Tony Takazawa - Vice President, Global Investor Relations Joe Tucci - EMC Chairman, President and Chief ExecutiveOfficer David Goulden - Executive Vice President and Chief FinancialOfficer

Aaron Rakers - Wachovia Capital Markets Laura Conigliaro - Goldman Sachs Shebly Seyrafi - Caris Keith Bachman - Bank of Montreal Toni Sacconaghi - Sanford Bernstein Andrew Neff - Bear Stearns Kevin Hunt - Thomas Weisel Partners Katy Huberty - Morgan Stanley Kaushik Roy - Pacific Growth Equities Paul Mansky - Citigroup Clay Sumner - FBR

Good morning to everyone. Welcome to EMC's call to discussour financial results for the third quarter of 2007.

Today, we are joined byJoe Tucci, EMC Chairman, President and CEO and David Goulden, EMC Executive VicePresident and CFO. David will start things off by walking you through EMC'sactivities and financial results for the quarter.

Joe will then spend some timediscussing his market outlook, EMC's execution of the strategy and the progresswe are making toward our annual goals. After the prepared remarks, we will thenopen up the lines to take your questions.

Today, we will be providing you with new financial schedulesand disclosures. Our slides contain important information that is necessary tounderstand our results and this new disclosure.

I highly recommend that youview these slides in conjunction with the audio portion of the call. The slidesare also available for downloading on EMC's website at emc.com.

An archive ofthe audio and slide presentation will also be available following the call. As always, the call this morning will containforward-looking statements.

Information concerning factors that could causeactual results to differ can be found in EMC's filings with the U.S. Securitiesand Exchange Commission.

In addition, we will be discussing EMC's results on both aGAAP and non-GAAP basis. There are schedules in today's press release thatreconcile our non-GAAP comments to our GAAP financials.

With that, it is now my pleasure to introduce David Goulden.David?

Tony, thank you. Good morning and thank you all for joiningus today.

We are very pleased with our Q3 operational and financial results. Wedemonstrated crisp execution, delivered strong performance in a number of areasand continue to make great progress towards our goals for the year.

On today's call, I will talk about EMC's consolidatedperformance and then spend some time discussing EMC's informationinfrastructure results. EMC information infrastructure is our storage, contentmanagement and security businesses or said another way, everything exceptVMware.

I am sure you have all seen VMware's earnings report from last night.So, I'm not going to repeat anything that was covered, but I will make somecomments about VMware's financial results within EMC. As Tony mentioned, we have made some changes to ourfinancial presentation and we've provided new supplementary schedules withtoday's press release.

Now turning to the numbers. Q3 consolidated revenues were$3.3 billion, up 17% from Q3 last year and included approximately 200 basispoints from currency.

GAAP earnings per share were $0.23. Excluding the gain werealized in the quarter, primarily from EMC's sale of VMware stock to Cisco,earnings per share were $0.17, up 31% over Q3 last year and free cash flow was$475 million, up 124% from Q3 last year.

I will now walk you through the consolidated revenue resultsin more detail, starting with our corporate revenue mix. Q3 systems revenueswere up 9% year-on-year driven by strong growth in our midrange products.

Year-to-date, systems revenues were up 11%. Q3 storagerevenues were up 25% year-on-year driven primarily by VMware, RSA Security andcontent management.

Year-to-date software revenues were up 27%, and Q3 servicesrevenues were up 25% year-on-year driven by strong performance in all of ourbusiness units. Year-to-date, services revenues were up 21%.

Now turning to revenue by geography, revenues from NorthAmerica grew 15% over Q3 last year and we continue to experience strong growthin our commercial business. Year-to-date, North American revenues grew 17%.EMEA revenues were up 23% over Q3 last year and this region had another strongquarter in midrange systems.

Year-to-date, EMEA revenues were up 20%. APJ had another good quarter with Q3 revenues of 18% overlast year driven largely by CLARiiON, which had very solid growth ofapproximately 40%.

Year-to-date, APJ revenues up 26% over 2006 demonstratinggreat performance in this important region. Finally, Latin America revenues were up 6% over Q3 last yearand up 6% year-to-date.

We are pleased with the revenue results of our majorgeographies and we remain focused on expanding our international footprint andincreasing our worldwide market presence. Next, I’d like to cover the revenue results from each of ourfour business segments, information storage, content management and archiving,RSA information security and VMware.

These segments represent the major marketswe focus on within IT and the solution sets we bring to customers. First, let'stake a look at our information storage business.

Total revenues for Q3 were $2.6 billion, up 8% over a strongQ3 last year. Year-to-date, information storage revenues are up 9% over lastyear.

In July, we had one of the most significant rollouts of new products inthe history of our information storage business. These new systems and softwarecapabilities span from the entry level to the high end and will help EMCfurther extend our lead in all of the storage markets we serve.

