Good morning, and welcome to the EMC Second Quarter 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 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 second quarter of 2012. Today, we are joined by EMC Chairman and CEO, Joe Tucci; and David Goulden, EMC President and COO. 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. We are also 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 correctly incorporated into your models. This model is available as background in today's slides available for download in the investor relations section of emc.com. With that, it is now my pleasure to introduce David Goulden. David?

Thanks, Tony. Good morning, everyone, and thank you for joining us today. I'm pleased to report that we achieved our 10th consecutive quarter of double-digit revenue and EPS growth in Q2, with revenue up 10%, non-GAAP EPS up 11% and free cash flow up 36%. Our ability to deliver these strong results is linked in large part to our strategy, which is to help companies use cloud technologies and Big Data assets in their trust environments. In spite of what is clearly an unsettled macro-environment, our solid results this quarter are a testament to the soundness of our strategy, the flexibility of our business model and the ability of our team to execute. As usual, Joe will comment more on the environment and what we're hearing from our customers, but it's pretty clear that things have gotten a bit weaker over the last few months. We all read the same headlines about Europe, concerns about slowing in China and the U.S., tight government spending, et cetera, and these are having an effect. While not immune to economic pressures, we do believe that important customer priorities such as virtualization, storage and security will continue to grow faster than IT overall. Customers need to continue to drive their businesses forward, improve competitiveness and reduce costs, and these are the areas where they will continue to invest. This is evidenced in our Information Storage business where we grew 7%. Within this number, our reported storage product revenue growth was 3%. However, this product number includes other storage product revenue, some of which is outside of our strategic storage offerings. The biggest line in this other storage product bucket is third-party products that we resell, and another meaningful element is our consumer products business. In fact, the consumer products business was the biggest drag…

Thanks, David, and a warm welcome to all of you who have joined us for today's call. Thank you very much. I would like to take a moment to publicly congratulate David on his promotion to President and Chief Operating Officer of EMC. The board and I are extremely confident in David's abilities and the people of EMC are solidly behind him. We know he will do a great job. David, as always, it's a pleasure working with you. I would also like to sincerely and deeply thank Paul Maritz and Pat Gelsinger for the many, many contributions they have made towards the success of VMware and EMC, respectively, over the past several years and congratulate them as they take on their new roles. I look forward to continue to work closely with both of you also. Focusing back on our Q2 results and accomplishments, I am pleased with our performance and our execution. We maintained double-digit top line growth, produced leverage on the bottom line and focused on our customer's success and satisfaction. Given the choppy global economic environment, these accomplishments were quite noteworthy. I'd like to congratulate and thank the more than 55,000 people of EMC and VMware around the world who produced these financial results while remaining dedicated to our customers. Well done. I would now like to comment on what we are seeing in the global economy and its impact on IT spending. On the macro front, pretty much everywhere in the world we are seeing more caution and more scrutiny before any decisions to procure any IT product or service is made. There is an air of uncertainty that permeates the world stage right now. Customers want to ensure that they will get a good return on their investment in a shorter time frame. Despite…

Thanks, Joe. [Operator Instructions] We thank you all for your cooperation in this matter. Operator, can we open up the lines for the first question, please?

[Operator Instructions] Our first question today comes from Ittai Kidron with from Oppenheimer. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: Joe, maybe you can talk a little bit more about Europe. You mentioned north being a little bit better than the south, but could you talk about the evolution through the quarter, what have you seen? And in your assessment when you're looking at your customers in Southern Europe, how long do you think they can kind of hold out on spending before things kind of catch up to them and they have to, whether they like it or not, spend on storage, data still grows downturn or not?

