpful to the overall Q3 gross margin rates. Overall, gross margin profit dollar increases at $0.11 per share the quarter's non-GAAP EPS versus last year's. Operating expenses grew 9% year-on-year reflecting major investments we are making at Pivotal and VMware and while we continue to make significant investments in EMC II operating expenses there grew only 3%. This increase in consolidated OpEx in Q3 over last year amounted to about $0.07 per share. Non-operating expenses was higher versus last year's Q3 due to VCE and FX related expenses. The reduction into our share count versus last year contributed $0.02. As a result, we finished Q3 with non-GAAP earnings per share of $0.44 again in line with our expectations. We generated $1.3 billion in free cash flow in Q3 and $3.2 billion year-to-date, approximately $700 million higher than our non-GAAP net income year-to-date. Our cash and investments at quarter-end were $15.4 billion, $3.6 billion of which is in EMC II U.S. We repurchased approximately $375 million worth of EMC shares in Q3 and returned about $240 million to shareholders via our quarterly dividend. We plan to complete the balance of our share buyback commitments of about $1.6 billion before year-end. Successful enterprises balanced this return of capital with growing the returns on shareholder capital through intelligent management of the business. Through our strategy and investments we are addressing several great opportunities in some of the hottest segments of technology, and we're incredibly well-positioned to continue to build the business as we move forward. IT is on the threshold where CIOs are looking to do things for their business that were impossible just a few years ago. Among their priorities are new cloud-agnostic application development via platform-as-a-service, simple and automated virtualized scale infrastructure that can connect seamlessly and securely to off-premise environments as needed via enterprise hybrid clouds and keeping architectural options open with solutions allowed for choice. Customers are seeking strong partners that are well equipped to help them achieve their new IT goals. The broad base of technology and expertise available through EMC is a distinct competitive advantage for us and the one that drew many customers for us in Q3. Trusting EMC as the only vendor capable of delivery in time and quality for the entire infrastructure stack were key to the choice of EMC and VMware technologies at a global bank in Australia. And the combination of an even broader, of EMC and VMware technologies drove the win of state government in the Mid West which expects to fund a strategic IT and cloud transformation with savings captured from its transformation to a consolidated standardized infrastructure. Their desire among customers has to be more tightly integrated and provide more cohesive solutions to help them with bigger problems. This is a common refrain. We are having strategic meetings with many customers, including a recent and well publicized meeting at a large financial institution where they're asking us to work more closely together no less. We expect to grow the number of wins that leverage capabilities from across the federation considerably as we build-out our portfolio of joint solutions from EMC II, VMware, and Pivotal. Pivotal is the fastest growing of our federation businesses benefiting from this transition to NextGen applications by the enterprise. Q3 revenue grew 24% year-on-year driven by strength of Pivotal Labs and Pivotal CF our commercial distribution of Cloud Foundry, which also gained traction in Q3. Large enterprises look for platform-as-a-service on which they can build-out their NextGen applications over next several years. In the early stages of these build-outs where we find ourselves today, just a fraction of the applications that will be built on Pivotal CF exist. As more applications on the data associated with these applications get created, the revenue associated with these implementation grows along with them. We continue to expand the number of customers adopting Pivotal CF in Q3, including addition of three major financial institutions, three technology companies, a major sports league network, a mobile carrier, and Lockheed Martin. Lockheed Martin is using Pivotal CF to improve the deployment of systems and software for missile and flight systems R&D with the help of Pivotal Labs and analytic tools Pivotal HD and HAWQ. The aforementioned sports network approached Pivotal Labs to create a system for measuring cellular data on live video usage through mobile applications. Using Pivotal software solutions including the Big Data suite and Pivotal CF, the team is creating a solution that will optimize media revenue through analytics. And these as with all Pivotal CF deployments we are laying the foundation what we expect to be many years of high value business partnerships. Pivotal is benefiting from its place as the leading commercial distribution of Cloud Foundry, as well as promised place in the federation, as many of these wins in Q3 were in partnership with other EMC businesses. VMware too continues its rapid growth with revenue within EMC up 17% year-on-year in Q3, driven by continued traction in VMware's three areas of focus: software-defined data centre, hybrid cloud solutions, and end user computing. The expansion of VMware's