Good morning, and welcome to the EMC Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce your host, Mr. Tony Takazawa, Vice President, Global Investor Relations of EMC.

Thank you. Good morning, welcome to EMC's call to discuss our financial results for the fourth quarter of 2011. Today, we are joined by EMC Chairman and CEO, Joe Tucci, and David Goulden, EMC Executive Vice President and CFO. To kick things off, David will comment on the results that we released this morning. He will highlight some of EMC's activities this quarter and he will discuss our outlook for 2012. Joe will then spend some time discussing his view of what is happening in the economy and IT, EMC's execution of our strategy and how EMC is helping customers navigate the massive transformation happening in IT to cloud and Big Data. After the prepared remarks, we will then open up the lines to take your questions. I would like to point out, today we are providing you with a very detailed projected financial model for 2012. This new model lays out all of the key financial assumptions that are the foundation of our 2012 expectations. We hope that you find this model helpful in understanding our assumptions and context and in ensuring that these expectations are correctly incorporated into your models. This model is included in today's slide presentation that you can see during the webcast and it is also available for download in the Investor Relations section of emc.com. In addition, please note that we will be referring to non-GAAP numbers in today's presentation unless otherwise indicated. A 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 of these are available on emc.com. 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's now my pleasure to introduce David Goulden. David?

Thanks, Tony. Good morning, everyone, and thank you for joining us today. I'm very pleased to report another quarter of record results for revenue, non-GAAP EPS and free cash flow. This excellent performance enabled us to achieve record results for the full year, driven by year-on-year growth in revenue of 18% to $20 billion and non-GAAP EPS of 20% and in free cash flow of 29%. Clearly, we're delivering on our ongoing commitment to strengthen our strategic position within the evolving IT landscape and on our triple play of gaining market share, reinvesting for growth and delivering leverage. These very strong results make us better prepared than ever to maintain our strategic agility and operational excellence as we head into 2012. As you know, fundamental changes are underway in IT right now, and it is our ability to identify and invest in these changes that has enabled us to achieve the solid Q4 and record full year results we're reporting today. The transformation of IT is occurring with customer shifts to private, public and hybrid cloud models. The transformation of business is also underway as new technology is enabling organizations to harness the power of Big Data in ways that were impossible only a few years ago. The transformation of EMC is ongoing as we continue our evolution of our company in order to remain at the forefront of these expansive opportunities and help our customers advance in this new age. As we look across our business, it is clear that EMC is well equipped for this era of transformation. To begin with, customers' cloud and Big Data objectives are best served by having the right information storage infrastructure. Intelligent automated storage is a critical component as is the ability to give customers options because the nature and use of…

Thanks, David. I'd like to begin by welcoming everyone to today's call. Thank you for joining us. I am pleased with our overall performance in Q4. Our results were strong and our balanced execution capped a very successful 2011. For the year, EMC's revenues grew 18%. And to be totally transparent, normalizing the effect of our acquisitions, we grew at 16% on an apples-to-apples basis while producing substantial leverage as our non-GAAP EPS grew 20%. I would like to congratulate and thank the now over 53,000 dedicated people of EMC and VMware for their hard work and dedication. It is truly a pleasure to work by your side. Now let's turn to the one thing that I'm quite sure is on everyone's mind. Namely, our thoughts and beliefs on the global economic environment and its impact on 2012 IT spending. We have no doubt that the global economy will remain choppy as it has for the vast majority of 2011, especially as it was in the second half. Within this economic landscape, we strongly believe that there will be real growth in IT spending this year. To put a number on it, we expect 3% to 4% growth in overall IT spending in 2012 over 2011. Putting this in context, this is about 1/2 of the 7% growth rate that we believe the IT industry experienced in 2011. But again, we see real growth. Within this 3% to 4%, there will be a lot of variability. There will be variability in geographies. We expect IT spending in Asia and on Japan, Latin America, Middle East and Africa, to be up 6% to 8% year-over-year. We expect IT spending in the U.K. and the Eurozone to be roughly flat. And we expect North American, Eastern European and Japanese markets to grow…

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

Our first question today comes from Aaron Rakers with Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Real quickly, I want to delve into the midrange product cycle. You cited 2,000 customers added just in the calendar fourth quarter alone. First on that, is that inclusive of both VNX and VNXe, and how does that compare relative to the 1,300 number you guys had thrown out last quarter? And basically, on VNXe, where do you think we're at in terms of really seeing the ramp into what you've characterized as a $5 billion addressable market in the past?

