Good morning, and welcome to the EMC Q1 2012 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 like to introduce your host, Mr. Tony Takazawa, VP Global Investor Relations of EMC.

Thank you. Good morning, welcome to EMC's Call to discuss our financial results for the first quarter of 2012. 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 our results and how these tie with the execution of our strategy. He will also discuss our outlook for the rest of 2012. Joe will then spend some time discussing his view of what is happening in the economy and IT, EMC's vision and strategy and how EMC is helping customers navigate the massive transformation happening in IT regarding cloud, Big Data and trust. After their prepared remarks, we will then open up the lines to take your questions. Please note that we will be referring to non-GAAP numbers in today's presentation unless otherwise indicated. The reconciliation of our non-GAAP comments to our GAAP results can be found in the disclosure today, in our press release, supplemental schedules and the slides that accompany our presentation. All of these are available for download within the Investor Relations section of emc.com. As always, the call this morning will contain forward-looking statements and information concerning factors that could cause actual results to differ can be found in EMC's filings with the U.S. Securities and Exchange Commission. Finally, I would like to point out that we are providing you with an update to our projected financial model for 2012. This model lays out all of the key assumptions and discrete financial expectations that are the foundation of our 2012 outlook. We hope that you find this model helpful in understanding our assumptions in context and in ensuring that these expectations are currently incorporated into your models. This model is included in today's webcast, and it is also available for download in the IR section of emc.com. With that, it is now my pleasure to introduce Dave Goulden. David?

Thanks, Tony. Good morning, everyone, and thank you for joining us today. I'm very pleased to report that EMC had a strong start to 2012. As you know, there's a major transformation happening in IT today, and the challenge for all of us is to make sure we correctly align our businesses to best take advantage of the opportunity the change provides. EMC's ability to correctly identify and invest in these changes has been a major reason for our success and enabled us to grow revenue 11% year-over-year this quarter with non-GAAP EPS up 19% and free cash flow up 67%. We are in a truly unprecedented time of transformation. IT is transforming with the shift to cloud computing. Businesses are transforming as they better leverage Big Data to deliver greater insight and uncover new opportunities. And the new threat environments is transforming the way customers think about trust. We at EMC are transforming our portfolio and operations to best take advantage of these major shifts. We believe that we have positioned EMC well, and our solid results are ongoing proof that we're executing on our strategy to address the major trends in cloud, Big Data and trust. Based on our strong start to the year and how we feel about our opportunity, we are now more confident about what we can achieve in 2012. Looking across our businesses, it's clear that EMC is very well equipped to help customers navigate the waves of change they are facing today. As a foundation for customers cloud and Big Data initiatives, information storage continues to thrive. With varied use cases and data types, EMC's broad and deep portfolio continues to prove to be best-of-breed. As a case in point, information storage continues the trend on solid growth with revenues up 7% in…

Thank you, David, and my thanks to everyone joining us for today's call. We appreciate your interest in EMC. Overall, I was very pleased with our execution and performance in Q1. I have always believed that starting at a new year with strength is incredibly important. The momentum and confidence it builds throughout EMC, our customers and our partners, is invaluable. I will talk about the economy and IT spending trends shortly, but we firmly believe that the 11% year-over-year growth rate we produced in Q1 was significantly greater than that of the IT market. And thus, we gained share. I would like to thank the more than 54,000 people of EMC and VMware for their passion to win and their dedication to our customer's success. In Q1, we saw IT spending in our business unfold pretty much as we expected and predicted. Overall IT spending growth was fairly good in the Americas and APJ, as our 11% and 20% year-over-year respective increases demonstrated. In Europe, I believe that overall IT spending growth was, at best, flat. For sure, the 6% year-over-year growth we posted in Q1 was better than average. And finally, we saw our highest growth rates in the rapid growth economies. Across our BRIC, plus 13 countries, we grew over 25% in Q1 versus the same period last year. Looking at Q1 year-over-year IT spending growth from a vertical industry point of view, we saw some softness in the banking sector. Average growth in retail, manufacturing, telco and information-technology verticals. Good growth in insurance, government, healthcare, education and media. And we saw rapid growth in and -- with service providers. Net-net, we continue to expect that global IT spending growth will be in the 3% to 4% range this year. And for sure, the IT markets for…

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

[Operator Instructions] Our first question today comes from Deepak Sitaraman with Credit Suisse. Deepak Sitaraman - Crédit Suisse AG, Research Division: Can you start by maybe just giving us an update on how drive constraints, how did it impact EMC in the first quarter and is it expected to have an impact in the second? And also, just if you could comment on how the price increases you put into place in Q1 were received by customers and whether you saw any orders pushed out of Q1 that could potentially benefit later quarters?