business beyond service virtualization was evidenced by its non-standalone vSphere license bookings in the quarter, which were once again greater than 50% of total license bookings. VMware has several other indicators of success in each of its strategic areas of focus in the past quarter. In SDDC, NSX customer count grew to over 250 from over 150 last quarter. In hybrid cloud the newly branded vCloud Air continues to expand its global footprint with a new location in New Jersey, the announcement of an early access program in our first locations in Japan and Germany, and an early access program for vCloud Air government service in the U.S. vCloud Air object storage joined VMware's hybrid cloud portfolio. vCloud Air object storage is based on EMC ViPR technology and offers extremely scalable, cost effective, and durable storage for unstructured data. And in a survey by Jeffries, VMware scored at the top of the list of cloud providers, with 80% of respondents considering VMware for part of their hybrid cloud deployments. This enthusiasm was collaborated by a survey of over 400 of our channel partners, where VMware topped the list of cloud service provider the partners carry or intent to carry well ahead of Microsoft and Google. And in end user computing, we grew new license bookings more than 60% over last year's Q3. And within this desktop license bookings once again grew double-digits year-over-year. Finally, with the OpenStack and containment announcements in the quarter, VMware clearly embraces one of the key values of the federation that of customer choice. It's through choice they were able to deliver tremendous agility to our customers. Now moving to EMC Installation Infrastructure. Year-on-year Q3 revenue growth in storage accelerated to 6%, demonstrating clear share gains and traction of several of our strategic investments, including notably strong growth in XtremIO, ViPR, and ScaleIO. We also benefited from considerable solid growth in our unified and backup recovery portfolio of 6%, which was held by accelerated growth of both VNX and Data Domain. The decline in the high-end eased from last quarter to 7% year-on-year. The VMAX-3 became generally available on September 26 and we're pleased the shipments of new systems in the quarter were in line with expectations. Some of these went to Superna, which operated data centers where companies can test and develop highly available and scalable DR systems. Superna adopted VMAX-3 for its performance, its highly available architecture, and its ability to quickly and simply provision storage. These features make it an ideal platform to build and simplify cloud enabled DR solutions for their customers. With the game changing capabilities that VMAX-3 brings to high-end, we expect to extend our lead in this segment of the market, as the VMAX-3 ramps starting in Q4 and through next year. Emerging Storage products grew 47% year-on-year and this category is now almost 60% the size of the high-end. CIOs continue to invest heavily in areas that will take their business to the third platform and are redeploying dollars from their second platform savings to do so. Flash, software-defined storage, and Hadoop are among the hottest trends in the data centre right now and we invested early to establish leading solutions in each. XtremIO are all flash array surpassed the $0.5 billion mark on an annualized demand run rate in Q3. This is an incredible milestone for products just be on the market for just over three quarters. XtremIO continues to be very profitable with customers building out mobile strategies with virtual desktop infrastructures. And with the launch of snapshots and compression earlier this year, we saw a notable increase in the deployments of XtremIO for database in Q3. There have been two major keys to success here. One is our superior scale-out architecture, as evidenced by a win rate of over 90% in Q3 based on the number of deals. The other is the ability of our sales force to quickly identify and seize opportunities for XtremIO technology. Our software-defined storage solutions, including ViPR controller, ViPR data services, and ScaleIO, enable customers to automate and simplify their storage environments. By abstracting array-based storage to drive high levels of automation and by providing new storage systems like objects and HDFS on commodity off-the-shelf hardware, ViPR allows customers to bridge their existing and NextGen workloads. As a result, its popularity is ramping rapidly. Isilon's growth accelerated again in Q3, driven by a strength in financial services and manufacturing, as well as by newer growth sectors in the areas of video surveillance and analytics where its native Hadoop capabilities allow cost and time efficient analysis of Big Data. In fact, Isilon now has over 400 customers running Hadoop on iphone systems. Pivotal is a popular analytics option here as is Cloudera. One of the bigger wins in the quarter was in partnership with Pivotal for the delivery of a daily rate solution for a U.S. based internet companies operations in Japan. The ISP shows Isilon simply management and improved processing of the environment, which have been running on application service. The improved processing speed, the customer will be able to gain with Pivotal HAWQ were important part of the value proposition. Our emerging storage broad group's 47% growth in