During the quarter, we introduced the DMX-4 and beganshipping in August. This is the next generation Symmetrix with built-ininformation security along with significant performance gains and even betterease of management and energy efficiency.

The DMX-4 is the highest performing, most cost effective,secure, energy-efficient and easy to use high-end array on the market today. Wemet our internal goals for the DMX-4 transition this quarter and we are pleasedwith the positive response we are seeing from customers.

For Q3, Symmetrixrevenues were down 3% year-on-year against, as you will recall, a very toughcompare. Year-to-date, Symmetrix revenues are approximately flat.

We had another good quarter in our midrange business withCLARiiON revenues up 18% over Q3 last year. Year-to-date, CLARiiON is up over20% over last year.

We are seeing good growth in the adoption of iSCSI. Over50% of our CX3 units in the quarter were dual protocol, i.e.

Fibre Channel andiSCSI systems. We are also seeing very strong demand for our Celerra NS20platform.

This is our new, entry level, multiprotocol, mass Fibre Channel andiSCSI array, which is also a powerful, yet easy to deploy, tiered storagesystem. Smarts, Rainfinity and RecoverPoint all had strong double-digit growththis quarter and we also had double-digit growth in our backup and recoverysoftware business led by our Avamar de-duplication technology.

Additionally, backup to disk library revenues were up over40% year-over-year. We continue to drive deeper integration of our acquiredtechnologies across our products to provide solutions that no one else offers.

And this quarter, we introduced important new products toour backup and recovery portfolio. In September, we launched EMC Avamar VirtualEdition, which enables customers to deploy Avamar's data de-duplicationtechnology easily and effectively in VMware VSX environments.

And last week, we introduced our next-generation backup andrecovery network of products. This release integrates our Avamar de-duplicationand RecoverPoint continuous data protection technologies into the NetWorkerplatform providing customers with industry leading, next-generationcapabilities for backup and recovery.

Information and storage services grew 13% over Q2 last yeardriven primarily by professional services. Our expanding professional servicesportfolio is enabling us to work in more ways with customers, and Dellrepresented 15.8% of EMC's total revenue this quarter.

Within this total, Dellwas around 35% of CLARiiON revenues and the balance came from a broad mix ofEMC's information and storage, content management, security and VMwareproducts. In summary, Q3 was a very solid growth, very solid quarterin storage for EMC with revenues up 4% sequentially and 9% year-to-date.

Thedemand for the differentiated products and services we offer gives usconfidence we are well positioned for continued growth and share gains instorage this year. Now turning to our content management and archive softwarebusiness.

Total revenues were $189 million, up 27% over last year.Year-to-date, total revenues for this business are up 11% over last year. Q3 license revenues were up 34% over last year and are up15% over Q2 of '07 reflecting a nice bounce back.

Maintenance and professionalservices revenues were up 20% year-on-year. Last quarter, I told you there were some key factors thatgave us confidence in our CMA business heading into the second half of theyear, including a strong pipeline of business, better market enhancements andstrengthening of our partnerships with several of the leading global systemsintegrators and confidence in the competitiveness of our product portfolio andour technology leadership in CMA, particularly with the launch of ournext-generation Documentum D6 platform in July, which we believe raises the barfor content management and archiving solutions.

We’re pleased to see that thesefocused efforts paid off in our results in Q3. And looking ahead, we see increasing demand for completecapture through archiving solutions and we remain confident that we are wellpositioned to post solid results in our CMA business this year.

Now, let me turn to the RSA information security business.Revenues in Q3 were $133 million, up 22% on a comparable basis over Q3 lastyear. Year-to-date, security revenues are up 23% on a comparable basis,validating the strategic focus of this business and demonstrating solidexecution and share gains.

Trends in the marketplace continue to turn fromperimeter-based security to information-centric security, driving demand forour RSA Security, access control and data protection products. Compliance, particularly around the payment card industry'sdata security standards and security information management continue to be themajor growth drivers and the acquisition of Tablus to our security portfolioadds important data leakage protection capabilities, which protects data atrest and complements our encryption and key management technology.

We believe there is no other company that offers as completea suite of best-of-breed products focused on securing the information itself.Combined with our professional service offerings for risk assessment andsecurity systems architecture, RSA solutions are covering the full spectrum ofthe security industry's most important growth areas. In summary, we are pleased with the revenue results from ourinformation infrastructure business units this quarter.

We continue to believewe’re focused on the right markets and have the best solutions to helpcustomers address their most critical information management priorities. Now turning to VMware.

Clearly, one of the highlights of thequarter was the very successful partial IPO of VMware, which achieved our goalsof exposing VMware's value to the marketplace, improving VMware's ability toattract and retain employees and reinforcing our commitment to VMware'sopenness. VMware had another quarter of record revenues with both Q3and year-to-date revenues up approximately 90% over last year.

