Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions). Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to Mr. Tony Takazawa, Vice President, Global Investor Relations. Sir, you may begin.

Thank you, Laurie. Good morning. Welcome to EMC's call to discuss our financial results for the First Quarter of 2007. Today, we are joined by Joe Tucci, Chairman, President and CEO; David Goulden, EMC's Executive Vice President and CFO; and Frank Hauck, EMC's Executive Vice President of Global Marketing and Customer Quality. David will start things off by walking you through EMC activities and financial results for the quarter. Joe Tucci, will then spend some time discussing his market outlook, EMC's execution of the strategy and the progress we are making towards our annual targets. After the prepared remarks, we will then open up the line to take your questions. Today's slides contain important information that is necessary to understand our results and commentary. We encourage you to view them on EMC's website at www.emc.com. An archive of the audio and slide presentation will also be available following the call. As always, the call this morning will contain forward-looking statements. Information concerning factors that could cause actual results to differ can be found in EMC's filings with the US Securities and Exchange Commission. In addition, all of the numbers we discuss today will be presented on a GAAP basis, unless otherwise indicated. For those of you interested in analyzing the non-GAAP numbers, we continue to provide a schedule in the press release that will help you adjust the GAAP results for stock option, restricted stock, and amortization expenses. With that, it is now my pleasure to introduce David Goulden. David?David Goulden: Tony, thank you. Good morning and thank you all for joining us today. I am going to walk you through our Q1 2007 financial results. Looking across our business, we are pleased with our performance this quarter and the progress we have made towards our 2007 operational and financial…

I would like to start by adding my welcome to all of you participating today's Q1 conference call. Thanks for your interest in EMC. Overall, I believe Q1 was a solid quarter for EMC. As always seems to be the case in Q1, we got off to a slow start, but we picked up ahead of steam in early March, which propelled us to a very strong close. I am very proud of how the EMC team has been executing our strategy in driving results, and I want to thank everyone in EMC for their continued hard work. In Q1, we intensified our focus in execution on our information infrastructure and virtual infrastructure strategies, which were very well received globally by our customers. I am particularly pleased with the growth and momentum of our international businesses. Especially APJ, which grew 28% year-on-year as our new management team there continues to make progress and gain traction in this important region. Turning to the IT capital spending outlook for 2007, it is shaping up pretty much as expected. In Q1, we did see a slight caution on IT spending in the North America enterprise segment. And don't get me wrong, I do believe there is still plenty of IT spending going on in the US. The year-on-year increase is not quite as robust as it was last year, year-on-year. Conversely, in the EMEA and APJ regions we saw an up-tick in IT spending. So overall, we remain optimistic and believe we are on track to meet and hopefully beat our annual revenue, EPS and cash flow targets. Again, this was pretty consistent with the view we had coming into 2007. So, why do I feel so optimistic about 2007? Well, first and foremost, EMC's strategy, products, and solutions sets are squarely focused…

Thanks Joe. Before we open up the line for your questions, as usual, we ask you to try to limit yourself to one question, including clarification. This will enable us to take many questions as possible. So, thank you all for your cooperation in this matter. Laurie, can we open up the lines for questions please?

Yes, thank you. At this time, we are ready to begin the question-and-answer session. (Operator Instructions). Thank you. Our first question comes from Laura Conigliaro with Goldman Sachs. Ma'am, your line is open.

Great. Last quarter, you did talk about historical seasonality in order to give us a better sense of possibilities for the March quarter. If we extrapolate that, what you’ve just reported to the full year, we do get numbers that are nicely higher than the $12.7 billion target, granted you got a plus 9 after that. Is there some reason why we should be thinking that your seasonality will be noticeably different this year?

Laura, this is David. I think the seasonality will be in a fairly typical range. I think, if you look at what we told you last time, Q1, Q2, Q3, Q4, we did point out a few other things that helped us here, in Q1 a little bit in the currency, the large transaction, which we talked about in APJ. You need to factor those in and look into the overall year.

All right. Next question please.

Thank you. Your next question comes from Aaron Rakers with A.G. Edwards.