Q3 propelled us to a $2.3 billion annualized revenue run rates. Clearly, our investments here are paying off and our strategy is working. While cloud mobile and Big Data are driving changes to the underlying technology, they are also driving changes to deployment models and selling the motions as well. The popularity of converged infrastructure as evidenced through the success of VSPEX and Vblocks speaks volumes about customer's preference for simplicity and speed and ease of deployment. Our channel partners continue to drive the success of VSPEX's referenced architectures, demand for which grew at over 30% in Q3. Our partners have been essential to our ongoing share gains, and in Q3 grew revenues considerably faster than the rate of storage overall. VCE surpassed $2 billion annualized demand run rate for Vblock and Vblock related products and services exiting Q3, which was the sixth consecutive quarter of greater than 50% growth in demand. Bringing the rapidly growing VCE more fully into EMC is a great move, as it allows us to more fully benefit from the clear leader in the converged infrastructure market segments. I would like to welcome VCE CEO Praveen Akkiraju, President Frank Hauck, their management teams, and VCE's more than 2000 employees who are experts in the design, building, sale deployments, and support of CI systems into EMC. Within EMC, we will expand the charter VCE to become the converged infrastructure systems integration and enterprise hybrid cloud solutions ARM of our company. Our professional services grew nicely in Q3, benefiting from an increasing focus upon delivering business outcomes, as well as from its role in assembling cost federation solutions. EMC services business led a number of engagements in the quarter that leverage a combination of technologies from EMC II, VMware, and Pivotal, and in some cases all three together, including a Deutsche Bank building out secure IT as a service and platform-as-a-service. A U.S. based healthcare provider building out IT as a service on a Big Data analytics platform. A Canadian oil company looking to simply its IT by deploying a hybrid cloud. A Chinese service provider looking to build-out platform and security as a service offerings. I'll stop here because I think you get the picture. And there are several more laid out in our slides. Again, these are only some of the cross company deal facilitated by our professional services teams. And there are many more wins that leverage across EMC capabilities that happened either without a consulting engagement or with partner support. In fact, bringing these solutions together on a more scalable and repeatable basis is the objective of our federation solution sets, drawn from a combination of technologies from EMC, VMware, and Pivotal. These engineered solutions are focused on third platform opportunities and make it easier for customers to get value from the combination of products across the EMC entities. We just launched the first of these five solutions, the Federation Software-Defined Data Center earlier this month and expect to launch the remaining four virtual desktop, enterprise data lake, platform-as-a-service, and security analytics, over the coming quarters. Turing now to security and content management. Security remains a top priority as organizations build-out hybrid clouds. RSA grew 4% over Q3 of last year, with strength in a newer part of business being offset by a lower growth in the traditional identity segments. Our Information Intelligence Group revenue grew 3% from last year with simplicity continuing to do very well. I am proud of the strong financial performance EMC II demonstrating Q3. I would like to extend my thanks to entire team who worked hard to grow the business and control costs. I'd also like to thank our customers and partners for their continued support. Now on to guidance. We are updating our expectations for 2014 and now expect to achieve revenue of approximately $24.5 billion, still up 6% year-on-year but reduced by $75 million due to currency headwinds we now expect in Q4. Non-GAAP operating margins of approximately 24%. Non-GAAP EPS of approximately a $1.90 due to a slow decline in share outstanding that we anticipated three months ago. And free cash flow of approximately $5.35 billion, driven by a $450 million reduction of VMware free cash flow from their July guidance. Finally, we expect the addition of VCE to be neutral to our 2014 EPS results. In 2015, consolidating VCE will result in higher revenues and the movement of non-operating expenses to operating expenses, which will lower operating margins. We expect the net effect of these changes to be slightly diluted to 2015 EPS. We are excited about the growth and strategic potential of VCE and expected to contribute to EPS growth beyond 2015. In closing, we have a strong competitive position and successful strategy. And these advantages have enabled us to outgrow our peers. More importantly, these advantages combined with the leading portfolio of technology assets we have carefully assembled over the past several years increased our relevance with customers at the time of unprecedented change and opportunity. The result is that we continue to out execute today and we're making the right strategic investments to out execute in the future. With that, I will turn it over to Tony to moderate today's Q&A. Tony?