Well, Ittai, first of all, the customers in Europe are spending, they're just not spending as much. If you -- and a lot of the difference in -- several points of the difference was currency, I think. It 6 points of difference, I think. At -- with -- at constant currency, we grew 5% in Europe, and of course in reported it was minus 1%. So a lot of it -- a lot of the headwinds in Europe is currency, and from the news today it looks like that's continuing. So there is a drive in Europe for sure, just like there is here, for productivity. And if we can help customers with their productivity, as I said, gain competitive advantage, help control costs, get more intimate with their customers, they are investing. What they're doing is they're taking longer to invest, that they're being like the good carpenter, they're measuring twice, cutting once. And obviously, they're being -- they're buying just exactly what they need and not buying in excess. So it's not that we're down on Europe by any means, but it is we are feeling the effect. And I think this will be with us for a while. I don't think this is a short-term phenomena. And that causes you to have things that are more back-end loaded because it just takes longer to get through all of the approval cycles. So I think all of those things kick in. But Europe is not just laying flat doing nothing, they are spending.

Thanks, Ittai.

Our next question comes from Brian Marshall with ISI Group.

Specifically with respect to cloud storage, public cloud storage business, small as that is, and as, well, there's more open APIs out there, obviously these -- a lot of these infrastructures are home-grown IT kind of taking an NFS, some in JBOD. Can you talk a little bit about, as this growth kind of ramps up pretty quickly here, what the impacts to EMC will be and other traditional enterprise storage vendors over time and how you might offset any migration of Tier 2 workloads that you might see there over time?

Well, as you saw, Brian, the first market I mentioned in terms of high growth for us was to service providers, so there's a concept out there that we're not selling -- they're all home growing their own, and that's simply not true. If you look across our line of -- we have a VMAX specifically for service providers. There's a lot of interest in Isilon, scale-out; tremendous interest in Atmos and in -- and also VNX. So we are -- and so it is a big market for us, and if you look at that market collectively, we're doing actually quite well in it. So we believe that our strategy of having a play both inside building cloud, inside customers' data centers, the private cloud, and working that in conjunction and building out a big ecosystem of public cloud providers is a winning strategy. And so far, that's working quite well. And we're going to keep pushing. And you see, the growth of some of these products, like Atmos, is pretty impressive.

Thanks, Brian.

Our next question comes from Aaron Rakers with Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: I want to dive into the gross margin a little bit. David, you had mentioned several different times about the mix towards the VMAX, to the new high-end platforms, and referencing the software richness of that platform, Unisphere, as well as extending FAST functionality out to heterogeneous environments. Just curious, as that ramps, should -- does that new platform bring with it a richer mix from a gross margin relative to the prior platform? Any help on that would be greatly appreciated.

Sure. And as I pointed out on my -- in my comments, the biggest driver both year-on-year and quarter-on-quarter in the improvement in gross margin is the mix shift towards higher-gross-margin products. And in that, obviously with us having a decent rebound in the Symmetrix product line, that helps a little bit in the gross margin particularly on the quarter-on-quarter basis. And yes, I mean, our approach is to -- as more of the value in the storage stack moves into software, obviously wraps into appliances in our storage platforms, we'll try and increase the overall software content. And on the newer products, the software attach rate is typically higher, and that's part of our strategies. So that is a part of our ongoing program to maintain forward movement in margins.

Thanks, Aaron.

Our next question comes from Kulbinder Garcha with Credit Suisse. Kulbinder Garcha - Crédit Suisse AG, Research Division: And just on the mid-end business, I think we saw a deceleration in revenue growth after several quarters of above 20% growth. Could you -- was that just all macro, how we come up against more difficult comparisons? And then a question for Joe, just on the Nicira acquisition, how does that strain the VC relationship, do you think, if at all?

All right, thank you. Let me start off with the mid-tier. So there are -- a few factors are going on in mid-tier growth this quarter. First of all, as we said last quarter, we did expect from Q1 to Q2 the growth in mid-tier to come down because of the stronger compare. If you recall, last year it was -- in Q2 was the first full quarter of VNX and there was a fair amount of pent-up demand for that, so that caused a little bit of a reduction in growth rates. Also, a couple of other factors. Europe is actually overweight from a mix point of view towards mid-tier. So a higher percentage of total revenues are in Europe for mid-tier given the nature of that market. And of course with euro -- with Europe being down because of the economy, of course, with the euro effect, that has a slightly bigger impacts on mid-tier than it did on the overall business. A couple of other comments: The channel in mid-tier remains strong, which is important for us. All the key major parts of mid-tier family, the VNX Family, BRS, Isilon, all grew. And then if you look quarter-on-quarter, mid-tier actually grew 3%, which is quite respectable. So when you kind of put all that together, that's really the story on mid-tier. And finally, I think, when the dust settles and you look at our 10% and you look at how others are going to wind up reporting this quarter for that segment of the marketplace, I think we're going to look pretty good.

