Joseph M. Tucci - Chairman, Chief Executive Officer, President, Member of Mergers & Acquisitions Committee and Member of Finance Committee David I.

Goulden - Chief Financial Officer and Executive Vice President Tony Takazawa - VP

Benjamin A. Reitzes - Barclays Capital, Research Division Richard Gardner - Citigroup Inc, Research Division Louis R.

Miscioscia - Collins Stewart LLC, Research Division Katy Huberty - Morgan Stanley, Research Division Brian Marshall - ISI Group Inc., Research Division A.M. Sacconaghi - Sanford C.

Bernstein & Co., LLC., Research Division Amit Daryanani - RBC Capital Markets, LLC, Research Division Ittai Kidron - Oppenheimer & Co. Inc., Research Division Maynard J.

Um - UBS Investment Bank, Research Division Deepak Sitaraman - Crédit Suisse AG, Research Division Scott D. Craig - BofA Merrill Lynch, Research Division Aaron C.

Rakers - Stifel, Nicolaus & Co., Inc., Research Division Glenn Hanus - Needham & Company, LLC, Research Division Alex Kurtz - Sterne Agee & Leach Inc., Research Division

Thank you. Good morning.

Welcome to EMC's call to discuss our financial results for the third quarter of 2011. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC Executive Vice President and CFO.

David will provide a few comments about the results that we released this morning. He will highlight some of EMC's activities this quarter and discuss our outlook for the rest of 2011.

Joe will then spend some time discussing his view of what is happening in the market, EMC's execution of the strategy, and how EMC is positioned to help customers on the journey to the cloud and in their efforts to handle the growth of Big Data. After the prepared remarks, we will then open up the lines to take your questions.

I would like to point out that we will be referring to non-GAAP numbers in today's presentation unless otherwise indicated. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today, in our press release, supplemental schedules and the slides that accompany our presentation.

All these are available for download within the Investor Relations section of emc.com. As always, we have provided detailed financial tables in our news release and on our corporate website.

These schedules are quite important in understanding our results, so we do encourage you to take a look at them. The call this morning will contain forward-looking statements and information concerning factors that could cause actual results to differ can be found in EMC's filings with the U.S.

Securities and Exchange Commission. And lastly, I will note that an archive of today's presentation will be available following the call.

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

Thanks, Tony. Good morning, and thank you for joining us today.

I'm pleased to report another quarter of excellent results. We achieved third quarter revenue growth of 18% and grew non-GAAP EPS by 23%.

We again improved both non-GAAP gross margin and non-GAAP operating margin both sequentially and year-on-year, and we grew free cash flow by more than 25% on a trailing 12-month basis. Our strong Q3 results underscore that our strategy continues to serve us well.

Our sharp focus on key areas of opportunity within cloud and Big Data is propelling ongoing momentum. Our broad portfolio of differentiated solutions within these secular trends is resonating with customers, and our disciplined operational execution and control are driving our success.

The combination of all 3 of these has driven our results over the past several quarters, but I'd like to take a moment to focus upon the power of our portfolio. We achieved $4.98 billion of revenue this quarter, a record amount for any quarter in our history because the combination of our storage, virtualization and security offerings is compelling.

Our results stem from having market-leading products and services in each of these high-priority areas of IT spend and also by leveraging capabilities across our lines of business. For example, we developed our storage solutions with an eye towards security and virtualization, and customers rely upon our expertise in these areas as they decide where to deploy their IT dollars.

In any business environment, customers want to make their IT operations more efficient and more agile. Having a partner who can get them there from start to finish is critical, and this is why we win.

This advantage was clearly demonstrated by our Information Storage results in Q3 where revenue grew 16% year-on-year to $3.7 billion, driven by product revenue growth of 28% in the mid-tier. Our storage portfolio has been taking share in both the mid-tier and the high end because we provide best-of-breed products which address customers’ specific use cases and uniquely enable them to manage massively expanding data volumes.

Our high-end product revenue grew 7% over last year's Q3, which we believe is faster than the current growth rate for this segment of the markets. Customers with mission-critical data sets needing the very best reliability, availability and scalability trust VMAX.

While customers have traditionally purchased our high-end storage to handle their biggest and most important business applications and databases, they're increasingly using VMAX to meet additional needs. Its powerful scale architecture is ideal for emerging use cases such as service providers using it for customer facing workloads.

And with the combination of FAST VP, Flash and large data drives, VMAX can automatically tier data across various drive types. This capability lets customers store more data types on their SIEM; data in some cases used to relegate the Tier 2 vendors and lower the total cost of ownership.

As a result, we win against high-end and Tier-2 vendors alike with VMAX's unique scale-out and other tiering solution. We had a great example of this in Q3 at a global pharmaceutical company where we displaced 1.5 petabytes of Tier 2 storage because VMAX is powerful, trusted and smart.

The resilience and sheer horsepower of the VMAX architecture was far superior for supporting this customers database application. Moreover VMAX's tiering capabilities enable them to use tier drives and get better performance at a lower price.

The introduction of FAST and Flash drives creates a value proposition that is unmatched and is a key reason why we continue to be the leader in the high end. We've been gaining share in the high end and are equally confident about taking share in midrange storage as well.