Thanks, David. Before we open up the lines for your questions, as usual, we ask you to try and limit yourselves to one question, including clarifications. This will enable us to take as many questions as possible. We thank you all for our cooperation in this matter. Candy, can we have the first question, please.

Thank you. Our first question comes from Aaron Rakers of Stifel. Your line is open. Aaron Rakers - Stifel: Yes. Thanks for taking the question. I want to touch on the guidance and what would be implied as a deceleration in growth for your EMC Information Infrastructure business into the calendar fourth quarter? And that on the heels of what looks to be obviously an important high-end product cycle. So can you talk a little bit about your assumption there, what you are seeing in terms of the installed base of VMAX-3 and how we should think about the cannibalistic effect of the XtremIO product in that installed base? Thank you.

Aaron, this is David. Good morning. Let me take that. So I think you need to look at the Q3 versus Q4 progression on a sequential basis, and it's very much in line with what we talked about. Coming into the year, bear in mind, we've actually got quite a big sequential growth from Q3 to Q4 because of change in business practices around the way we're handling the quarter-end. So the reason why you see the actual growth rates change, going down from Q3 to Q4 is really to do with the compare with last year. And this year is sequentially exactly in line with what we've been talking about. You also mentioned VMAX and XtremIO so let me touch on those. As we said, we started shipping the VMAX-3 at the end of the third quarter. We expect to saw ramping of shipments into quarter four. Remember this is a very major architectural change in the VMAX family. Every six or seven years we introduce a brand new architecture that takes longer to get to the 50% transition than when we do a texture and this is one of those longer transactions so expected to be into the middle of next year before we get to the 50% mark in terms of percentage of new systems being shipped. And then, finally, you mentioned the XtremIO which we always phenomenal growth in the quarter of XtremIO I talked about a $0.50 billion run rate. As we said last time, most of those systems are going into either net new applications or competitive environments, about 20% of the XtremIO systems were installing basically, taking applications from either a VMAX or a VNX. So understand it can impact both system but 80% are going into net new environment for us. Aaron Rakers - Stifel: Thank you for the color.

Next question, please.

Thank you. Next question is Kulbinder Garcha of Credit Suisse. Kulbinder Garcha - Credit Suisse: Thanks. I have a question, a clarification for David and a question for Joe. David, for you, on the gross margin within the information storage business, it did disappoint again and there was some commentary about variable costs. Could you just explain that again or be a bit more specific? And then the question for Joe I have is that I appreciate there's been obviously lots of conversations with your investors and lots of strategic discussions EMC are having. My basic question is, is there a point at which the outcome of whatever you're discussing is going to be communicated to the street and is there a timeframe we can think about for that? Many thanks.

Hi. It's Goulden, and good morning. Let me go first. Yes, on the gross margins, let me explain to you -- first of all, year-on-year -- let's say on the call the important things that we lookout are what's happening to the impact of a mix in the portfolio on pricing and as I said, we got benefit from those year-on-year also, what's happening to our fixed costs, the change we're making to our business processes to helping us to bring our fixed cost down, we got good leverage from that on the higher volume. The compare year-on-year are not as strong as you would have expected because it's masked by some variable cost benefits you got in Q3 of last year those variable cost benefits are related to some product vendor rebate and some other credits that really helps the gross margins a lot in Q3 last year. If you took those out you see really strong growth year-on-year. Another way to look at it is that we did see gross margins increase their sequentially from Q2 to Q3 on a modest volume increase there you see a very normalized impact of margins going throughout the year as we expect and then of course I just talked about is going help us also going into Q4.

I'm not going to answer your questions specifically let me say it this way. I do believe we owe our investors and those who follow us an update and kind of an Investor Day and Analyst Day and we will do that early in the New Year.

Thanks, Kulbinder. Next question please.