This stronggrowth reflects the tremendous impact that VMware virtual infrastructure ishaving on the marketplace. We’re also very encouraged that we continue to see VMwarevirtual infrastructure as a key-driver for network storage deployments.

Turning to VMware's reported results, let's talk about howthey contribute to EMC's consolidated results. For Q3, last night, VMwarereported revenues of $358 million and GAAP net income of $65 million.

WithinEMC's consolidated numbers, these results are adjusted for audit reconciliation’sand the minority interest of VMware not held by EMC. On this basis, VMware's results within EMC were revenues of$354 million and net income of $58 million.

This net income translates into a$2.06 contribution towards EMC's Q3 consolidated GAAP earnings per share. Within this $2.06, it is important to notice that to notethat $0.07 was from an atypically high level of software capitalization and areduction in VMware's annual tax rate, which resulted in a beneficial catch-upin the tax rate in Q3.

Moving on from VMware and based upon our discussions withyou, we know that there is a lot of interest in how EMC is doing, excludingVMware's results now these are reported separately. In order to better help you with your analysis, we are addinga new financial presentation of EMC's information infrastructure business thatincludes our information storage, content management and RSA Securitybusinesses, i.e.

everything except VMware. Today, we are providing you with an income statement view ofthe information infrastructure business for the last four quarters of 2006 andthe first three quarters of 2007.

These schedules are included in today's press release. Thefinancial presentation of the information infrastructure business will enableyou to better understand the growth dynamics of the business and give youvisibility into how we are doing operationally.

Based upon your feedback, we will be presenting theseresults on a non-GAAP basis, excluding stock-based compensation and intangibleamortization. This detail will enable you to see how we are managing thebusiness model and give you a view into how we are improving operating leverageand generating cash.

I’ll begin by taking you through the components of how wereconcile EMC consolidated GAAP results through to our EMC informationinfrastructure business on a non-GAAP basis. This may take a few minutes, butit will help you understand the basic mathematics of how we get to the numbers.

More importantly, I’ll then discuss the relevant operatingmetrics of the EMC information infrastructure business and talk to you aboutthe improvements we are seeing there. Now let's start with the basic math for Q3.

We start withEMC consolidated GAAP revenues of $3.3 billion and earnings per share of $0.23.Next, we adjust to earnings per share for the Q3 investment gains, primarily onEMC's sale of VMware stock to Cisco. Within these adjusted consolidated EMCresults, we then have the VMware GAAP standalone contributions as they reportedlast night.

Now, as I just explained to you, we then adjust for auditreconciliation’s between VMware standalone results and those results reportedin our consolidated numbers and the minority interest of VMware not held byEMC. This gets you to VMware's contribution within EMC.

EMC's adjusted consolidated results less this VMwarecontribution gives you the results for the rest of the Company, representingthe EMC information infrastructure business. We then adjust for the non-cashitems so you can better see our progress in terms of operating efficiencies andcash generation.

These items are stock-based compensation of $0.02 andintangible amortization of $0.01. This gets to our EMC informationinfrastructure earnings per share on a non-GAAP basis of $0.18 for Q3.

Okay. So, there you have the math and as you can see, it ispretty straightforward.

We think it is the right way to look at the informationinfrastructure business and gives you a great view of how we are doing. So next, let's talk about what these numbers tell you.

Q3revenues for the EMC information infrastructure business were $2.9 billion, up12% over last year. Year-to-date, revenues for the EMC informationinfrastructure business are up 14%.

Gross margins improved 40 basis points sequentially drivenby higher profit margins in our information storage business. Year-to-date,gross margins are up 40 basis points due to the higher mix from RSA Securityand CMA.

Operating expenses were down 50 basis points sequentially,reflecting good cost control. Year-to-date, operating expenses were up 20 basispoints reflecting the growing contribution from the RSA Security and CMAbusinesses.

As I have mentioned before, these businesses have higher grossmargins and they also have higher operating expenses compared to the storagebusiness. Now let's take a look at the operating margin trends.

Theoperating margin of our EMC information infrastructure business is up 80 basispoints sequentially and up 20 basis points year-to-date. This shows the solidprogress we’ve made towards improving the leverage in our operating model overthe course of this year.

In Q3, we continued to make progress on our one EMCinitiative. We are now about two-thirds of the way towards completing the Q4'06 restructuring plan and we anticipate completing the majority of theremaining actions by year-end.

We’re pleased with our operating margin improvement thisquarter and continue to be focused on our cost base, expense management anddriving operating leverage. Q3, EMC information infrastructure non-GAAPearnings per share were $0.18.

Year-to-date, on the same basis, EMC informationinfrastructure earnings per share were $0.53 up 18%. So while I have gone through a lot of new numbers today, Ithink you will find it very helpful in your analysis of EMC.