EMC has built out a unique best-of-breed midrange offering over the past few years. This allows us to attack traditional midrange players head-on with a new converged VNX frontline from underneath with a new low-end VNXe offering and from the flanks, with market-leading backup and scale-out NAS offerings.

Add to this product portfolio, a distribution channel that has doubled the number of partners in its ranks over the past year and vastly expanded the volume through these partners, and you get a clear picture of why we're so confident we're taking share in these segments. Let me touch briefly on some of these factors that are driving our acceleration momentum in the midrange.

Starting with our VNX Family, which includes both VNX and VNXe. The transition from product generation unified mid-tier products is ramping according to plan, with over 80% of our new system revenue in this space coming from the VNX Family.

VNXe, our new simplified storage solution built and priced to meet the needs of the SMB market, continues to flourish. VNXe has enhanced our value with existing customers who are deploying it in departmental and remote implementations.

VNXe is winning us new accounts as well. Since introducing the VNXe in March, we've added well over 1,300 new to EMC customers with this easy-to-use storage solution.

As VNXe is a brand-new product that just came out this year, and our win share are almost all incremental, it goes out saying that we are also gaining share in the low end. Its value proposition is clear, simple, efficient and affordable.

VMX, like the VNXe, is also simple and efficient, and on top of it, delivers the raw power and effective utilization rates needed by large enterprises. It is winning us new footprint because of its ease-of-use, its high integration with VMware and its ability to tier data automatically, resulting in a lower total cost of ownership for customers.

These attributes make VNX a great fit for cloud environments which is why the largest tire distributor in the country chose to put its private cloud on VNX. American Tire uses its VNX-based cloud, 99% virtualized on VMware, to run its mission-critical Oracle e-business suites, and in doing so, was able to significantly increase performance during usage peaks.

VNX replaced incumbent systems as several other companies as well in Q3, including a global pharmaceutical company, a global retailer based in France, a financial software company based in California and an insurance company based in Michigan. With the accelerated growth we saw in our unified platforms in Q3, it is clear we're gaining market share from traditional SAN and NAS vendors alike.

Our Backup Recovery Systems business continued to lead the market and exemplified the EMC effects. We still have a lot of room to grow, both home and abroad.

We expect BRS to continue to be one of our fastest growing segments for a couple of reasons. Our unique approach to deduplication makes us faster for both backup and recovery than a competition.

And on top of this is the integration we built between the products in our portfolio. Whether a customer is simply replacing tape or virtualizing and working on a next-generation backup architecture, we can provide a best-of-breed solution.

We saw this in Q3 with one of our longtime financial services customers who is now switching their entire backup environment to leverage our dedupe portfolio. A large city in Finland also expanded its EMC footprint on the strength of our combined BRS offerings, including Networker to create backups of their virtual machines, Avamar for backing up the virtual machine files and Data Domain as the backup target.

Altogether, this solution enabled the city to reduce its data protection costs by 28%, the type of result that resonates with businesses and public sector organizations alike. With growth that continues to outpace the market, we are clearly gaining share with our differentiated backup and recovery solutions.

The same secular shift to ever larger data sets and file sizes is driving demand for our Big Data storage and analytics products and services as well. Our offerings here are growing faster than the market, with the revenue for our portfolio of Big Data solutions including Isilon, Atmos and EMC Greenplum, up over 100% again in Q3.

Within this, we're encouraged by the continued penetration of Isilon beyond verticals like life sciences in media where Isilon has become the de facto standard. Isilon is now expanding its presence in broad implementations that are not vertical specific.

In these more general purpose data center uses, we're seeing a lot of purchasing for NAS solutions to run things like Neil [ph] and archiving, filesystems and home directories where data consistently expands and requires a solution that can scale where other NAS implementations cannot. Such was the case with a large financial service provider in Q3.

This bank was struggling with a solution for an incumbent NAS vendor that just couldn't scale for its growing general-purpose file shares, archives and backups. Isilon met their need for viable long-term NAS solution that offered simplicity of a single file system, scalability in line with data growth, ease of use of managements and lower CapEx to improve utilization.

Overall, Isilon has been tremendously successful in solving customer challenges and is making life increasingly difficult for the competition. In addition to the financial services I just mentioned, there is a long list of competitive displacements across a wide variety of more traditional NAS use cases.

In fact, in Q3 alone, Isilon displaced incumbent vendor at one of North America's largest natural gas producers, universities in Georgia and New Jersey, an international law firm, and an IT managed service provider, to name but a few. The big story here with Isilon is that it's quite clear that we continue to be successful in verticals where they've been well known, but more importantly, we are taking share and removing competitors in more horizontal use cases where other vendors' clustered approaches cannot scale nearly as easily or as efficiently as Isilon's.

Our excellent results across our midrange portfolio demonstrate the synergy of having so many best-of-breed tools in our back. Sometimes it's the combination of Isilon for true scale-out file and VNX for database as we saw with the displacement in Q3 on one of the world's largest providers of business outsourcing solutions where performance and utilization were falling behind.

Often, it's Data Domain, given the opportunities to present its value proposition to a new scale-out VNX customer as we saw in numerous deals in Q3. Regardless of the final solution with EMC, customers can be confident of achieving optimal results across their environments, physical and virtual alike.