Yeah thanks guys, congratulations on a good quarter. I guess my question is on the operating expense side. It looks like in the first time for more than two years actually OpEx has come down. So my question is, what type of leverage can we think about in this model? And maybe set the stage for that by any update in terms of the 1,350 employees taken out of the company, how far are we on that and what OpEx structure looks like over the next several quarters?

I am going to turn that over to David. Aaron, this is Joe. I just want to say that, as we've said many times, we are incredibly focused on gaining leverage in controlling our operating expenses throughout EMC. But it is the major focus and it will continue to be a major focus, and that's why we are getting the results. And Dave, you can elaborate on the question a little more?

Yeah to give you a bit of color, Aaron, I'd say the one benefit here of the business unit focus is we really are able to look at the businesses and look at the expense ratios for each one quite carefully and manage that way as well as manage on a consolidated basis. You saw the improvement that we've made year-on-year when you pull out VMware and Security. Relative to the restructuring program, I don't want to give you a specific number, but I'll tell you that we're about a third of the way through that in terms of the overall targets that we've set for ourselves, albeit, clearly those were coming in towards the end of the quarter.

Thank you very much.

Thank you, Aaron. Next question please?

Yes. Dan Renouard with Robert Baird, you may ask your question?

Hi. Thank you. I wonder if you could give us some insight on the reference to the hardware gross margin, you referenced mix and Symmetrix there and CLARiiON being flat year-on-year. Maybe you can just give us a little bit more detail there in terms of what drove gross margin? Do you view it as a one-time or how would you view that gross margin for the products that are playing out through the year? Thanks.

Yeah, Dan, certainly. What I wanted to do is, clearly once you look at the numbers and get a little bit beneath the covers and do the kind of analysis that you will do looking at our services margins and taking software 80% or 85% and back into hardware. You would see that the hardware margins were down, which is what I wanted to point out to you. What I wanted to make sure is that you understood the reason for that. Obviously, margins can be down for a couple of reasons. If they are down because of basically pricing and margin compression for a single product line, that's a tough thing to recover from. And that's why I pointed out that's not the case for Sym and CLARiiON. So, this quarter typically a little bit of an atypically high mix of some of the lower margin products, some of the third party products that EMC resales Connectrix, and a few of those partially driven by the way that the quarter panned out from a bookings point of view. But also in terms some of the backlog changes that we carried from Q4 into this year or kind of drove that slightly a typically high mix. So, we do believe that during the year that mix will improve.

Thank you, Dan. Next question please.

Harry Blount with Lehman Brothers, you may ask your question.

Thanks. Joe you ran through the list of spending priorities and how EMC matches up with that. On the stay-tuned part of the software and service, you indicated you are going to launch the new product there. I wanted to tie that with your acquisition strategy. Last quarter you basically said, you're done with major acquisitions, do you still stand by that and therefore should we expect software and service primarily as an organic growth vehicle?

I think, Harry, the first part is what we were saying is, when you think of the backup recovery space and you think of the archiving space, we will have an alternative to customers rather than say, here is your hardware, here is your software, here is your services. We can charge by the drip and we will host all that for you on one of our premises and one of our partner premises. So that's what the service will look like. Those are the areas we'll be focusing on. In terms of how much we do ourselves, how much we do with partners and how much we do by getting a jump start, by doing a not huge but smaller acquisition that’s something I still want to keep to ourselves.

Thanks.

Thanks Harry. Next question please.

Shebly Seyrafi with Caris, you may ask your question.

Yes. Thank you very much. So last quarter, you talked about a typical percentage of annual revenue for the next quarter. Looking at the last three years, your Q2 has ranged between 23.7% of annual revenue and 24.3%. I am wondering if you could say that's a typical type of expectation you expect for the June quarter as well, and using the high-end of that range will imply about $3.1 billion.

This is Joe. I am going to take David off the hook. So maybe, you guys can do the math as well as we can and we try to get to you. We said that we expect this year to have fair seasonality. We stick by that statement, and you guys can do the math and come to your own conclusions.

Okay.

Next question please?

Paul Mansky with Citigroup, you may ask your question.