Yes, on the Nicira front. And obviously, I should say Nicira and the VX land front, which together are VMware's initiatives in the SDN arena. Paul Maritz made it very clear yesterday, and I'll second what he said, that our strategy with Cisco is very important and continue to play very much with Cisco. There's a tremendous amount of opportunity where Cisco can add their hardware layer, their software layer, their firmware layer and their ASIC layer, and we think this is not a one's -- a one versus the other. I think it -- we're -- doing these well both together can give the new experience that the software-defined data center in total demands. And as such, both John Chambers and I and our teams remain extremely committed to the VCE initiative and joint venture.

Thanks, Kulbinder.

Our next question comes from Alex Kurtz with Sterne Agee. Alex Kurtz - Sterne Agee & Leach Inc., Research Division: Joe, could you just take us through the dynamics with Symmetrix and V-Max over the next couple of years? I know you've always talked about that being a sort of a mid- to high-single-digit growth business. As VNX is growing capacity, has that kind seen a kind of cannibalization on VMAX? So sort of a refresh on your views on that growth rate for that business.

Well, I still remain -- and I'll let David comment too. I still remain convinced that this is -- this will be a growth business for us, albeit in the single digits, mid to lower, mid-6 single-digit range. It is -- I think it's the functionality, the performance, the way auto tier storage are just critical to today's environment, cloud environments, as well as yesterday's environments. So I think we're well positioned. We're going to keep investing in it. I know there was a lot of worry last quarter when we had a decline. We said that, that was the effect of a very tough compare. We said that was the result of being 3 years since we announced the new VMAX. And we said point blank that, as much candor as I could, that we were going to have a significant VMAX relaunch at EMC World, which we did. And we said on the back of that, we believe that we would return to the growth rates that we predicted. So here we are.

Thanks, Alex.

Next in queue is Ben Reitzes with Barclays.

Could you talk a little more specifically about Isilon? What was that particular growth rate in the quarter? How's the momentum there? And what do you think will happen with demand once Mavericks is out?

All right, Ben, thank you. Let me take that. Isilon was the fastest-growing of our major mid-tier families. I'm not going to break out the exact number, but it was a strong growth rate. As I mentioned in the call, we are seeing the traditional use case being strong. We're also seeing Isilon playing more in the data center and in more of the traditional file -- large file applications. I think that Mavericks is going to basically just expand the opportunity. The Isilon value proposition is really absolutely true scale-outs. And as we add more of those enterprise services, the TAM for Isilon is going to continue. So I think we're just going to kind of continue to keep that product moving forward. I think the growth rates are not going to slow down in the foreseeable future. It's doing very well.

Okay, thanks, Ben.

Next in queue is Bill Shope with Goldman Sachs.

There's been a growing amount of confusion over storage market share trends, with some calling into question the third-party data firms. And I think investors are really struggling to parse that organic and inorganic share shifts amongst the players. Can you help us understand what your data is telling us in terms of your market share trends? And in particular, how do you benchmark your performance versus NetApp over the past several quarters?

Bill, thanks. Ultimately, when it comes down to market share, it's all about math. I mean, you just need to get the math right. And I think there's been a little bit of confusion because of -- comparisons have included organic and inorganic growth, et cetera. The way to look -- the way we look at it is really very simple: We think the right way of looking at growth is, first of all, to kind of not break out individual products but look at the broad market performance of the different businesses. The other thing is to make sure you include a true what we would call apples-to-apples growth rates, so you include all the revenues from acquired companies as if you acquired them in prior periods. And then once you do that, here's how the math works out, it's really quite simple. If we look at NetApps and we look at the last 4 quarters of growth rate, including the guidance for their current quarter, their 4-quarter growth rate average is 4%. If you look at our business -- and by the way, that 4% includes services that have been growing faster than their products. If you look at our business and you just look at the mid-tier product category alone, that same 4-quarter apples-to-apples growth rate is 19%, and if you want to really stretch the case and include Symmetrix and include all of our storage products, it's 12%. So it's either 12% or 19% against 4%. I think that's the math.