Story massive and growing amounts of data is one thing, making sense of and getting real value out of this data to add business insight is quite another and what our Greenplum business does very well. Greenplum solution was built for the era of Big Data.

And for many companies, it's a next step in their analytic strategy. Greenplum's massively power processing capabilities let companies capture more data and make it more readily available.

This is true Big Data analytics as its more real-time nature explores the details of business operations and customer interactions that aren't typically captured in a data warehouse. Such was the case with the win in Q3 at a financial regulatory entity which now puts Greenplum in 3 of the top trading and regulatory organizations.

This organization was looking to process both structured and unstructured data to aid its decision making as its legacy system was being overloaded with the dramatic growth of data from outside sources and by the large volume of users. By augmenting their system with Greenplum, they are now able to process the large volumes of data necessary to spot patents that might be of regulatory interest.

All companies are keen to harvest valuable insights like these, and this is why Greenplum's business continues to ramp in terms of both revenue and employees to keep pace with growing demand. Looking across our storage portfolio, it's clear our best-of-breed base of offerings is broad enough to meet the needs of a wide variety of customers and the wide variety of needs within each customer.

We've always believed that it's best to have the right tool for the job in this market and that the "one size fits all" approach would ultimately be unsuccessful. The fact that we're gaining share in and across all our storage solutions sets is proof that customers agree with our approach.

In addition, the fact the competitors are increasingly following our lead underscores the realization that their approaches have been incomplete. EMC's storage innovation engine continues to produce new compelling products.

The latest example is our service life Flash initiative project lining, and I'm pleased to report that this is progressing well with the first shipping in Q3. Our approach confines five 9s Flash-enhanced array technologies with best-of-breed server Flash and FAST software into a single architecture for a compelling combination.

While our storage capabilities are broad, there are also deep comprising solutions that are second to none. We've proven leading-edge technology and standard of service that are consistently recognized as amongst the highest in the industry.

Armed with these advantages, we're strengthening our storage leadership position in the 2 biggest opportunities in IT today, cloud and Big Data. Another key opportunity for us is building trust in the cloud, and our RSA Security division is the critical asset that is allowing us to pursue it.

With revenue up 16% over Q3 a year ago, RSA is benefiting from its integrated solutions set that works across physical and virtual environments. Our advanced security management and compliance solutions offer the situational awareness that today dynamic threat environments requires.

They are agile, adaptive, coordinated controls that get more predictive as patents of data movement and use behavior are absorbed, which contain the necessary remediation capabilities to ultimately thwart an attack. Our identity management and protection products are also seeing strong demand and benefiting from some larger renewals in the quarter.

Customer trust in our solutions is high, and in fact, last month, SecurID won Information Security Magazine's Readers' Choice Award for Best Authentication Product in 2011. Nearly 200 Information Security professionals polled in the spring and summer, ranked SecurID especially highly for its integration and compatibility with existing infrastructure and its ease of use for end-users and its scalability.

Our long-standing data centric approach to IT security is clearly the right one. Competitors seeing the advantages to this strategy are now trying to cobble their point products into a more cohesive solution.

In addition, security professionals are drawing on our expertise in IT security to discuss best practices for protecting sensitive information and systems. In the past few months, senior RSA officials have participated in APT Summit in Washington D.C.

and London and presented recommendations to Congress. We'll continue to leverage our expertise in this space to help build the blueprint for an evolving threat environments within a rapidly shifting IT landscape.

Revenue from our Information Intelligence Group was $171 million, flat from Q2. IIG continues to transition its offerings to lighter-weight, content-enabled applications on top of xCP using modern virtualized frameworks.

In Q3, we announced Documentum clients for iPad, an app which provides users secure access to information and Documentum and enables them to access share and collaborate on their preferred device. VMware revenue grew 32% in the quarter to a record $941 million, driven by the massive shift to more efficient and more agile cloud architectures, for which virtualization is the cornerstone.

The popularity of VMware is underscored by the record attendance at VMworld in Las Vegas in August with more than 19,000 customers, partners, press and analysts, and by more than 20,000 registered for VMWorld Europe and the Asia Pacific and Japan V4 events being held this week. VMware continues to differentiate itself in this space with virtualization offerings that are far more developed than any other competitors.

By building onto vSphere's capabilities with more robust features in storage, business continuity, virtualized security and edge functions, modern infrastructure management and monitoring, a multi-tenant provisioning resources, VMware continues to enhance its strategic relevance in the data center. With our shared vision for offering IT-As-A-Service in cloud environments and ultimately, via hybrid clouds, the evolution of EMC storage, Content Management and security portfolio is increasingly complementary to VMware's feature set.

We have already seen in study after study that EMC is the infrastructure provider of choice in virtualized environments, yet another study in August showed us extending our share here even further with 44% of CIOs polled naming EMC as the preferred provider for the virtualized environments. As VMware continues to build out its capabilities, our underlying infrastructure will continue to be second to none for supporting virtualization.

With VMware's stronger results, the full year minority interest expectation for VMware has increased slightly. Also, as we advised last quarter, it is important to correctly account for the additional dilution from VMware.