All right, Deepak. Let you take that answer. So first of all, kudos to the drive suppliers for responding rapidly to a very serious situation. And the quarter played out as expected. There were constraints, and there still are constraints, particularly in near-line drives. But we got the drives. During the quarter, we expected -- needed to make our numbers. Albeit, in the near-line space, they came in a little late in the quarter, end of February to early March. And of course, as we said on the last call, we had to do some balancing during the quarter to meet supply and demand. We do expect it to be constrained certainly throughout Q2. But again, we do have line of sight to the drives that we need. We think there'll be some incremental improvement in the second half but a certain class of drives will see constraint throughout the entire year. On the price increase side, as you know, we did put drive price increases up between 5% and 15% in early January. And whilst nobody likes a price increase, you can tell by our gross margins that we're able to capture the majority, if not all, of those price increases. And given the supply constraints, we don't expect there to be any significant reduction in prices in the near future. Maybe towards the end of the year when the whole situation becomes a little bit more normal. And then finally, in terms of orders, the good news is that although it took us a little longer this quarter to deliver some of the orders we took early in the quarter, we don't think we lost orders and we don't think that customers pushed out business because I think everybody's in the same boat when it comes to drive availability. And I think, if anything, we were better off the most.

The next question Aaron Rakers with Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Kind of sticking to the similar topic on the drive discussion. You guys obviously outlined that the price differential between Flash and all the way down to near-line SATA drives. Can you talk a little bit about the mix of those drive configurations? Where we stand today and where you expect to be a year from now. And also, on top of that, how should we think about that similar to the price discussion, the differential in the gross margin that EMC sees.

Okay, Aaron. In terms of -- yes, right. You are right. Right now, when you look at what we ship inside arrays, the majority -- the vast major part is between fiber and the SATA FAST type drives. Flash, today, is a small single-digit percentage. But the adage goes, in hybrid array, a little Flash goes a long way. And what I mean by that is that you can improve the performance of an array dramatically by having maybe less than 5% of the capacity in Flash and using FAST software, moving those hot data sets into the high-performing media types. So we see a small increase and a steady increase going forward in the mix of Flash, but we still think that the vast majority of capacity shipped for many, many years is going be fiber and SATA. Within that, a mix more towards SATA and less towards fiber. But we think that's pretty much how things play out. And from a margin point of view, as Joe said, we're fairly agnostic to the media type. In fact, different media types are in fact good for us because we can offer more choices, more price points to our customers. And we're getting, very broadly, similar margins across those media types. So the mix shift in media is not going to have a material impact upon our gross margins.

Our next question comes with Brian Marshall with ISI Group.

Obviously, the cloud market is growing very rapidly. And I think, Joe, you mentioned -- I think you used the word rapidly when you discussed the service router growth. We've been picking up that the private cloud adoption has grown much faster than the public cloud adoption and was wondering if you could give some commentary around here. Is this still an issue with respect to ELAs as well as security and data breaches? And if so, when do you think this is going to fixed where you could see public cloud adoption really start to grow at the rate of private cloud?