As you haverequested, we are breaking out the EMC information infrastructure business. Weare giving you a full income statement view of seven quarters of historicalcomparisons so you can see our progress.

And we are providing a view of the business, excludingnon-cash expenses, so you can track our success in terms of driving operatingleverage. We believe presenting the EMC information infrastructure business ona non-GAAP basis allows for the most transparent and clean view of our operationalperformance.

Now moving to the balance sheet and looking at a fewconsolidated balance sheet and cash flow items. EMC consolidated cash flow fromoperating activities in Q3 was $718 million, up 57% from Q3 last year.

Thisimprovement came primarily from our increased net income and improvements inworking capital, including growth in deferred revenues and better inventorymanagements. Looking at the other balance sheet items that impactoperating cash flow, inventory turns were 6.6, up from 5.9 in Q3 last year andDSOs were 54 days, up five days from Q2 due to a number of factors, includingVMware and some acquisitions that closed towards the end of the quarter.

Thisis a little higher than we would like and we will work to bring DSOs closer to50 days. Excluding VMware, Q3 cash flow from operating activities was$529 million, up 51% from Q3 last year.

And year-to-date, excluding VMware,cash flow from operating activities was $1.6 billion, up 35% from last year.EMC consolidated Q3 free cash flow was $475 million, up 124% from Q3 last year.CapEx was $177 million and software capitalization costs for the quarter was$65 million. Excluding VMware, Q3 free cash flow was $357 million, up123% from Q3 last year.

Year-to-date, excluding VMware free cash flow was $1.1billion, up 80% from last year. We are very pleased with the improvement we’vemade in this area.

Now, turning to cash use on a consolidated basis. In Q3, wespent $352 million on acquisitions for our information storage, contentmanagement and VMware businesses.

And we spent $224 million to buyapproximately 12 million shares in Q3. We were restricted from buying sharesfor most of the quarter due to the partial IPO VMware.

We ended the quarter with cash and investments ofapproximately $7.5 billion. $3.7 billion of this is held in our overseasoperations and in VMware.

We believe our capital structure initiatives over thelast year, including our share repurchases, convertible debt transaction andpartial IPO VMware, have been very beneficial for shareholders. So far this year, we have bought back 73 million EMC sharesreturning $1.1 billion to our shareholders.

As always, we are committed todelivering shareholder value, so I am pleased to announce we are now increasingour January 2007 share re-purchase commitment from $1 billion to $2 billion. This increase includes a return of a portion of the proceedsfrom the VMware IPO and we expect to complete this repurchase by the end of Q12008.

The average diluted share count for the quarter was 2.177 billion, upover 2.5% from Q2. The largest driver of this sequential increase is theaccounting treatment for the additional shares from our convertible debt thatwe issued last November.

Accounting rules for this convertible debt caused ourfully diluted shares to increase as the quarterly average share price increasesabove the convertible exchange price of $16.08. And while we have structures in place to eliminate the netdilution to shareholders when the convertible bonds mature in 2011 and 2013, ourreported diluted shares outstanding will continue to reflect the fullaccounting impact.

This accounting impact is meaningful and for those of youwho are unfamiliar with the share calculation used in accounting treatments,there is a slide at the end of the presentation illustrating the math andincluding a numeric example. While I am not going to walk through the calculation withyou this morning, the example provides, the example provided illustrates themagnitude of these accounting treatments.

Assuming EMC's stock price averages$22 for a given quarter, the calculation would lead to an accounting increaseof approximately 60 million shares or a 3% increase in our current dilutedshare counts. This will reduce our earnings per share by approximately$0.01 a quarter.

I point this out because you'll probably want to keep thismath in mind as you work through your future models. Looking forward and based upon our results year-to-date andour expectations for a solid fourth quarter, we are now very clearly on trackto exceed the annual targets we set in January of $12.7 billion of revenue and$0.64 of earnings per share.

With that, I will now turn the call over to Joe.

Thanks, David. I would also like to welcome everyone totoday's conference call.

Thank you very much for joining us. I was quitepleased with EMC's performance in Q3.

Our execution and results were strong andvery well balanced across our four businesses, across hardware, software andservices and across our three major geographies. And besides posting solidresults, we gained share in each of the major markets we serve.

Looking a little more closely at EMC without VMware,clearly, our information infrastructure strategy powered by our one EMCbusiness model served us well this quarter. We grew revenues, we grew grossmargins and we increased leverage.

Which resulted in improved operatingmargins. Also, this past quarter, I was very pleased with our cash flowresults.

Storage continues to be the bedrock of our informationinfrastructure business as customers around the world look to EMC forindustry-leading products and services. In Q3, we were pleased with the launchand customer reception of our new Symmetrix DMX-4 product family.

Also, this past quarter, our CLARiiON CX3 line continued topost strong results. The market acceptance of our new entry and mid levelmulti-protocol systems, the NS20 and NS40, was nothing short of phenomenal.