Our expectation for the combination of the minority interest and VMware dilution for the full year is now approximately $220 million, an important consideration when modeling consolidated EMC EPS for the year. The excellent performance of our services organization extended into Q3 as customers continue to look to us to build out their cloud architectures and get the most from the information contained in the infrastructures.

A great example of this was a milti-million dollar deal signed in the quarter with a South American telco. As they embark on a multiyear IT transformation to align their fixed and wireless systems, run their business more efficiently and enable more targeted cross-selling across marketing of their products, they engaged us to help drive their cloud, Big Data and security strategy implementation.

Customers also look to EMC to guide them through projects centered on optimizing cost efficiency such as data center consolidations. This was a case we won the world's largest pharmaceutical companies in Q3, which listed EMC for the consolidation of 10 globally dispersed data centers.

This was a strategic win, thanks in part to the high quality of product service engagements which opened the door for even larger opportunities against the incumbent provider, in this case, HP, in the future. As our products and services portfolio grows and evolves, so does our go-to-market approach.

Our efforts to expand and deepen our channel relationships are paying off for both EMC and for our partners. We've laid a strong foundation with the onboarding of several thousand new channel partners year-to-date and are now directing our efforts towards averaging these incremental routes to markets.

Our progress was recognized earlier this quarter by Computer Reseller News which named us a winner in their prestigious 2011 ARC awards, and also awarded us a special 2011 Tech Innovator award for VNXe, a channel-only products. We added another channel-only product in the quarter with the Data Domain 160 deduplication storage system for small enterprise data centers in remote offices.

The strides we've made with our channel efforts are manifesting our results with our mid-tier product revenues through non-Dell channels growing over 40% in Q3. In addition, VCE continues to gain traction with orders up approximately 50% from Q2 as a single converged infrastructure solution that can be up and running on day one.

With a single pane of glass for management and a single point of contact for integrated service and support, Vblocks are truly differentiated in the market. The value proposition of Vblocks perhaps even more relevant in uncertain times as our converged infrastructure means faster and easier deployments that requires far few resources of reference architectures.

For these reasons, we expect demand for Vblocks to continue its rapid growth. Across all business, we will continue to improve our technology portfolio, enhance our relationships with customers via our world-class services and sales forces, and build out and deepen our relationship with partners.

This approach will serve us well and is resulting in clear value for our customers as our results in Q3 and for the past several quarters have shown. In Q3, total revenue grew 18% to $4.98 billion.

We reported strong growth internationally, with revenue from APJ leading the way up 37%, while the EMEA revenue grew 15% from Q3 of 2010. Growth in North America was also strong at 16% where we saw strength in financial services and year-over-year growth in federal.

The power of our portfolio is also evidenced in our operating results where our faster growing higher-margin products continue to drive gross margin in the right direction. Non-GAAP gross margin expanded by 250 basis points over last year's third quarter to 63%, driven by favorable revenue mix shifts and better gross margins across the business.

This improvement helps us to continue to show leverage in non-GAAP operating margin which increased to 24% of revenue. We are very pleased with the progress we've made here over the last several years through improvements to our mix, improvements to our product and services costs, and efficiencies in our operating structure.

And while we remain on the offensive to take advantage of the vast opportunity in cloud and Big Data, we'll do so while spending prudently and investing wisely. Our balance sheet and cash flow continues to be very strong.

Deferred revenue grew 34% to $5.7 billion, driven by strong bookings and renewals. Our free cash flow generation continues to be strong, with trailing 12 months free cash flow of $3.8 billion, approximately $500 million than non-GAAP net income for the same period.

We ended the quarter with $9.3 billion in cash and investments. We returned $800 million to shareholders in Q3 via the repurchase of EMC stock.

We expect to repurchase the balance of the full $2 billion amount that was authorized by the board in August before the end of the year. We now expect our average share count for the full year to be 2.235 billion shares.

Turning now to the outlook. While Joe will give color on what we're seeing in the macro environment globally, one thing is fairly obvious.

Uncertainty about the global macro environment has increased in the past few months. On the other hand, there are some things we are quite certain about.

We're focused on the highest priorities in IT spend. Our product portfolio is in the best shape ever.

Our go-to-market approach is well defined and our reach is expanding. Our partner ecosystem is getting stronger and our operations are more efficient than ever before.

We are focused on our a triple play over the long term and the priorities we laid out to gain market share, invest for growth and deliver leverage continue to guide us through the balance of the year. We remain on track to exceed $19.8 billion in revenue and exceed non-GAAP EPS of $1.48.

In short, our strategy is sound, our investment approach is disciplined and our execution is solid. We expect these qualities, which have driven our success over the past several years, to continue to serve us well as we navigate next year and beyond.

With that, I'll turn it over to Joe. Joe?

Thanks, David. I would like to begin by welcoming everyone to today's earnings call.

Thank you very much for joining us. Overall, I am very pleased with our Q3 results.

They were hallmarked by impressive top line growth, which undoubtedly produced share gains for us, and leveraged on both the bottom line and in free cash flow. The key ingredient to our success was balanced growth, double-digit year-on-year growth across the vast majority of our product and business units; namely, in VMware with its leading virtualization and cloud-aware software; in our Information Storage business; in our Information Protection business; in our Information Security business; and in our information analytics business.