Well, I think, for a long, long time that the private cloud market is going to be much bigger than the public cloud market. That being said, the public cloud market will be the faster growing of the 2 because it's coming from a tiny base, if you will. But we do believe, totally, that the world is going to be hybrid. Certainly, as you heard on the VMware call last night, kind of the state of the art is that customers are now confident enough that they are, in significant numbers, working on virtualizing and cloudizing, if you will, private cloudizing their Tier 1 apps. And that probably has the most return and benefits for our customers and that's where a lot of the action is. But certainly, on their lower tiers and test and dev, I think over time, you'll see customers -- basically, when they get to a peak workload or a peak time of the year, they'll be pushing out some applications like test and dev and other applications to a public cloud, and that'll avoid them having to buy for peak of the day, peak of the day, peak times and help reduce and contain their overall IT cost. Which they can then plow back into doing more application work and get business benefits. That's a trend you're going to see. So it's not an either/or, we're in a world of both. You also heard Paul say yesterday that the progress that we're making in vSphere adopted clouds, and of course, I just told you that the public cloud business is probably the fastest growing sector of all kind of verticals, if you will, that I spoke about. So both sides of the consolidated company are doing well with the cloud trend and phenomena. And we think we're going to continue to push the heck out of it. But it's a world of both, it's and, not or.

Our next question comes with Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: You've won a lot of new customers in the mid-tier segment of the last several quarters. Can you talk about the penetration rates of those customers versus your expectations? And maybe similar color on the share of wallet opportunity here and how significant that could be for you EMC going forward.

Great, David, why don't you start and I'll...

Yes, Brian, I mean that's clearly be well in the whole locks of all the measure that we have success, and particularly the VNX Family, but also applies to Isilon and BRS, which are all significant new customer door openers for us. And those new customers are across-the-board in terms of size. So in some cases, we've been going after kind of small, medium businesses where, effectively, we become their internal IT storage device. But also many of those new customers are in large enterprises. So it's not a one-size-fits-all banner. Also, I mentioned that VCE has been a significant new customer door opener for us, in those case, in some of the very largest enterprises. So we think there's great potential and it's not all in the SMB marketplace. There's some new customers in the enterprise market which we're in for the first time in many years. And obviously, those are great potential growth markets for us going forward.

Yes, Brian. To drill down, on the specific question, you asked about mid-tier and new customers. This is the -- I always felt that the best way to look at growth in any market is on an apples-to-apples basis because obviously, acquisition effects can swing your growth rates. So on apples-to-apples basis, in the last 4 quarters, which would be Q2 of '11, Q3 of '11, Q4 of '11 and of course, Q1 of '12, and of course, that one year time span, we have grown well over, year-on-year, on an apples-to-apples basis, 20%. And a great thing is that we have really kind of hyped up our channel programs and are a full -- I believe 2/3 of those orders were heavily touched by our channel partners. And a lot of those customers, we don't give specific numbers, but a lot of those customers are new customers and this channel reach is really helping us. So obviously, this mid-tier thrust we have and really terrific set of best-of-breed products there really paying off.

The next question comes from Alex Kurtz with Sterne Agee. Alex Kurtz - Sterne Agee & Leach Inc., Research Division: When you look at the Symmetrix growth rate, obviously, it was up against a tough comp. How should we be thinking about that product going forward, in the enterprise, as well as the service provider market? I know it's had success in the service provider market in the past. Is that really where Symmetrix is going to grow? Provide the upside to the range longer term or do you see maybe a product refresh helping in the enterprise as well?

Alex, let me take this. First of all, we are very confident in the future of Symmetrix and VMAX. We expected VMAX to be down this quarter for 2 reasons. One is the one that David highlighted and you mentioned. It is a tremendous quarter we had one year ago. I mean, it's highly unusual that you would grow from a Q4 to a Q1, with Symmetrix, 12%. Highly unusual that you would actually decline from Q1 to Q2, 8%. Which is exactly what happened last year. That was just -- so year-on-year growth last year was 25%. So it was a really strong quarter and that is absolutely a major factor and we knew that, and that's why we planned the way we planned. But you hit upon the second reason, which is a major reason too. Look, life cycles are important in any product. But I'll tell you point-blank, the higher-end product you have, right? The more important a life cycle is. And if you recall, we launched the VMAX in April of 2009. So it is pretty close to exactly 3 years old. And clearly, our customers are expecting and wanting a new, even higher-end model and product. And all I'm going to say is we don't want to get ahead of ourselves and ruin the announcement, but I'm probably am going to do that anyhow. I'll tell you point-blank, the customers are expecting that will not be disappointed, and it's coming soon.

Our next question comes with Brian White with Topeka Capital Markets.