Let me take that. So yes, the 2,000 does include VNX and VNXe and is directly comparable to 1,300 last quarter, so you can see the number of new customers ramping. The other point I'd make just before I come back to your VNXe question, just to reinforce the point I made about VNX because I also made a very important point in my remarks. When you look at the full year, half of all the customers who bought VNX, and I'm talking VNX, not VNXe, were also net new customers for our unified line. Going back to VNXe. Absolutely on track, we've had a huge program inside the company this year, focused upon what we call the lower end of the mid-tier marketplace, and our growth rate in the lower end of the mid-tier market has been significantly higher than our growth in the higher end of the mid-tier market which is what we've been trying to do this year, so we're very pleased. A lot of those net new partners I talked about, the 1,700 new partners who came on during the year and sold our product for the first time, were also selling VNXe. Having said that, we recruited twice as many partners as actually started selling this year, so we still got work to do. But net-net, VNXe is on track.

Our next question comes from Ittai Kidron with Oppenheimer. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: David, I want to dig into these last comments that you mentioned regarding the 2,000 new customers for VNX. Can you give us a little bit more color on the competitive landscape in that area and who you're seeing most of the gains from? Like who are the 1, 2 vendors that you feel you're bidding more often than not then, with using this product?

Right, just to clarify again. So let me clarify again that the 2,000 was across VNX and VNXe, so that includes both. And Joe, you may want to comment on the competitive environment that we're facing there.

Let's put it this way. If you take the major players in mid-tier, we believe we took share across the board.

Our next question comes from Brian Marshall with ISI Group.

Joe, if you think the industry grew 7% last year and you grew 18%, that's about a 250% increase relative to the market. Next year, if you take -- or this year, I guess calendar '12, if you take the midpoint of the industry growth, 3.5%, and you expect to grow double digits, call it 10%, that's about 290% growth above the market. So your implied growth rate is actually 15% higher. So is that assuming that you guys continued to take share and that's the result there?

Yes, Brian, let me take that. I mean, obviously, there are a number of puts and takes, but absolutely, we do expect to continue to take share. We talked about, if you take the average of what Joe spoke about between 3% and 4% growth, 3.5.% for IT spending, 10% for us, it's close to 3x. So we are confident that we'll be taking share. Obviously, with VMware growing midpoint about 21%, the rest of business would be growing about 7%. That would also be about 2x IT spending average. So we're confident about our share gains. We've got a number of things in our favor this year. For example, we've got a full year of VNX and VNXe. Remember, last year, we went through a transition in the first quarter and into the first half. And also we've got the maturity now, the more mature channel that we spoke about, that we really only tried to put in place this time last year. So we do have a few things going for us that'll help us with those extra share point gains this year.

And Brian, the only color I'd add to that is what I said in my kind of prepared remarks. And that is that we're facing a very good, fortunately, we'll be faced with a very good product cycle and exciting launch schedule next year, so that gives us additional confidence.

Our next question comes from Deepak Sitaraman with Credit Suisse. Deepak Sitaraman - Crédit Suisse AG, Research Division: Joe and David, last year on the midrange, building out the channel was a key initiative for you. Can you tell us where we are in that process and how much more to go in terms of just channel partner on boarding? And maybe if you can give us some examples of what you're doing just to make your channel more productive.

Well, this is Joe, Deepak. There's a litany of things. Obviously, one of the things I've said is one of the things we had to overcome this year was, obviously, as we separated from Dell, that was a big channel. The other thing I pointed out early on was having Dell as a key partner made it very difficult to attract a variety and the kind of channel partners we need to go the other way. So what we're really focused on is saying, okay, the Dell divorce is finalized, so to speak, and we need you, we want you. And we've done all the things that you would think we've done. We've made sure that we're worried about the margins, not only of ourselves, but of our channel partners. We took our comp plans and made it favorable for our sales forces to partner with, and use the channels to become successful. When we build products like VNXe and VNX, channel-ready, adding new products into the channel like scaled-out Isilon and things we've done with Data Domain and Avamar, I mean all these things give breadth to the channel. Like everybody else in life, I don't think any company or any channel partner wants to be totally dedicated to one company, but they want to kind of narrow their scope and really go deep with their chosen partners. So we've really stepped up and done that role. So I think those are the key things we've done. Are we done? Never. We're going to continue to -- there's a lot of things we could do better and we're dedicated on this path, and I love the fact that we have a big and very successful and somewhat revered direct sales force and getting that direct sales force and channels -- it's not or, it's and channels -- to work together is a powerful, powerful go-to-market message and that's what we're going to do.

Our next question comes from Lou Miscioscia with Collins Stewart.

Maybe if you could just talk about the dynamics about the price increase. Obviously, hard disk drives vendors raised their prices, and you guys announced that you're going to raise some of your prices to your customers. I mean, what does it to do to revenue for you all in the first quarter, does it help a bit? And also maybe what it could do to your margin structure.