Thank you. Next question is Maynard Um of Wells Fargo. Maynard Um - Wells Fargo: Hi, thanks. VCE becoming an EMC business seems to put greater odds against parts of VMware's portfolio on the converged side. I'm just wondering if you can help us understand this dynamic and how this plays out really going forward. And then, Joe, could you just touch on your plans following February of 2015? Thanks.

Hi, Maynard, good morning. VCE coming into the portfolio, bear in mind VCE is producing converged infrastructure based upon building blocks that come from EMC, VMware, and the Cisco. So bringing in doesn't really change that profile. And as you already know, EMC is partnering with VMware around the EVO RAIL initiative to produce low-end of CI systems as well. So bringing it in really doesn't change the positioning of the portfolio, we'll continue to build Vblocks, we will build an expanded family of Vblocks going forward over time as part of EMC.

You asked about my plans and they really haven't changed. You should view February of 2015 as kind of a guide post not a definitive date. I have told the Board in many discussions and they're actively involved in the succession process obviously, it's theirs to do. I have told them that if you had some, you had a person, and you wanted to move earlier that's fine with me. If you need me to stay a little bit longer and I'm not talking years, I'm talking a little bit longer, months, quarters that's fine. And then I've also -- I've offered that if you wanted me to stay on some kind of Chairman role, I would certainly contemplate that favorably. So that's kind of where we are.

Thanks. Before we move on to remind you that we're only taking only one question please, no clarifications so you're going to have to pick one. Next one, please.

Thank you. Next question is Amit Daryanani of RBC Capital. Amit Daryanani - RBC Capital Markets: I figured Tony was going to put that law down before I asked a question so I'll stick to one. May be if you could just touch on some of the linearity that you saw in the quarter. One of your larger peers, IBM, obviously talked about a big slowdown in the month of September. Your geo data doesn't suggest much is happening there. May be in APJ, there's some softness. But may be just touch on the linearity in the quarter, if you saw anything on a geographic basis that stood out to you towards the end?

Yes, good morning and thank you for the long question. On linearity, obviously we saw a good September. We saw as you would expect in Q3 particularly with Europe being relatively quiet for a couple of quarters, sorry for a couple of months and coming back in September. In order to have a strong Q3, you need to have a strong September and we saw that. We did see as usual customer caution kind of pushing more towards the backend, the backend loaded nature of quarters continue. From a geography point of view, let me just make kind of couple of comments about how we saw things developing. In -- obviously we saw a strong growth in Europe, I mean much stronger than our peer sets. And there we saw really good growth in every market apart from Russia. Russia was down significant year-on-year for kind of obvious reasons. But without exception we saw strong growth across the business in the Europe. In APJ, in China we saw double-digit growth, which we were pleased about. We saw some continued weakness in Japan, which was largely due to currency and that kind of gives you I think some of the highlights around geo flavor. I would comment in North America we did see a bounce back in the federal business. Of course we had a really tough year last year on the EMC side of things because of the budget problems a year ago and we saw a much more normal quarter in the Q3 in federal. Amit Daryanani - RBC Capital Markets: Thank you.

Thanks, Amit. We appreciate your help. Next question please.

Thank you. Next question is Keith Bachman of Bank of Montreal. Keith Bachman - Bank of Montreal: Hi, my one question for Joe is strategic choices. Joe, your stock has underperformed the S&P over a number of different measurement periods, one, three and five years. So at least as measured against one metric, stock price, your strategy has not been rewarding shareholders. You've acknowledged that you've spoken with shareholders but it sounds like you want to embark on more of the same strategy. And so the broader question is are you willing to consider more meaningful changes in your strategy? And as part of that, it has been widely reported, and HP has even acknowledged it, that you've had some M&A conversations. If you could please fit in your answer what led you to the conclusion to at least have a conversation that would be a large M&A deal? Thank you.