Additionally, we exhibited this balanced double-digit, year-on-year growth in our global services business and across our major geographies, in the Americas, in EMEA and in APJ. These impressive results are clear indicators that our hybrid cloud computing and Big Data strategies are resonating extremely well with customers.

They see our products and services as relevant, and they are entrusting us to help them accelerate their journey to the cloud and its significant advantages. I would like to recognize the more than 52,000 people around the world who are members of the EMC and VMware Family and thank them for their innovation, their hard work and for their dedication to our customers' success.

I would now like to add a little more color as to what we saw and experienced in regard to customer spending trends in information technology in Q3 and then comment on what we expect to see in Q4 and a little bit beyond. For sure, in Q3, we saw that customers were examining their IT purchases with more scrutiny.

Customers are looking for, in fact, demanding that their IT -- that their investments in IT yield real productivity gains and help them achieve competitive advantage and/or better intimacy with their customers and constituencies. This increased level of scrutiny resulted in our order flows being skewed more towards the end of the quarter.

The good news is that we saw a customer interest in cloud computing both private and public to be quite high and growing. Even better news is that EMC and VMware are becoming more relevant as we are being viewed by more and more customers as a strategic partner, as they accelerate their plans and journey to the cloud.

In Q4, we fully expect this customer spending scrutiny and selectiveness towards IT purchases to continue. The winners will be the IT vendors that can truly help customers produce faster ROIs, the ones that have the strategy, products, services and ecosystem to help customers move to and receive the massive benefits of IT-As-A-Service, and of course, we expect EMC and VMware to remain at the top of this list.

Within this context, we believe that IT spending in Q4 will represent a meaningful increase over Q3, but perhaps a tick below our normal Q3 to Q4 increase. I know there's a lot of interest in our take on what 2012 might look like, and as always, we will speak in depth about 2012 on our January call.

But since this level of interest in next year isn't higher than normal, I thought I would share 3 beliefs we currently hold about 2012. First, we expect that there will be growth in global IT spending next year, but this growth rate is likely to be somewhat lower than what we saw and are seeing this year.

Second, we are confident that interest in and investment in cloud computing, Big Data and security will remain top IT spending priorities. And third, we expect EMC to continue to gain share on our markets, therefore, growing significantly faster than the IT spending growth average.

With that, I will now turn it back to Tony to moderate the Q&A portion of today's call. Tony?

Thanks, Joe. Before we open up the lines for your questions, as usual, we ask you to try and limit yourself to one question, including clarifications.

This will enable us to take as many questions as possible. We thank you, all, for your cooperation in this matter.

Julie, can we open up the lines for the questions, please?

I guess my question would be centered on the midrange product cycles, specifically the VNX. Can you talk a little bit about where we're at in that cycle?

How we should think about the trajectory of that cycle over the next couple of quarters? And any color on how much of that momentum that you've seen is basically leveraging the installed base versus really greenfield new competitive wins?

Yes, let me start. So first of all, as I mentioned in my comments, if you look at what we call unified which is basically the old 2 Cs plus VNX, now 80% of the systems revenue from that category is now in the VNX Family, so the transition to VNX has happened.

As I mentioned again in my comments, obviously, we are seeing a lot of upgrade potential and upgrade happening from the installed base, but we're also winning a number of new accounts as I mentioned. The third point I'd make is, that the channel play with VNX is also very strong, with VNXe close to 1,500 new to EMC customers this year, and as I mentioned, again, the non-Dell channel revenues for the mid-tier in total, the biggest piece is unified, is up 40% year-on-year.

So we feel good about the take-up, the adoption, the momentum and also the ability to expand the market into not just the VNX space, but also VNXe.

Yes, we're basically 2 quarters into the VNXe cycle, and obviously, there's more to go in this cycle. And we have a very robust roadmap, and there'll be refreshers and kickers coming to this product family in the not too distant future.

A question for Joe. I think, Joe, you've been talking about IT industry growing at kind of the high end of 5% to 7% range for calendar '11 and your commentary with respect to calendar '12 being below those rates.

To put some numbers behind it, I mean, do you think we're talking about 3% to 5% outlook for the industry next year?

Brian, I still am convinced that when all the smoke clears and we look backwards at 2011, you will see 5% to 7% growth this year, probably maybe 6% to 7% in the higher end. So next year is all we're planning for right now from everything we see is that will slow down somewhat.

We're still collecting a lot of data, and you read the same analysts and reports that I do, both industry and Wall Street analysts, financial analysts. So there's a lot of work out there.

So right now, we're -- our belief is we want to share the best with you, yes, they will be somewhat slower, but we do expect positive growth. I don't want to go with any numbers yet.

I promise you we will give you a number when we -- our best guess at a number, not guess, but hard work estimate of a number when we get to Q1 January call.

I wanted to focus on your fourth quarter commentary where you mentioned, correct me if I'm wrong, that you expect the third quarter trends just to continue but to be slightly below normal. Maybe incrementally, can you talk about what vertical are you seeing -- in what verticals you're seeing that slight incremental weakness that now leads you to believe you're not going to see the fourth quarter as you hope you would see?