Great, thank you. I guess without trying to put you on the hold for any type of specific guidance on Q2, which obviously you are not providing. But maybe if you could just talk about trends that you have seen exiting the quarter and entering the new quarter on a geographic basis that we have seen continued softness in the US enterprise, Europe still continuing to show some strength as well as APJ on a normalized basis?

Well, obviously, I had it pretty much wrapped up in my remarks. When I say softness in the US enterprise, what I am saying is, again, the year-on-year growth is definitely what we are seeing so far less than it was, say in 2005 and going into 2006. So, we will see if that continues or not. And conversely, we do see the international markets year-on-year spending increasing. And overall balance, we think we are setup for that. I think the real opportunity for us is going to come in focusing down market. Clearly, those markets are growing faster than high-end or mid-tier storage, and clearly the margins are better there. When you get into the big accounts everything is a beauty contest with a bake-off and obviously, the companies use their size to get better pricing. So, it's a great part of the market, and we are just starting now to come out with our new product sets. And I think executing well on this is going to be a good opportunity for us going through the year. And that goes across all our markets and of course, that's where we got to invest in our channels and where we got to invest and continue to build out our lower-cost sales force. Well, that falls on Bill Teuber's shoulders now. And as we do that well, I think that's one of the things we are looking for. So, I think the geographic picture you've got. And I think I wanted to put in where we think if we execute well with the products suites we have coming out, it can be opportunity for us.

Thank you for that.

Thanks Paul. Next question please?

Yes. Ben Reitzes with UBS, you may ask your question.

Yeah, thanks. Dave, could you talk a little bit more about free cash flow? According to my calculations, I am seeing about $0.28 in the quarter, something in that range, double EPS. Free cash flow was an issue for you guys last year. It was little lumpy, and for a few quarters it was below EPS. It looks like you really got on the right track here. Can you talk about how free cash flow is looking this year, vis-à-vis your GAAP EPS estimate of $0.64?

Yeah, Ben, first of all, as I am sure you picked up from our comments on the call this morning and some of the things that we put in the proxy statements as well, free cash flow is a major focus for us this year. Up and down in the company, we've laid a focus upon it. We are looking at all the things that drive it. And we would certainly expect this years free cash flow to grow faster than EPS will grow. I don't want to range that, but certainly we are looking to have faster growth on free cash flow. I would say when you point out Q1, and I would kind of agree with your math in terms of calculating the per share calculation. Obviously, we do have the benefit from a significant reduction in taxes paid compared to last year. But even without that, it was a very healthy growth.

Thanks a lot.

Thank you, Ben. Next question please?

Katie Huberty with Morgan Stanley, you may ask your question.

Good morning. Joe, you talked about VMware as a driver of server virtualization. But how does that then impact the need for network storage? Many CIOs are talking about the need to step up the percentage of servers attached to storage over the next several years and we would just love your insights.

Well, first of all, I hate to categorize. So, I think we are doing VMware to server, so we categorize it only as server virtualization. This is a platform, which virtualizes anything related to the X86 platform. But that being said; you are right, [we chose] a lot for server virtualization. And when that happens, you pretty much have to have network storage. Each of the virtual machines or each of the physical machines or virtual machines has its own storage. That storage has got to be pooled, which means networked. So obviously, that's a good trend for us. As you know, we work for VMware openly, and they have other storage partners, which as sitting over both companies, I encourage. Because I think making this a ubiquitous open platform is the best for us. But it does absolutely positively favor network storage and of course, that's where we have a 100% of our focus.

Thank you, Katie. Next question please?

Yes. Toni Sacconaghi with Sanford Bernstein, you may ask your question.

Yes, thank you. Can you comment on your buyback? It sounds like your provision for this year of $1 billion would allow room for $500 million according to your current plan. That seems particularly light, given proceeds from VMware that are likely to be $1 billion or more and your expectation that cash flow is going to be a lot higher than EPS. Can you comment on your willingness to go above the billion and update us on what you believe is the required gross cash required to run the business?