Okay, it's very helpful. Quick follow-up, if I could. It looks like the new VMAX cycle's pretty much on track with historical cycles. But how should we think about that over the next few quarters, the ramp's impact on margins and revenues relative to prior SIM cycles? And how do you think the macro-environment may influence that adoption curve?

Well, Bill, obviously, as I mentioned, we're actually very pleased with the adoption rate of the new family, which as you know is the 10K, the 20K and the 40K, with about 1/3 of the new systems revenue this quarter coming in from that new family. So we're getting out of the gate a little bit faster. I think that next quarter we'll probably get closer to 50%. So we've always said it takes between 2 and 3 quarters to get to a 50% transition on a new family. It looks like, in this case, we'll be there a little sooner. And relative to the macro, nothing really to add. As Joe said, it's impacting everybody, but we've been executing well against that so I don't think that particularly is a dynamic against the VMAX transition rate.

Next in queue is Keith Bachman with Bank of Montreal.

I had a question on September. And David, specifically for you, if you could talk about within the context of the overall guidance for the year of $22 billion, is it your anticipation that September relative to June, any comments there on the sequential patterns? And then as part of that, for the overall operating margin guidance within -- the guidance was 24%. It would appear that you're anticipating that operating margins will be down sequentially in the September quarter, assuming a normal December bump. Is there anything that you want to call out? I would think that margins would actually increase with the VMAX ramping, but anything that you would want to call out for the operating margins in the September quarter or otherwise?

Keith, we're really going to try and not get into talking around individual quarters, obviously with we've done for the first half and what we guide to for the second half. The math for the second half is relatively clear. Europe is in an environment that is typically, as you know, being more impacted. September is typically the weakest quarter for Europe, so that's one of the factors to bear in mind. But beyond that, we're not really going to get into the dynamics between Q3 and Q4. We are clearly expecting a stronger Q4. And we're expecting a degree of budget flush in Q4 consistent with prior years to get to the overall number.

Okay. Well, then, perhaps I'll just get a follow-up in there on the -- Joe, for you, on the server side, if you could talk a little bit about the impact of specifically when you anticipate getting some revenues on VCache (sic) [VFCache] and/or the V Thunder side. In the corollary, if you could also talk about your views on the impact to storage spending as a consequence of more Flash on the server side.

First of all, we are getting revenue from VFCache. You've got to remember, what is important? There's 4 things that are important when you consider storage. One is, what performance do you need for that information? And again, that's going to change over time, so the performance you need for an -- for that particular piece of information today might be less than the future usually is: the persistency of that information, the longevity of that information and how much you want to share that information. The answer to those questions tells you where to place your storage and what type of storage to use. We have software that seamlessly and agilely moves and fits that information across these storage types and medias that I just mentioned. And again, this is the key to when you talk about a software-defined data center. That's what you want to have happened. So it's not a "one size fits all" world, that's kind of yesterday's paradigm. The cloud paradigm is basically saying, what does the application need? What does it need to meet my SLAs? What does it need to meet my policies? And then, what type of device am I going to select, okay, what type of media? And then, where am I going to place that media? So I could take the storage and I could put it on a PCI card and put it right into the server. I can put it on the server side of the network, in a project like we have, like Thunder. We can put it, of course, in arrays and we can put both Flash -- memory Flash and storage -- spinning storage devices, media devices, in those arrays. And that's where we're playing. And we're all automating it through our FAST technology, and that's basically going to be root. I talked about one of the roots of the software-defined data center: How do you do that automatically? That's where we're spending our money. So it's -- that's the way we're playing the game, and a lot of the other stuff is just the bunk.

Thank you, Keith.

Next in queue is Amit Daryanani with RBC Capital Markets.