Performance, reliability, ease-of-use, functionality andversatility of these new multi-protocol systems sets a new bar for the storageindustry. And there is more to come.

In the not too distant future, we willannounce a system specifically designed for Web 2.0 data centers and new lowerend, SMB oriented products. Turning to our content management and archiving business, asyou will remember in Q2, we said we were disappointed with the results of ourcontent management and archiving business.

We told you we are in the midst ofboth organizational and management changes and that we told you we expected andwould do better in the second half of the year. As you can see by our 27% year-on-year growth in contentmanagement in Q3, we are off to a good start.

Unstructured informationcontinues to grow at a rapid pace. The value of that information can only berealized by, proper storage and management of this content.

Thus, we see agood, long-term opportunity in the content management and archiving businessand the leverage it generates with our storage and security business isimpressive and growing. Our RSA Security business for the fifth quarter in a rowposted a year-on-year growth rate of over 20% as the demand for securing theinformation itself through encryption and robust centralized key managementcontinues to grow and the need for strong authentication and assured complianceis now a must have across virtually all industries.

And again, you can see the synergy and leverage between oursecurity business and our storage business and content management businessesincreasing. Examples are products like enVision for storage, RSA's StrongAuthentication, which is built into Symmetrix, secure content management, theintegration of information rights and management into our content managementofferings and coming soon, you will see PowerPath encryption.

And lastly, our strategy calls for EMC to provide integratedinformation infrastructure solutions to assure one of the key ingredients forsuccess on this or any other solutions front is having a strong and experiencedservice organization. Today, our service organization has over 11,000 peoplearound the globe and we expand this presence significantly through ourvalue-added service partners.

Proof of our success here is a 25% year-on-yeargrowth we achieved this last quarter. Now, I would like to briefly comment on the economicenvironment and the IT spending trends.

As I said, in Q3, we actually saw astrong demand for our information infrastructure products and services instorage, content management and security. I know there’s a lot of concern out there about a slowdownin the financial services arena, particularly in the U.S.

But I must say, Iwould not categorize our Q3 performance in this sector as high-growth; we didsee a little year-on-year growth in the financial services market this pastquarter. Trends that led to this growth were business continuity,consolidations, risk mitigation and compliance, intelligent archiving andbackup to disk solutions.

We continue to see good growth opportunities in theSMB and commercial market segments across the globe. We continue to see robust growth opportunities in AsiaPacific, Middle East, Eastern Europe and Latin America and to complete thepicture, in Europe, we see IT spending continuing at a pretty good pace.

So, despite the air of caution in the financial servicesindustry, we currently see enough opportunity to achieve our growth objectivesgoing forward. As David already said, without a doubt, the highlight of thequarter was the tremendously successful IPO of Vmware.

It was coupled with their equally impressive Q3 year-on-yearrevenue growth rate of almost 90%. And for me it’s virtual infrastructure isclearly being embraced by a wide set of customers across the globe.

The goal of this partial IPO was to unleash value and thisgoal was definitely met. Undoubtedly shareholder value was unleashed andundoubtedly VMware's unparalleled value proposition was exposed to a broaderaudience of current and future customers.

Going forward, I assure you we will continue to focus oncreating shareholder value for both groups of shareholders. We are very pleasedwith the performance of our asset mixed and we have no current plans to furtherdistribute VMware shares.

This is consistent with what we said at the time of the IPO.With that, let me turn it back to Tony to moderate the Q&A portion oftoday's call. Tony?

Thanks, Joe. We open up the lines for your questions, asusual, we ask you to try to limit yourself to one question, includingclarifications.

It will enable us to take as many questions as possible. Thankyou all for your corporation in this matter.

Draney, can we open up the linesfor questions, please?

Thanks, guys and congratulations and also thanks for theclarity on the organic business. I guess my question is around the operatingmargin story, very strong story with 80 basis point improvements here over thelast few quarters.

And I guess when you look out going forward, can you give usany type of target around where you would like to manage this business from anoperating margin perspective? And then also on top of that, how much of thisrecent expansion is due to headcount versus just the changing mix of youroverall business?

Thank you.

Hi, Good morning. Let me take that for you.

First of all, weare not going to give you a target for where we want to try and get the marginsto, but I would point out that our goal is to continue to drive leverage. Actually, in some ways, leverage is a little strongeryear-on-year than it might have looked from the numbers because if you justlooked at Q2 and Q3 versus Q2 and Q3 last year, the leverage would be up 60basis points on the core business on a non-GAAP basis.

Because, if you remember in Q1 this year, we had a slightlyunfavorable mix of hardware products so, normalizing that out, the improvementis quite good. You are going to see continued impact of the move towards thesoftware businesses.