Lou, sure, let me take that. Obviously, this is an industry-wide problem that we're facing around disk drive availability. And as Joe said, because of our position and our market leadership, we're in a better position than both. But what you'll see is, that everybody in the industry basically has announced that they will be raising prices in the first quarter. We said we'd raise ours between 5% to 15%. It's different numbers across different drive types, obviously based upon the supply and demand situation. And first of all, again bear in mind, we said we'd get enough drives to get to our revenue plan in Q4, which we did. We also said that we expect the revenue in 2012 to follow a normal seasonal pattern, so we're not expecting a skewing in our revenue because of drives. We think we'll get enough each quarter to make our numbers. Relative to margin, we think we can offset the margin dollars that we're facing in terms of cost pressure with price pressure so we don't expect to have less margin dollars coming through because of price increases.

Our next question comes from Ben Reitzes with Barclays.

Could you guys talk about free cash flow for 2012? I know you're going to get a goal, but what are the puts and takes? You're expecting it to be above net income and there's also some funding that you need to do that doesn't get included in there, like funding, the repurchase of VMware stock to keep your stake at 80%. What do you expect that to be? And maybe the funding of the VCE, how much do you expect that to be and how much is to EMC shareholders?

Obviously, a multi-part question there. We expect growth in free cash flow from where we were last year. At 2011, we had more than $1 billion higher than our non-GAAP net income. Deferred revenue was the biggest driver of that, we expect continued deferred revenue growth in 2012, mainly from prepaid maintenance contracts, prepaid service contracts that are doing very well for us. So we'll give you a number when we next speak but, obviously, it's going to be north of $4.4 billion. It's going to be north of our 2012 non-GAAP net income. In terms of uses of cash, we have actually, as I mentioned, early this quarter, we spent $1.7 billion to retire the first half of our convertible debt, so that has actually happened. So that's a deduction from our year-end cash balance. I gave you the number that we would spend on EMC buybacks during this year, about $700 million. On the VMware side, we will, on the EMC side, we will reduce the amount we're spending on VMware buybacks and we'll move more of that load towards VMware. In total, we will buy back to keep EMC's ownership around 80%, but the EMC contribution of that will be less than it was in 2011. Oh sorry, the final question was VCE. The thing to VCE, which will be a combination of what we spend to cover operating expenses, plus what we spend to fund working capital. We're expecting our cash funding to VCE to be roughly similar in 2012 to what it was in 2011.

Let me just add that about VCE. What you really see here is VCE's cost because all the margin flows to the parent companies, Cisco, EMC, VMware, et cetera. So the more successful VCE gets, right, the bigger you'll see that number on the income statement. But remember, the benefit and the growth and as David said in his remarks, we're now over an $800 million run rate and we're approaching that $1 billion where we said we'd be quickly. And I don't think that $1 billion by any ways, shape, or form, near to max. We're going to go into multibillion, this thing has potential for multibillion dollars in size. So we do internally have a management plan which we drive then to where we give some of that credit back. So you shouldn't say this is a total of just use of cash without balancing on the other side of the income which comes through all the business lines in Cisco and EMC and VMware.

Our next question comes from Scott Craig with Bank of America Merrill Lynch.

A question for David. Hey, David, for 2012, when you look at the gross margin, can you talk maybe a little bit about some of the puts and takes that will happen on the actual gross margin line? And then as a clarification question on the hard disk drive situation, is that actually impacting revenue dollars in 2012? Because you talked about normal seasonality, but it does sound like you're seeing some impact.

Scott, let me take your hard disk drive question first. Basically, the challenges of availability of hard disk drives is just something that we're going to have to work around. And we did work around it in Q4, we plan to work around it in 2012. Just as the disk drive suppliers are doing a good job of working their supply chain, we're doing an excellent job of working our supply chain, trying to match supply and demand during the year. And whilst lead times will be a little longer for certain items than we would normally expect, we will get the drives to make our numbers. So it's really a question of extra work to do more work through the supply chain and working with our field and our customers to kind of satisfy their needs in a constrained market environment. So it's not affecting our seasonality, as I discussed in my comments. In terms of gross margins, when you look at the business, we do expect continued progression positively in gross margins, if you just kind of look at the relative growth of various segments of the business and the mix changes inside the business, we do expect gross margins to continue to improve for EMC in 2012. But as you know, we've guided to relatively constant operating margins from 2011. And in this environment, with the opportunity in cloud, Big Data and trust, we're going to make sure we are investing to drive future market share gains. So those are the puts and takes around gross margin and hard drives.

Our next question comes from Amit Daryanani with RBC Capital Markets.

Just a question on free cash generation. I think you obviously talked about greater than $4.4 billion next year. Could you just maybe help us understand why is the buyback dropping off rather dramatically from $2 billion in 2011 to $700 million? And given the strong cash position, is there any thought or appetite for a dividend at some point?