Well, just to use a little prose, I do expect that we will see a budget flush, but what I try to be -- give you is -- I'm seeing, I think that our budget flush is likely to be real and meaningful, but perhaps slightly below what we've seen in other years, Q3 to Q4 growth. So I still think it will be fairly good.

Within that, I mentioned areas to watch where public sector, what was happening in southern Europe, what was happening with commodity pricing. You go down that list, interestingly enough, in public sector, knock on wood, I know others are seeing it, but so far, we're not seeing this public-sector growth slow in the U.S.

or in federal government. But we did see some public sector -- a little bit of public-sector slowdown in Europe.

I had talked about southern Europe, certainly, that's something we continue to watch and how that impacts on the Eurozone. On the commodity front, you read what I read, again, that oil prices are down and most commodity prices are down also.

So that doesn't seem to be too potential -- too big of a potential risk right at this point. The banking sector, everybody worries about, it's really interesting.

We saw in the U.S. kind of a slow first half, but a resurgence in the second half of this year.

In Europe, in some of the Eurozone banks, there was a little bit of softness in Q3, so we'll continue to watch that. So that's a pretty broad brush of what we're seeing.

But overall, again, this slip back into prose, I do expect that we will see a budget flush that ends up being a little bit slower than normal.

Just one maybe follow-up on the December quarter expectations. Maybe if I look at $19.8 billion as a full year run rate, it would imply December is up about 8%.

I think historical seasonality tends to be up 15%. Given the fact that you aren't really seeing a lot of issues in public financials, could you help us understand why the big delta versus historical trends which you guys are guiding for December?

Well, first of all, understand that our guidance is to exceed $19.8 billion and exceed $1.48. So you can't plug those numbers in.

We said that we're going to do better than those numbers. So that perhaps is the most important data point to start off with here.

As Joe said, we're expecting to see a strong Q4, a meaningful increase in revenues from Q3, and a slightly lower-than-normal budget flush, but still a decent budget flush, so we're looking for a strong Q4.

And I mean, I guess maybe the part I was trying to get on was, do you think FX can have some sort of impact in the December quarter on a sequential basis?

On a year-on-year basis, which is perhaps the way to kind of look at it, quarter-end FX rates would give us a neutral impact in Q4. Obviously, they were a help on a year-on-year basis in Q3, so FX would make basically a couple of points of difference.

We had about 170 basis points of help from FX in Q3. And currently, we expect no FX help in Q4.

David, can you maybe go through the gross margin side a little bit more both on a quarter-over-quarter basis and on a year-over-year basis just sort of how much did mix and, say, the efficiencies and sort of the product and services cost reductions that you're seeing contribute to the gross margin improvement just in a little more detail?

Sure, Scott. Year-on-year, the big driver is our product margins.

Basically, VMware product margins improved and storage product margin improved, and the storage product margins are from 2 things. One is from a continued mix shift towards our higher margin products, which is our software products and our appliances, and we've kind of promoted that theme for the last kind of couple of years.

That helps us. But we also got some margin rate improvements in almost all the major products on a year-on-year basis as well.

Quarter-on-quarter, we saw a little bit of improvements in product gross margins, but the bigger improvement quarter-on-quarter was in services gross margin where a couple of things happened. We saw a mixed shift towards our maintenance services which are more profitable than our professional services.

But also within our professional services, we also saw a few points of margin improvement there, and those are the biggest drivers.

Joe and David, on VNX, relative to the 1,300 new customers that you've noted for VNXe, what were the comparable number be if you were to just look at VNX? And in terms of share gains in the midrange, specifically for VNX and Isilon, can you share some thoughts on where you think the share gains for each of these product families is coming from?

Let me do it this way. I don't want to break out -- break apart VNX and VNXe.

But the risk of David throwing something at me, I'll evoke executive privilege here, and I'll give you a number you would -- but it's like I don't -- we're going to basically -- we're focused on mid-tier and that's the number we're going to give you, but I'll delve back. Year-on-year, our VNX products grew over 20% year-on-year.

And so in other words, if you took Celerra, CLARiiON last year and you took those same product families this year with VNX, VNXe, we grew over 20%. So the family is doing fine.

We're having applicability across a wide, probably all verticals and in several big cloud topology. So we're very pleased with the way the VNX Family is progressing.

And Deepak, let me just add to that. Obviously, VNX is a huge part of the mid-tier.

But also in mid-tier, you got Isilon, which we said basically doubled on a year-on-year basis, and you've got Backup Recovery and the systems that are also kind of in the 20% plus growth range as well. So you'll look at all and it's a really strong portfolio, and I think we're definitely gaining share in the mid-tier.

I just want to delve a little deeper into your comments on the financials and the federal verticals, which doesn't sound like you had issues that others have been seeing. Does your commentary about the linearity of the business also apply to these verticals?

And in particular to federal, was the budget flush in the U.S. as you expected or was that more attributed to share gains there?

I believe in the federal. Obviously, it was the quarter end for federal, so there are always some budget flush in the federal and we saw some of that.

And I do believe we took some share, specifically, in the mid-tier product family. When you look at the power of the VNX, the VNXe, the unified, the Data Domain and Avamar products, we have tremendous portfolio there.

And there's no doubt in my mind we took some share.