Joe, I'm wondering if you'll talk a little bit about the Greenplum opportunity. I know one of your colleagues was at a conference recently, highlighted the Greenplum opportunity is essentially what VMware had seen that type of growth over the last several years. So I'm wondering, number one, do you believe that? And number two, if you could give us a little more granularity on the trends you're seeing in that business.

First of all, we're very, very pleased with the trends in Greenplum. Rather than give our view, let me quote IDC, they just came out with a Big Data white paper and analysis for hardware, software and services and they did it from 2010 to 2015. I don't know if you saw it. But in 2010, they thought the Big Data market was $3.2 billion and they think it'll grow almost 40%, 39.4%, if memory serves me right, it was the actual CAGR they had in there. Between then, it'll be a $16.9 billion market in 2015. So there's a heck of an opportunity. Now if you look at the Big Data market, we're really playing in the highest end of that market. If you think of what a customer really needs to do to get an incredible competitive advantage, they want to take their internal structure data, which there's a ton of; they want to take their internal unstructured data, which there's multiple times as much of; and then they want to go to the public markets and public sources and get the massive amount of data that's available there and blend these all together and really use this data in real-time predictive analysis to give their companies a competitive advantage. And that's the area that we're playing in and we don't even try to go and say displace a existing data warehouse. We're going after the new stuff which is more complex and that's what products like Chorus and our Hadoop distribution and support is all about as well as, of course, our Greenplum database. So we're playing, I think, at the highest end of the pyramid. So if the entire pyramid is growing at 39.4%, ours is growing faster than that and we're growing faster than that. So we're very excited about the opportunity here. And as I said, I've always been -- one of the things I preach, and my team is probably tired of me saying it, but I really believe big companies should not do small things. Big companies should only do small things that are going to become big things. And in our case and our size, we should not enter a market unless we think we can do $1 billion plus there. And this is the case where I think that $1 billion plus will be light, we can do more than that and we'll do more than that. So I'm very pleased with our progress and that's kind of how we think about this opportunity.

Next in queue Amit Daryanani with RBC Capital Markets.

Just had a question. You guys discussed the Flash-based markets in your prepared comments. Could you talk about, maybe initially, the initial uptick of the VFCache? And I know EMC offers multiple options when consider deploying Flash, be it pure 0, VFCache or Thunder. I guess, which form factor do you see eventually having a broader uptake and do you think you have all the pieces internally to play in the Flash deployments or would you need to do some acquisitions there?

As opportunity would have it, Pat Gelsinger literally just walked through the door and to listen. And take us a second to give them the mic, which we will do, and I'll let somebody who knows a lot more about this subject than me answer the question. So Pat, when you get the mic hooked up to you, please.

VFCache. We really view Q1 as a seeding period for VFCache. Lots of early customer experiences, lots of trials, lots of environments and as I think David commented on his remarks, about Oracle database environments, SQL environments, et cetera. We've also started to seed them into the Internet properties as well, right? Which is where some of the other vendors have had early success. So Q1, clearly a lot of early interest from many, many customers across many, many industries. So we're quite excited about that. We're also starting to see the broadening of the product family as we go through the year. Clearly, a Thunder-like appliance is an easier product for an EMC sales force, right? And many of our customers don't want to be disrupting blade environments and others that occur. So we're actually seeing that there's a lot of interest for a Thunder appliance in many use cases, and as such, quite excited about this potential. We're just beginning, as we've indicated in Q2, we'll have the first early customer betas beginning for the Thunder appliance. With regard to last piece of the question, we are clearly seeing that this is a hot segment of the industry. We have organic activities, we have many engagements with other industry players. We're not going to make any indications toward broader, nonorganic plays. But we do see that this is great opportunity for us. And we've clearly accelerated our internal activities, both from the VFCache Thunder, our use of MLC cache as well as SLC Flash, as well as the hybrid array opportunities which, as Joe indicated in his remarks, is clearly -- the large majority of the industry will be hybrid arrays for the long-term.

The next in queue is Shelby Seyrafi with FBN Securities.