So, as I said in my comments, as you model going forward weexpect the margins will continue to increase with mix as we move towards contentand security, but also expect that to drive a higher SG&A yield as wellbecause those businesses have higher SG&A profiles. So we are driving forleverage, but we are not going to give you a target.

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

Laura, we have made nice progress during the year. Q4 isalways our strongest quarter from an operating margin point of view, so youshould expect improvement from Q3 to Q4, but we do want to try to get away frombeing stuck to specific targets here.

Just expect us to drive leverage and wewill give you more a view into what we might see in 2008 as we get into 2008.

Yes, thank you very much. So you mentioned earlier that youhave no plans, current plans to distribute more VMware shares, but I amwondering how firm you are with that statement.

Effectively, the stub or you call the EMC informationinfrastructure segment is selling at like single-digit P/E ratios, which Ithink is not appropriate. If this kind of disconnect continues might you changeyour mind over the next year?

And if you can frame this in the context of early 2009 whenyou can do this tax-free, I’d appreciate it. Thanks.

The IPO is barely two months old. We have generated, Ibelieve, something close to in that year period, looking back here, about 70%growth in the shareholder value.

We are focused. I understand all the movingparts.

I would submit that we’ve done a pretty darn good job and wewill continue to work in the best interest of the shareholders and beyond that,I am not going to say anything at this structure.

Thanks. Next question, please.

Hi, thank you. Joe, I think this is for you.

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

When I think of storage virtualization, I think of threeareas. One, and I think the most important is what is happening on the fileside of the business.

If you look at both growth rates and utilization rates,you look at almost any factor of control. Companies across the globe have done a much better jobinside the data centers on SANs of bringing up high levels of utilization andhigh levels of management and the sharing of that data.

Still if you ask -- I have yet to ask a CIO anywhere howmuch data they have around their file systems or how many file systems theyhave around a company that knows the answer. I do think this file virtualization, global namespacetechnology is going to be is a very important space and one we are focusing on.I also think that we call virtual provisioning, some companies call thinprovisioning.

We call it virtual provisioning because what we are doing inprovisioning, which we will have that out on all systems first part of next year,it is out on our NS product line today, has tremendously broad capabilitieswhere we can expand and contract loans and provision only when its necessary. So I think virtual provisioning is going to be important.And I think there is a lot of hype around SAN provisioning.

SAN utilizationespecially when you apply thin provisioning or virtual provisioning, are goingto get very high. And you are going to see most of that virtualizationobviously used for dynamic movement of data between tiers and we have a greatanswer there with our Invista, which is networked-based virtualization.

So, we have all three covered and I actually mentioned whatI think is just about the order of importance so if customers out there want tosave the most money, just focus on what you're doing in your file systemsaround the world in storage. If you want to look at a second thing, I would look at whatvirtual provisioning can bring to you.

Then I would look at SAN provisioningfor easier and more effective use of data mobility. It's probably not going toaffect your utilization rates at all.

So yes, it is an important set of categories, but it is thatset of categories that are going to make up this broader storage virtualizationthat you talked about.

Thanks. Next question, please.

Yes, thank you. I wanted to follow-up on your comments, Joe,about the relative weakness in U.S.

financial institutions. My estimate is thatU.S.

financial institutions perhaps comprises about 10% of EMC's revenues. Canyou confirm that?

And then more importantly, it looked as though you hadweakness in storage software licenses. Those were down year-over-year.

You alsohad some weakness albeit against a tough compare in the Symmetrix productline.Weakness in high-end systems and in software licenses is consistent with whatIBM saw. Was that particularly concentrated in U.S.

financialinstitutions or was that more broad-based and there is a broader explanationfor particularly the software license decline?

Well, first of all, Tony, we don't comment on what anyparticular vertical sector makes up as a percentage of our business, so I willpass on that broad topic. But the answer to your question is really a littlebit of both.

Obviously, when you look at conditions around drivinglicensing, financial services in the U.S. is important to us, but it’s morebroad.

We have got just tremendous coverage of our software and we use a schemaas you know where you pay for the license and then you get future upgrades forfree as part of your maintenance, so our maintenance revenues on software aregrowing. We don't have as much growth on a Symmetrix especiallybecause of the way we licensed over the past years.

But it is still Symmetrix;we think that the high-end industry over the last three years has just hadsingle-digit growth, lower single-digit growth. So this year, we are essentially flat.

Last year, we were upa few percent, so I expect that to continue. I mean that business, I’ve said toothers, will look a lot to us as the IBM mainframe business looks to IBM.They’re not going away.

Customers' most mission critical data is on that. We really have to have robust business continuity.

Thosesystems are chosen. Or we’ve given options now where you can actually tier inthat box and we are just about to release the one terabyte drives to be putinto a different tier of the Symmetrix.

So, those things should help or preserve and have slightgrowth in that business. So, it is a great business and one we’re proud tohave.