I was hoping you could flush out the Isilon comments a little bit. Dave, you mentioned that Isilon, as you said, making life more difficult for the competition in general-purpose, file-based workloads.

Could you add a little bit more color there on where Isilon is gaining share and why?

Yes, sure. I mean, we wanted to make it very clear that Isilon, whilst it may have grown up in a kind of more vertically oriented marketplace, is really doing exceptionally well in the horizontal markets, particularly people who just have kind of large scale-out file requirements.

And the key is simplicity. What you do with Isilon is you start small and you basically add to the systems and it scales linearly.

It has a very high utilization rate as well. So it really is displacing systems well often.

Other vendors will have multiple filesystems that will try and do a single job, and there's a lot of load-balancing going on between those filesystems. We can just put one in there that replaces the entire amounts.

And all the example I mentioned on the call were examples where we've actually displaced incumbent NAS vendors. And then in the vertical markets, obviously, places like oil and gas, media, where it's becoming a household name, et cetera, still going very, very well.

I think the message here is that what we've got with Isilon and with VNX and with Data Domain is in each cases we've got a best-of-breed platform, and the best-of-breed platform is providing better utilization, better returns and is not providing a compromise compared to a one-size-fits-all, and that seems to be the solution that's winning in the market right now.

David, can you just remind us the bomb cost improvements in VNX versus CX4? How that helps you in your pricing strategy with VNX in the midrange and sort of what that leverage allows you to do in the market?

Yes, Alex, what we said when we introduced VNX and VNXe, and it's actually holding out pretty well, is that with VNX, we expect to get slightly higher average gross margins than the predecessor products. And with VNXe, we expect to get slightly lower than average gross margins in the prior products, so that is -- because we're aiming that at a price penetration point.

But in total, the gross margins are pretty comparable in terms of the new family to the old family, and that's pretty much how it's being playing out. That's the strategy we talked about in January.

And as you've gone through the year, that's what we've seen happening. Obviously, we've got a much more opportunity to sell software and upsell software packages on the VNX.

We basically repackaged a lot of our standalone software products into 3 or 4 bundles on the VNX, and that's also being successful. So we're getting higher software attached rates which is also helping gross margins.

So we think we're very well positioned competitively on VNX and also VNXe, and the margin profile is as we expected. A couple of other things I'd point out as well is that on the VNX, with the higher range models that kind of high end and mid-tier, we're getting over 50% penetration rates on both Flash and FAST, which is really driving the tier storage agenda which is, again, is relatively unique in the market place and is also helping with margins.

So the strategy as we played it out in terms of bringing the tiering, bringing the differentiation and having the price point differences is working for us in the margins and holding it well.

David, over the last week, the hard disk drive vendors have announced that production will be impacted by the flooding in Thailand in the fourth quarter. So just curious if you have a view yet as to whether you have enough inventory to manage through the quarter or if there's any risk of price increases to get your hands on drive?

Katy, we've been very working closely with our suppliers since the initial problems and, of course, we're not sure exactly how that they're going to be because water levels are still rising over there. But based upon our current information and where our current suppliers are actually based physically, we are not expecting supply chain constraints in Q4 and we're not expecting the pricing environment for our supply chain to change in Q4 either.

Bear in mind, we tend to be our supplier's largest customer and get pretty good treatment when it comes to situations like this.

Joe, I think you had commented that the quarter was a bit more back-end loaded than usual. I would say given the prevailing economic uncertainty in Europe, that actually sounds a little counterintuitive to me.

I would have thought that uncertainty would have heightened over the course of the quarter. So perhaps you can explain what you think happened in September that led to that statement.

Is there any risk of pull forward from Q4 into Q3 perhaps you can allude to backlog? And then finally, related to that, if normal seasonality is kind of 12% to 15%, other than spending levels being a tick below normal, what other considerations should we be thinking about in building our models for Q4?

Yes, Tony, you got a lot in there as your questions usually do. Let me see if I can parse it up a bit.

You talked about the order flow, and what I was -- the forecasts were very consistent. As a matter of fact, as we got near the very end, forecasts were actually going up a tick which usually doesn't happen.

But -- so if we didn't have the forecast for the quarter, I'd say, maybe we pulled in but we didn't. I mean, and we don't give backlog numbers, but they're not material in the analysis here.

So it really was that we had our sites, we had the fearless forecast and we knew where the orders were forecasted, we follow them, and those were the orders we got. So they just came later and we saw our customers having additional levels of scrutiny or levels looking at -- levels within the organization looking at and purchasing departments getting maybe a little more involved, things you do when customers really want to kind of -- signs that they're watching their budgets tightly.

But also, it's clear to us that customers are going to spend on priority items, and they're not freezing. So you always get this question, how do you -- how does this look to you compared to 2008?

And I think it looks vastly different. And again, we're in considerably different shape because if you look at our product portfolio in 2008, since then, we didn't have VMAX, we didn't have VPLEX, we didn't have VNX, we didn't have VNXe, we didn't have Isilon, we didn't have Greenplum, we didn't have Data Domain -- or we just got Data Domain in the end of that year.

We're on vSphere 3 going to vSphere 4 not vSphere 5. So we're -- we as a company are in a lot of situation, and customers, while they're being diligent, still want to get productivity gains and remain competitive.