We talk about the buyback. We look at buybacks, obviously, over a multi-year period of time. So you really have to kind of average them out. So we did increase our buyback authorization last year from $1.5 billion at the start of the year to $2 billion. So we have a couple of things going on this year. Essentially, we kind of borrowed a little bit of our 2012 buyback into 2011. So if you put that $500 million back, they're really roughly similar. And then of course, bearing in mind I did mention that we're spenting $1.7 billion on repaying the first half of the convertible debt. So that's the way to think about buybacks. Think of it averaged out over a period of years. A period of years in this case, the 2-year average would give you roughly similar numbers. And then, Joe, you want to comment upon our thoughts on dividends?

Yes. Obviously, it's an active discussion on the board. I think in the last meeting or the one before that, I forget now, I said I truly believe it's a matter of when, not if. And obviously, what we try to do is return capital through buybacks and return -- make sure that we continue. And I'm still committed to this string of pearls approach we have, where we buy exciting new companies. We have a lot to do around the opportunity around cloud, Big Data and trust. And when we can buy these smaller acquisitions and grow them substantially into billion dollar businesses, I think that's a home run for everyone. So those are the -- the way we do it today and, obviously, there's no question in my mind at some point here we will add a dividend to that, too.

The next question comes from Alex Kurtz with Sterne Agee. Alex Kurtz - Sterne Agee & Leach Inc., Research Division: When you guys look at Isilon's performance in 2011, would you say that the salesforce penetration was pretty dispersed across the commercial and enterprise groups or was it really just segmented towards certain verticals? And sort of how do you see that progressing into 2012?

We had good success in both enterprise and commercial accounts. Obviously, there's areas where Isilon excels, some areas of life sciences, some areas of media, seismic processing. But again, we have seen a shift and again, into more what you might call enterprise or corporate customers. And as we have more and more software enhancements come out, I think you'll see continued more and more penetration of those kind of accounts, too. So we're very excited when we -- when Isilon became part of the family, and I can tell you without a doubt that we're even more excited today than we were when we bought it. So we've got great prospects ahead.

Our next question comes from Jayson Noland with Robert Baird. Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: Just to confirm that roughly a storage array or proposal is comprised 20% to 25% hard drives. And then I wanted to ask about Europe, Joe. Any additional color you can provide on Western Europe by country or end market.

What was the 25%?

Jayson, we don't get into the kind of details of our balm [ph]. I mean that's really between us and our supply chain. So we're trying to avoid getting into those numbers. Our supply agreements with our suppliers are obviously confidential between us and them, so we don't want to give away information that could impact what people think about them as well. So we'll stay away from that question. And then, Joe, Western Europe, just color.

Well, as we said, we're expecting kind of Europe in total, both the Eurozone and the U.K., to be relatively flat next year in IT spending, which puts a bit of a headwind because we did have decent growth this year. But again, we do expect -- and our plans are to grow, from an EMC perspective, in Western Europe. But you read everything I read. It's definitely more competitive and more difficult now than it was a year ago.

And Jayson, just color on what we saw in Q4 in Europe. You saw that we saw Europe growing about 6% year-on-year in Q4. And not surprisingly, we saw relatively stronger growth in Northern Europe and relatively weaker growth in some of the southern European countries, but we still saw growth in Europe which I think is good in this environment.

Our final question comes from Daniel Ives with FBR. Daniel H. Ives - FBR Capital Markets & Co., Research Division: Just can you give us your view in terms of financial spending for 2012? I mean, obviously, it's been strong. Just sort of your view baked into guidance, at least anecdotally?

When you say that, Daniel, are you talking about spending from the financial sector? Daniel H. Ives - FBR Capital Markets & Co., Research Division: Yes.

It's pretty interesting. We had a decent quarter in financials. Insurance did better than banking, but both markets did okay for us. And I think when you talk to that industry, it's kind of a tale of 2 cities. Obviously, there's a lot of pressures, but also, there's obviously a lot of regulation and a lot of productivity needs that these companies have. And of course, to meet these regulations that are happening around the world and to get the productivity gains, you've got to invest in IT. So we still see good opportunity in the financial sector broadly and there's a lot of caution around it. You've got to make sure you work hard to get your return on investment case very clear. But again, they invest wisely and they need productivity gains and they have to meet the regulations of the land, so we're fairly bullish on our opportunities in 2012. Well, thanks, everyone for joining us. We really do appreciate it. We truly believe that our cloud, our Big Data and trust strategies are well placed and are being very well received by our customers and partners. We have a lot of confidence in our strong 2012 product roadmap. We have a truly great team. Very importantly, we have momentum, and everyone in EMC is really excited about our prospects to grow and take share in 2012 and beyond. So we are in a pretty good place right now and confident, so thank you very much for joining us and we look forward to chatting with you in 3 months. Bye-bye.

This concludes today's conference. You may disconnect at this time.