First of all I don't know I'm not aware that of any statements that HP made but we have been very clear that we don't comment on speculation rumors. So I'm not going to do that today. In talking about the business, it's kind of baffling in a way because if you look at counting this year something we make the forecast that we believe we will. If you looked at our top-line over the last three years we've grown at 7%. If you look at our free cash flow we've grown at 9%. If you look at our EPS 8% and if you look at our EPS it's about also about 8% so and that's CAGR. So obviously stock prices not moved a lot I agree but so it's not reflecting our performance. So -- as I said before our management board, our management and Board is very focused on announcing shareholder value. But we also believe and again this is what we do believe with Elliot that we are in good businesses then we have a strong position in those good businesses. We do have great technology assets. We have a very talented leadership team and a great workforce and yes, we're undervalued and that's why we're undertaking and making sure that we're very focused on enhancing shareholder value. But the underlying performance at a business, if you compare it to companies kind of born and when we were born, which is we were born in the client server age. So we look at companies born in client server age or before we are right at the top in terms of producing results. So it is a good baffling and I think we have tremendous bets you talk, may be talked about 2.3 billion our emerging markets on EMC II side. VMware posted good growth numbers yesterday on their emerging side so and Pivotal is 100% immersed in the third platform. So I think we got a great -- I know we have great assets and so we're taking all of these things and basically saying a) communicate better, continue to get -- retain customer confidence and wins which we're doing and tell to make sure that we focus on enhancing shareholder value so. Longer answer and I probably should have done but that's what's going through our heads right now. Keith Bachman - Bank of Montreal: Okay. Thank you.

Thanks, Keith. Next question, please.

Thank you. Next question is Ittai Kidron of Oppenheimer. Ittai Kidron - Oppenheimer: Thanks and Joe, I was hoping to get a little bit of color behind what drove the change in the VCE ownership, what was working, what was not. Why did you feel that the partnership with Cisco and VMware on this had to change from what -- it was working up until now? And with the change also in management there, what new opportunities are now opened up to VCE that were potentially more limited under the previous ownership structure?

I'll give a little color but this business VCE is going to report to David. So I'm going to let David start.

Okay. So let me kind of start where you ended. So in terms of what we can do with VCE, as a member of the EMC family, is actually very exciting. First of all understand we built with VCE, we built the number one player in the converged infrastructure marketplace with now $2 billion revenue run rate, growing very rapidly, over 2000 people are immersed in this technology. It's a really key strategic asset and have the ability to bring into EMC is very exciting because CI of course is very important to our strategy as a company. So we created this particular part of the strategy outside of the company and by bringing it really lets us now double down with it. In terms of focus and expansion, first of all lets us -- we will be -- basically maintain but slightly expanding the charter inside of EMC. First of all we'll expand the charter to overtime produce an even broader range of converged infrastructure solutions than we have right now from VCE. But very importantly you've heard us talk a lot about enterprise hybrid cloud, you'll hear us talk a little bit more about it in a couple of week's time. What we're going to also charter VCE we're doing is to become the solutions of the company to really help deliver the dense price hybrid clouds to our customers because lot of our enterprise hybrid cloud activities are actually based on top of Vblocks. Having the Vblock capability and the ability to integrate the Vblock now put more software on top of it to really help our customers get all the way up to enterprise hybrid cloud is a really great opportunity to expand upon the charter. So that's what we'll be doing with VCE as it comes in. We do expect it to close just before the end of this year and that point in time we'll move into mode, which I just talked about.

I assure you this was done with very close cooperation with Cisco. I think you'll all agree that anytime you do a joint venture they always, they never just kind of sit there and percolate forever, they need to morph and change and this is one of those morphings. VCE was created and John Chambers says it well how you -- it's how you -- not only the active lead in a industry transition and to find the company and you could see VCE was right there on top of that and kind of led the entire industry. And again this is morphing and we're going to -- I think this has actually improved our relationship with Cisco and they're still committed and obviously an owner and I just think it's going to work better for both companies and then we think it's going to continue to be a major growth driver for EMC. Ittai Kidron - Oppenheimer: Thank you.

Next question, please.

Next question is Nehal Chokshi of Technology Insights Research. Nehal Chokshi - Maxim Group: Thank you. I'm actually with the Maxim Group now. Can you talk about how you expect each of your major service product lines to perform in the fourth quarter? I'm especially interested in understanding expectations for midrange and backup and recovery services given that we're now looking at a relatively tougher comp for the December quarter and vice versa for high end given its just refreshed product line?