I'm sorry a couple of questions in there. First of all just to be clear, I did say in my remarks that over and above the $1 billion minimum target we will look at returning some of the IPO proceeds to shareholders, potentially in the form of buyback, although we haven't finalized just that. So as we get close to the IPO, we can update people of our intentions. Obviously as we get more feeling for pricing ranges and value and cash inflows, etcetera. And then just to reiterate what we said about the cash we need to run the business as we look forward into 2007. That number is about $4 billion and it's made up of about $2 billion of cash. It is essentially certainly trapped a little bit in our overseas operations, $1 billion of flow we need to run the U.S. business, and then just about a $1 billion of cushion. So we really need about $4 billion, certainly the level I feel comfortable to keep the business operating. And then as I said, we will basically update the buyback outlooks when we get closer to the IPO.

Good morning. Next question please.

Tom Curlin with RBC Capital Markets, you may ask your question.

Good afternoon. On the recent announcements with Microsoft and Cisco, are we to take this as your strategy on service desk and support is simply to partner with Microsoft or will you do some similar things with companies like BMC or perhaps on your own from a service desk perspective? And also if that fits into your application management strategy, is it solely a Microsoft strategy, or is that a heterogeneous approach?

It will be more heterogeneous. Obviously we've done several things here. Most of that will be Microsoft, some with Cisco as you notice. That's primarily in the management space more than the service desk space. So I don't think we have done anything exclusive at all in the service desk space. So stay tuned, we'll continue to build out an open platform work with many companies.

Thank you.

Thanks Tom, next question please.

Bill Shope with JP Morgan, you may ask your question.

Okay thanks. Joe in the past, you have stated that you've refreshed products on the 12 to 18 months cycle, and it sounds like you reiterated that with your opening comments. Can you clarify where we stand with the Symmetrix business on this time-table particularly since we have had a few minor refreshes since the last major refresh? Just wondering where we start and looking at that 12 to 18 months time-table and whether or not that holds for the Sym business at least at this point in time?

Bill. Obviously, I know that answer. At least, you would hope that I would not answer, and I do. But I think, I just work against myself. What I wanted to get out there is, we have a pretty good handle on when the next round of major refreshes are in the high end. Obviously we just we've not longer refreshed our high end mid-tier, if you will, or mid-tier, higher end mid-tier. We know when our competitors in other words HDS, Hitachi and IBM will refresh, we'll have a good idea. Let's put it that way. And what I said, I'll stick with this. We are going to be very timely with our refresh. We will not be at a disadvantage, and I really said there are a lot of opportunities going to come as we come out with the next phase of CLARiiON and Celerra products, which go down market. And I think, there's massive opportunity there. So, more than that I don't want to say, because you do end up working against yourself.

Thanks Bill. We have time for one more question.

Thank you our final question comes from Kevin Hunt with Thomas Weisel Partners. Sir, your line is open.

Thank you. Couple, one clarification you mentioned on linearity. You kind of said the quarter started off slow, but then finished stronger. Was that a function of -- obviously you have software now a much bigger part of the mix. So, should we expect that that's going to be sort of the way things go going forward?

I hope not. I hope we can improve it a little bit, because we dig it off to a later than normal start. As I said, it just seems that every year I have been here Q4 was kind of a great calendarization and good place to do it. It seems rather easy in every Q1. We have to work a lot harder and I guess that's because we sell so much in Q4. The customers go through bit of an install cycle. But we have to work that. I think again, having more products to go down market. And working comp plans and everything else that we are looking at with our sales force to see if we can do, the kind of incentive, our customers on our sales force to pull orders is going to be in our benefit. Because obviously doing it the other way forces us to have higher inventory levels. And of course as David said, we are incredibly focused on free cash flow this year and that's a tremendous opportunity ahead of us. So, we've got to work those issues, and Kevin, we are not at all happy where we are. But I just wanted to give you a little bit history there to. So, you can tamper everything I said together and come to your own conclusion. Anyway, in final comments I want to thank everybody for joining us today. We think we are off to a good start. We believe we're very well positioned. In 2007, a lot of exciting product announcements, the VMware IPO is exciting, and thank you for your attention and we will keep you updated as always.

Thank you for participating in today's conference. The conference has concluded. Please disconnect at this time.