So you did very well in VMware and in security. But in storage, I think you were impacted by the high-end compared -- difficult compare and the product transition. But I'm wondering if there's another factor in storage. Competitive. Maybe you can talk about the competitive environment, especially in the channel versus say net app over the past 6 to 9 months.

Well, I've said it -- a little bit of it before, Shelby. Our 20% apples-to-apples growth, I think, is significantly fast than net apps. Significantly faster. And our channel buildup is great. I've said many times that there was certainly a negative side with our kind of divorce from Dell, if you will, and I said there's a significant upside and that it always -- the channel always reacted negatively to our Dell relationship. And without them, since we've had that divorce, we have really ramped up the channel and I really don't think there's any big company doing better in the channel right now than we are. We've made tremendous gains and get tremendous recognition. That's a big piece of our success and we're going to continue to hammer that home.

Next in queue is from Daniel Ives with FBR. Daniel H. Ives - FBR Capital Markets & Co., Research Division: Joe, could you just talk but, specifically, what you're seeing from Europe? I mean, from your conversations with customers, maybe compare it to where we were 3 months ago or thoughts going into the year.

Yes. I'll let Dave little handle a little bit of that, too. But I'll give you a little bit of color. A matter for fact, I was in Europe last -- I spent the week in Europe last week and I was in 3 different countries, U.K., Switzerland and Italy. And clearly, there's opportunity there, right? The things are not stalled. Clearly, everybody's worried about everything, whether it's the elections in France or Greek debt. I mean, everybody's got more than a few things to worry about. I know this conversation always come up in the business with CIOs and CEOs and COOs that I meet over there, government officials. But the private companies over there are still -- got their head down and they're moving forward and they have plans and they understand that it if they stay still, they'll go backwards. Because it's very tough to stay still in a competitive global economy like this. So there are investment opportunities and I do think that, at best, the IT spending will be flat. But if not, I don't believe IT spending will be down anything dramatically. I would say, less than 1% down to flat is where -- if I had to call it or place a bet is where I'd bet. So obviously, there's a lot of caution, everybody is looking over their shoulder. But there's also, in the business community, a lot of confidence in themselves. Not as much in the governments, but in themselves, and I think that bodes well.

All right, thank you. We have time for one more question and then a few concluding comments from Joe.

Our next question comes from Katy Huberty with Morgan Stanley.

I appreciate your comments around the incremental margin drivers you had in 2011, but the reality is the first quarter is, that was your lowest operating margin? And the guidance of 24% for the full year doesn't imply that much expansion as we move through this year. So can you just talk about what, other than conservatism, is driving that lower margin expansion?

Well Katy, I think you're exactly right. You do need to look at things sequentially. And what I'm really saying is that we expect gross margins to increase sequentially from Q1 to Q4 this year. I pointed out the sequential increase you saw last year, half of that was from the things that really we don't expect to reoccur. And just to put that, also into context, when I look at the 290 basis points of gross margin improvement we achieved, Q1 this year versus Q1 last year, about 1/2 of that improvement was also from the 3 factors which I mentioned, which would have occurring during 2011 that won't be occurring during 2012. So I do expect they'll be sequential margin improvement from where we are. Also, bear in mind that we've been pretty consistent upon our guidance for OpEx during the year. We said that we expect our SG&A growth to be in line, broadly, with revenue growth and we expect R&D growth to grow faster. So we do expect OpEx to continue to increase as a percentage of revenue, this year, as we move through the year. So you put all those together and you can trend to a number that's pretty consistent with what we've implied in our guidance, and those are really the moving parts.

Well, again, thank you for being with us today. Just kind of -- to summarize, we truly believe that our cloud, Big Data and trust strategies are right on. And they are opening up expanded opportunities with our customers and they're creating, exponentially, more excitement with our partner ecosystem. Our 2012 product roadmap is strong. We have a really great team. We have that momentum I spoke about, in my prepared remarks, and confidence within EMC that we can succeed. And we will talk you more about our strategy and products. And to that end, I would like to invite you to EMC World, it's always a place where we launch a significant number of products. And there's more than little bit of excitement there, so that's in May 20, and we invite you to join us. So again, thank you for being with us today and I wish you all the best. Bye-bye.

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