I believe your question was to do with the fourth quarter. I just want to clarify before answer it? Nehal Chokshi - Maxim Group: Correct, correct.

Thank you. Well I mean obviously we're not going to get into all the puts and takes in the fourth quarter going forward. We don't guide to that level but I can give you some direction obviously. We would expect the -- on the high-end the product cycle as we start to ramp up through VMAX-3 to help us so as I said I expect in aggregate the second half of the year to be better than the first half of the year from a VMAX point of view. We see continued steady progress in our unified backup recovery platforms and we expect to see continued growth in the emerging markets. Obviously some of those are tougher compares but there again a year ago we didn't have XtremIO apart from it in a very minor way. So I think that you're going to see the portfolio kind of shape up broadly similarly in the fourth quarter than you saw in the third. Nehal Chokshi - Maxim Group: Okay. Thank you.

Next question, please.

Thank you. Next question is Brian Alexander of Raymond James. Brian Alexander - Raymond James: Okay, thanks. Good morning. I just wanted to go back to the VCE and I want to just ask what gives you the confidence that Cisco will remain committed to the partnership and why shouldn't investors be concerned about customer retention here as may be customers sense the relationship between Cisco and EMC is fraying? And especially as it sounds like you're considering forming partnerships with more of their competitors, at least that's what I read into your expanding relationship comments, David. And I guess related to that, who ultimately controls the customer relationship in most of these VCE deals? Thanks.

This is Joe; I'll start and give it to David. In the VCE deals, VCE has a considerable sales force there and they're on top of this. It gives you confidence is common sense. This is a $2 billion business which is very meaningful for both Cisco and EMC. Customers are applauding us and there is a lot of rumors floating around this past quarter when VCE grow over 50%. So it's complementum, we've got customer acceptance. With this many -- with over 1000 customers over 2000 Vblocks -- both cultures of EMC and Cisco are going to be we're going to support the hell out of our customers and we're going to try to continue to drive as much revenue to get as we could and that's exactly how we need to -- when I get together with John that's how we talk. And I believe we Cisco is our -- one of our top -- top partners and will remain one of our top partners. And obviously in this there's co-opetition is alive and well and they do think -- sell their UCS servers and access switches with other competitors of ours. We are like some of that but we both understand how to kind of co-opitate so to speak if that's the word.

And Brian, just to pick up on that, obviously VCE is and will continue to be one of Cisco's biggest partners in terms of chunk of that $2 billion is obviously going to them across their server and networking line. Cisco remains an investor in VCE. We have multi-year engineering, resell, and support agreements, between the companies. So customers can be assured of continuity. VCE comes in for EMC intact as an organization with its omission it's an operating chart, it's an old structure, we're not going to break something that's working very nicely. So bear in mind that VCE as Joe said, does have a sale force, does have a service force, and that will remain in side of EMC as a specialty group. It has its own engineering team as well as all remains inside of EMC as a specialty team focused upon converge infrastructure. So initially I think the customers will see very little change in fact for the foreseeable future. Existing customers will see nothing change as a strong commitment to continue to have Vblocks. Vblocks will continue to be exclusively technology from Cisco, EMC and VMware. Brian Alexander - Raymond James: Okay. Thanks.

Next question please?

Thank you. Next question is Andy Nowinski of Piper Jaffray. Andy Nowinski - Piper Jaffray: Hey, good morning. I'd just like to go back to your comments about 20% of applications moving to XtremIO. Is that enough to cause customers that were previously buying multiple VMAXes to only buy one VMAX system now and could there be similar impacts to VMAX from customers that may be moving some data to a public cloud provider such as Amazon to only buy one VMAX system? Thanks.