And that does reflect some of our licensing. David, you wanted to add some?

Yes, Tony, I just walked out

Joe, one comment. When you are looking at Q3 year-on-year,which you were doing in those statements, don't forget that Q2 and Q3 lastyear, we had this abnormal distribution due to the backlog we carried out of Q2into Q3.

So what you saw is a proportionally higher SIM revenuenumber in Q3 than you would have done in Q2 last year. So you are comparing alittle bit of apples-and-oranges when you are just looking Q3 versus Q3, whichis why I think the year-to-date comparisons I mentioned during my script areperhaps the more meaningful ones.

They don't change what Joe said, but it just basicallynormalizes that Q3 phenomenon.

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

Sothe statements that I made to you still hold in that context.

Next question, please?

Sure, if I could, Joe, just going back to what you weresaying a moment ago about the weakness was primarily in that any weakness yousaw was primarily in U.S. financial.

What are other customers telling you? Imean they can all read the same newspapers we all do.

What makes them -- why aren't they being more cautious? Andjust, David, going back to your question before, comment before in terms ofcash, can you give us a sense about how much cash could be available for sharerepurchases?

I did use in my comments the words air of caution. You askeda question on U.S.

financial services. When I talked -- and maybe constructionwould be the industry or industries affected by construction might be in thatsame camp, but other than that, when I talk to CIOs across the U.S., not toomany or any for that matter told me that, okay, my boss just significantly cutmy budget for this year and going into next year.

But everybody is alwaysasking -- everybody is a little bit worried worried. There is an air of caution out there, what is going tohappen, are interest rates going to be lower?

How is the economy going to havesoft and long and how are we going to get through this credit crunch? And sothere is an air of caution and there is a lot of unknown and I think we haveall got to stay tuned.

But as I said, right now, set of products and solutions thatwe have that our customers, even in financial services. As I said, we hadslight growth.

Nothing to write home about, but we did have growth year-on-yearin financial services. So, if you have the right solutions, customers are goingto pay, are going to invest in those kinds of opportunities and soconsolidations helped them save money for the future.

So, data center consolidation, server consolidation, storageconsolidation are hot, virtualization is hot in a lot of areas. Customers needto make sure their businesses continue, so to back up the tape paradigm is justnot a good way to recover information.

So backup to disk is hot, de-duplicationtechnologies are hot. So, as long as we have two bits of nothing in the SMB space,two bits of nothing in the Web 2.0 space where big money is being spent in bothof those.

So, we have got to focus on opportunities and the opportunities areout there broadly and that is what we do as a company.

Thank you.

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

Cash, yes. Obviously, I gave you the math to quickly figureout.

We have $3.8 billion of cash in our U.S. business, excluding VMware.

So, the way to think about that consistent with what we saidbefore, we need $1billion of that to run the business, we need $1 billion ofthat as a cushion because you wouldn't want to run the business without anycushion, so in theory, you have got $1.8 billion extra, which we could investin projects or other programs. And we basically committed this morning toreturn close to $1 billion of that to shareholders over the next few months.

So that is the way to think about the cash position.

Thank you,

Andy. Next question.

Hi, thank you. I had a mechanical question.

Maybe David cananswer it. In terms of the minority interest, what’s the -- I was trying tofigure out how that is calculated here.

But can you help us out there a littlebit?

Yes, sure, Kevin. Its, first of all, this quarter, it is apartial quarter because we only had a minority interest in VMware for basicallya little less than half a quarter.

The minority interest this quarter wasapproximately 7%. If you look on a basic share count basis and what it wouldbe next year, next quarter rather, it would be 14% next quarter.

So, basicallywhat you are doing is you are just taking the VMware GAAP net income and thenyou are deducting the minority that we don't own before we consolidate into ournumbers.

Okay. Thanks, David.

The half-quarter is what threw me off.Thanks.

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

Katie, from the new systems, the only one that would kind ofcategorize as low-end would-be the NS20, so we actually expect that to continueto ramp and do well and I categorize that kind of market acceptance as prettyclose to phenomenal. I mean it is a tremendously hot product.

We do have otherproducts coming out that will be more towards the first of the year. So I thinkyou will see some better news in Q4 and some better, better news in Q1.

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

Oh yes, they should continue to ramp. The CX3 is doing verywell.

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

Thanks, next question, please.

Thank you. Overall, Q3 demand was pretty good for EMC, sowhy aren't you raising your full-year guidance?

You will only have to generateflat revenues to get to your target.

You, got to basically take a position and the position wetook was that we are going to give annual guidance and we did that and we didthat, we said we hoped to, I think meet or exceed or more than I think we saidor at least okay, thank you, David. We said at least $0.64 and we said at least $12.7 billion.As you know, those were the goals.