And it's really interesting, you watch the financials in the U.S., it was a little bit slower in the first half of this year and it was -- we watched it closely. But in the second -- in third quarter and what we think will happen in the fourth quarter, as their information gains and their plans to fund different projects come, can't be held back any longer, they're spending.

So -- and I'm sure the same thing will be true in Europe. We saw a little bit of the converse there, some of the Eurozone banks are stronger in the first half than the second half.

But again, these projects, they have -- everybody's got a worry about things like Basel III and other laws we have here in the United States and -- so it's hard to say that any one sector is going to be soft. The one I continue to worry about is public sector as a lot of governments, if I had one systemic where you will be that as governments are really stretched and they got to be.

But again, there, we see more of a movement to the cloud. So that's kind of a little bit more color of what we're seeing.

Did I answer -- I don't know if I answered all your points in your question.

Just considerations for Q4 modeling on normal seasonality of 12% to 15%, anything else we should be thinking about?

Well, it's all we want to say, Tony, is we're planning for a tick below. You can look what we normally do at Q3 and Q4 gain, and we believe it will be a tick or a bit below that.

Just a follow-up on some previous questions. As we think about seasonality for modeling next year and give -- so can you comment on whether there's supply issues might really hit more sort of the first quarter and the overall seasonality next year, should we think about a normal year or perhaps a little more back-end loaded?

Glenn, again, we're -- my answer on the supply really relates to Q4, which is what we're most keen on locking in. We're still kind of working with our suppliers relative to whether there's any impact on Q1 and we can't really give you an answer, positive or negative, right now to that effect.

We're not seeing any alarm bells. We just haven't finished all our analysis with our suppliers on Q1 yet for supply.

And then, again, as Joe said, 2012, we want to give you a little bit of color today because there's been a lot of questions just in terms of which direction we think IT spending is going to go. We've given you a view of a direction.

And then, really, apart from that, we really want to keep our comments on everything else to do with 2012 until we get together again in January when we'll give you a lot more color on what we're seeing out there.

Maybe to change the topic a little bit, if you could talk about storage virtualization, what you're seeing out there in the sense of this is starting to pick up from your standpoint and how do you view the competition versus the product that you have out there?

Well, let me say this. What we think as the most important aspect of storage is how you auto tier.

And you can -- customers can store a string of information bits, bytes. You can do it in memory.

You can do it in Flash technology. There's several different kinds of Flash technology.

There's SLC. There's MLC.

There's consumer MLC. You can do it on 15K Fibre Channel drives.

You got 10K Flash drives. You got huge 3-terabyte going to 4-terabyte SATA drives.

So depending on where you store the data, you got tremendous cost differentials, hundreds to one when you go from memory down to some of the other tiers that are 1001 in cost parameters and speed and everything else. So the real most important thing we see with customers is how we used all those technologies.

And then based on hitting their service levels and their policies, we'll automatically tier that storage for them and give them a lower total cost of ownership and again, actually produce drives -- arrays that are smaller, more green, and far, far more performing. So if you're going to ask me what is the most thing -- what moves the needle most in storage, I would tell you it's that.

The storage virtualization is basically used today for how do you move data across different arrays. And we have -- with VPLEX and other things we're doing, we have very strong offerings, and we believe our offerings are best-of-breed.

And you're going to see a lot more of -- some of that technology even be put into the virtualization engines, namely VMware. So we're very, very pleased with our position, and actually setting the tone and the path to where this market will go.

Can you just talk a little bit about the geographies? Joe, what did you see in Europe?

It looks like pre-currency growth was probably like up around 10%. That's still actually pretty good for that environment.

And APJ, why was it so good?

Ben, let me just give you a couple of the flavors on currencies. Actually, constant currency was near 12% in Europe, so, again, strong.

Well, I just want to give you that data point. Joe, you want to comment on the -- did you have colors?

No, APJ is just really hot for us, as our other parts of the world. If we broken out our business in the Middle East and other parts of the world, countries in the world where we're quite robust, and it's the big investment we've been doing in these rapidly growing economies and new developing economies, which is paying off.

And of course the way those economies are just natively growing. If you look at EMC as a lot -- a younger, much younger company, despite being formed in 1979, we really didn't get up on storage until 1991-ish.

So our revenues are still -- and, of course, Q3 is probably more U.S. skewed which is 54% of revenues, but kind of in a -- most of the other quarters you'll see our -- we still have 52-ish percent of our revenues in the U.S.

So obviously, we have a lot more potential outside the U.S. for our products and services, and we've been focusing on that percentage -- on that potential while still growing the U.S.

at very good percentages. So we're very -- so part of it is focused, part of it is the, I think, just the attractiveness of our product line.

Part of it is the fact that we have younger and have a lot more growth opportunity relative to our potential outside the U.S., and I think that's why Asia. In Europe, as you said, as David said, in constant currency, we grew 12% which we think is pretty good.

Clearly, taking share in Europe. And I think in the U.S., without a doubt, we took share.

So we had some pretty good balance and good products, good strategy, good go-to-market and a lot of good people on them, very fortunate.

Well, thanks, everybody. It's great that you are with us today.

In summary, we believe that we are well positioned with our cloud and Big Data. [Audio Gap]