And let me clarify the same because I think you may be misunderstood. I didn't say that 20% of VMAX application moving to XtremIO from it. I said of the XtremIO systems which are being shipped, 20% to those which are being shipped are being shipped into environments where people are moving applications from a VMAX or VNX. It's a very, very different statement. I'm glad you asked it because I don't want that to be misunderstood. There is no way near 20% of applications moving off now there are clearly some very performance hungry applications sitting on top of enterprise class storage systems that can do better from an all flash storage array but today is nowhere near 20 points. So the answer to that is it is most unlikely that customers are going to buy a less VMAX in total because they are buying to Xtrem. I don't know what customers are doing. They're do much more tearing where they go into existing environments and taking those real always on performance hungry applications and moving them on to the XtremIO tier and then keeping all of their mixed workload applications that benefit from the benefits of flash and disk together on their VMAX systems. But again to clarify its 20% of the XtremIO systems that we are shipping are going into environments where they are taking applications off of VMAX or VNX and 80% of the new XtremIO systems are going into net new application environments or competitive environments. Andy Nowinski - Piper Jaffray: Okay. Thanks.

Next question please?

Thank you. Next question is Katy Huberty of Morgan Stanley. Katy Huberty - Morgan Stanley: David, Joe highlighted disruptive investments that are costing high teens EPS in 2014. Does that headwind grow or decline in 2015 and are there cost efficiencies you can drive in the legacy products to fund these and other investments going forward?

Katy yes, I mean we wanting to clarify that the investments we have there are in the high teens this year. And bear in mind, we have already being self-funding a whole lot of those. So we've been able to create this into like high teen spending envelope while still growing our EPS in line with revenue by redirecting a whole lot of investments from more traditional areas into these new areas. So we're still being growing our EPS while making these strong investments. As going forward incrementally as these one-off and kind of gets to approaching $1 billion range then they start to go less from the negative column in towards the positive column obviously the one that's closest to doing that right now, all the things we've talked about is XtremIO. But obviously a lot of these are going to continue well into 2015. So for example, DSSD, we haven't even have that for the full year of this year. We are going to have it for the full year of next year; we're going to continue to grow it going forward. So there's going to be certainly a healthy investment appetite across these six areas going forward certainly into 2015 and some cases quite well beyond before we start to contribute.

Thanks Katy. Next question please?

Thank you. Next question is Ben Reitzes of Barclays. Ben Reitzes - Barclays: Hey, thanks. Obviously, a lot of things have been asked, but I just wanted to clarify, Joe, that you're going to give a comment in February or it sounds like early next year with regard to your strategy. Does that imply that you're doing a strategic review now and would you be willing to say now what that strategy implies for your VMware ownership though just to take any uncertainty off the table? And I'm sure you love this question, but obviously that's what everybody's thinking. So thanks.

I'm going to stay with basically the statements I have made I think they expect me to do that but it was a good try. Again, we understand the balance. I mean we just got the question on those six areas of investment, which I highlighted there is others that I highlighted those six. Obviously if we didn't do them, we took the $6 billion that used off the balance sheet and we took the EPS hit of high-teens and investment that all into buybacks, our stock would be probably be higher today. But when you see a secular ship like we're seeing, and I understand the need to show return and we talked about next year enhancing, basically make sure we're aggressively consistent with the needs of maintaining our strategic and financial flexibility. So we are thinking about that aspect heavily. But on to itself buybacks, spinoffs, things like that are not the strategy. They are basically a tactic and tactics are I'm not taking anything away from tactics but you need to build a strategy and we've invested in the strategy and we have some great assets that we're leading and these are going to payoff big time. But the question is how do we do that and also get better return for our shareholders because believe me it's painful to see to look at our kind of progression of revenue growth, EPS growth, free cash flow growth, and see this stock flat for three years, we are underperformed in the market it's painful because I know we're placed in the right bets. So we will put that all in context for you and we will be at early in next year.

Thank you. We are out of time for questions. Thanks. We will have a few concluding comments from Joe.

I want to thank everybody for being with us today. And I just want to kind of talking about this little bit at the end. I truly believe we have great technology and great asset that play well in both the second and third platform IT worlds. Our strategic relevance with our customers that are all time high. They have given us provision to play and win in their IT consistence more so than ever. We have solid momentum. Our 65,000 plus people deeply believe in our future and our mission and I'm blessed with a stellar leadership team that I know can take EMC family and companies to the next level. So thank you very much for being with you and we look very forward to that meeting with you in person in early in next year. So thanks again and we will be in touch with you through the quarter.

Thank you for your participation. That does conclude today's conference. You may now disconnect at this time.