The goals actually as you saw that the Boardgave us was $12.75 billion and $0.64.We then got into the midyear and said wechanged, we were very bold and said more than we changed at least to more thanand now we said we would definitely exceed. So I grant you that’s not much, but you have got to take theposition that you're going to do quarterly guidance or you're going to doannual guidance.

We took the position for annual guidance. We are doing prettywell, so I will stay with the definitely exceed.

I strongly believe it willdefinitely exceed $0.64 and $12.7 billion.

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

Yes, sure. I mean, of course we see them.

It’s reallyinteresting. When I look at those startups, most of those startups, and to givethem credit, have come up with a fairly innovative and good technology in aparticular area So one startup is basically hypes the heck out of thinprovisioning.

Another one says, hey, I invented for iSCSI, another one says Ibuilt it for Web 2.0, another one says I do spin down, etcetera. And what I am telling you is that every single one of thosetechnologies, every single one of those technologies with the exception of Web2.0, we will build into all of our products.

So we will be able to outperformanyone in terms of the port for say thin provisioning. We are calling it virtual provisioning because we think wedo it better.

David, talked to you about the tremendous successes. We have doneiSCSI and iSCSI replication both into our NS product line and our low-endCLARiiON product line or all the CLARiiON product line.

We will come out early next year with spin down for on ourdisk libraries. I told you, we’ve built a specific system, which will be outvery, very shortly, for Web 2.0.

So again customers love all the functionality,the 11,000 people we have in support and every one of those technologies we arebuilding in and when we build it in, we know, okay, we compete very well and aswe come out with these technologies, as we compete with those customers, ourwin rates go way up by these new companies. So I think, give them credit, they have done some innovativethings, but we have been noticing those too and of course we have got to buildthem in a more robust way because we are EMC and we are the leader and when wedo that, our win rates are terrific.

Thank you. That's helpful.

Next question, please.

I had one question, but the prior question was a littleinteresting. I actually wanted to follow up on that.

As we kind of look backpre-bubble, I mean we have had, I think about, four or five hardware relatedIPOs come out in the last year or set to come out and that is exactly four orfive more since pre-bubble. What do you think it is that has changed from a buyingdynamic that has allowed these companies to emerge?

I know you mentioned thetechnology, but technology differentiation has always been there. There hasalways been the opportunity to differentiate.

So what is it from a purchasing or a decision making processor a fundamental system requirement process that you think has enabled thesecompanies to kind of mushroom out of nowhere?

I think, what has happened, Paul, is by focusing and doingkind of one thing well and just one thing that customers have been asking for.That’s why we have been building these into our systems. But obviously when youhave all the other feature functions and benefits that we have to build thesethings in a very robust way.

Because one of the things I could tell you after acquiring aheck of a lot of companies, it just strikes me as before you bought company X,you call around to a bunch of my non public company obviously, a bunch of myfriends that were CIOs and said, what do you think of this technology? Andeveryone said, it's great, it's great, it's great.

We'd love to see you haveit. All of a sudden, you buy it and then two weeks later, theyare calling you and saying, hey, this technology is not up to EMC standards interms of quality, in terms of service, etcetera.

And I said what do you expectme to do in the two weeks I have owned it? But on the other side, there is an expectation that when wecome out with a product, it is what I call is EMC standard and rock solid.

Sowhat happens is these companies get cut a little bit of break and thensecondly, they are doing some really good innovative things and they arebringing it to market quickly and customers are saying, hey, let's bring it inand try it and then of course we will go put pressure on the EMCs of the worldto go build these things into their current products so that we don't have topay extra for them. Because if you did go out there and say, okay, let me buythis product because I like spin down, let me buy this product because I likethin provisioning, let me buy this product because I like iSCSI, you are goingto cost yourself a fortune in your data center supporting all those disparateproducts.

So what they really want is us to bring it, to have thesefunctions in there, meet those price points and have the quality and that’sexactly what we are doing. Obviously to do that, I can't snap my fingers and doit quickly, so what they are beating us with is time to market.

They are getting there quickly. They are showing that thistype of little technology or technology point works and it has value.

And thenof course we are parallel building it in and as I said, with every one ofthese, by the end of Q1 we will have it built into all our systems.

Thank you for that color. I appreciate it.

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

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

We’ve not broken that out though. I think, what we have doneis we've given you how big the storage how fast the storage business grew.

Weshowed you CMA. I think we have given you enough views of the business to breakit all out.

So hopefully you can work that through and, if not, we will talklater on.

Okay. Thanks.

Thanks, everybody, for joining us today. We really doappreciate it.

I look forward to following up with you. Clearly, there is morewe can do around what we call the one EMC initiative, which creates leverageacross our products.

There is more we can do with the one EMC initiative wherewe can hopefully take as we have acquired over 30 little companies now of somesize over the past three to four years. There is obviously some management layers we can reduce andsome efficiencies we can create on the people side and we will continue todrive that.