I just have a question. If I look at the reiteration of the 2012 revenue guide, this implies you've got about 53% of the total revenues in the back half of the year, which is about what you've done for the last few years. And so I'm just trying to connect the dots between an essential reiteration of the guidance seasonality in the back half versus your commentary that demanded that you down-ticked on a macro basis in the last few months. Is there a delta? Is there a market share shift that you expect to be extremely in your favor? What's driving seasonal expectations still for the back half?

Actually, one of the key things we talked about is that we really saw these increased economic pressures in Q2 and we looked at the growth rate we achieved in Q2 and we kind of look at what customers are telling us about the rest of the year in light of these current economic headwinds, and that's how we get to $22 billion. If you do the math against the seasonal average, you'd actually get to slightly above $22 billion. The way we looked at it, if you just apply the seasonal math, you might get nearer to $22.3 billion. But to your point, Amit, things are a little tougher than they were in Q1 so that's why we feel the number, $22 billion, is kind of where the -- our expectations come out.

Thanks, Amit.

Next in queue is Maynard Um with Wells Fargo.

I wonder if you can talk a little bit more about the competitive environment. You talked about Isilon presumably taking share from NetApp. But any other detail where and from whom you're taking share, or is it primarily NetApp? And just related to that, how to -- how do you think about pricing environment going forward, particularly if you continue to take share from your competitors?

Maynard, let me take that. When we look at market share, there are really a couple of major buckets. There are the server vendors that collectively still have, depending upon how you want to count the math, between 30% and 40% of the network storage market. And then there are the more specialized people like NetApps, Hitachi, et cetera. And we kind of look at share in total, as opposed to focus upon one or the other of those. We mentioned how we do against NetApp because that question has come in recent times. We still think the right opportunity is to continue to take share collectively from the server vendors, and that's one of our biggest areas of focus for them. While storage is important, it's just not as important as it is for us. And as you know, this is again where technology and investment and dedication is important and that's where we tend to win and focus. So that's the bigger pool. And then from a pricing environment, it's tough out there, it has been all year. But as you see, because of the innovation, the quality, the differentiation of our products, we've been able to maintain our gross margin despite what continues to be a tough marketplace. So we feel good about our position there as well.

Thanks, Maynard.

The next question comes from Toni Sacconaghi with Stanford (sic) [Sanford] Bernstein. A.M. Sacconaghi - Sanford C. Bernstein & Co., LLC., Research Division: Perhaps this is for Joe. But I was wondering again if you could comment on the macro. If I look at VMware's results, they did equally well outside of the U.S., as they did inside the U.S. If I look at EMC, I think your growth rate in the U.S. was 14%. Outside the U.S., you were about 6% or 7%, so very wide differential. Perhaps you can comment on why that might be. And then related to that, at what level of IT spend or at what level of the euro do you begin to get uncomfortable with your current forecast? And how should we be thinking about that?

Want to take the euro part?

Yes. Toni, let me take the second part of that. As Joe said, we now expect IT spend about 3 or a tick less. And we're comfortable with that level. At the euro, when we put our numbers together -- first of all, let's just talk about the euro for a second and the impact that's having upon our business. If we look at Q2 quarter, Q2 year-end growth rates, it's about $250 million headwind year-on-year. And about $0.03 is the impact of the euro this year versus last year. Current spot rates, that includes -- then it goes up to like $280 million, $290 million on year-on-year impact and still about $0.03. And euro, at the level of where it was at quarter end and where it is now in that range, is consistent with our thinking about guidance. So those are the 2 parameters: 3 or a little less IT spending, and euro between where it is now and where it was at quarter end and again understand, relative to our growth rate, where it is now year-on-year, the euro is having about 150 basis points of year-on-year headwind growth on us. So when you kind of compare this year versus last year, you're going to take that into account. So those are the assumptions that go into the guidance that we've given. And then relative to EMC versus VMware outside U.S., I'll let Joe take that one.

Yes. I mean, Toni, if you look at our results and if you look at the Americas and you look at APJ, we grew 14%. If you looked at the BRIC plus-plus countries that we focused on, we grew 20%. So obviously, we're pointing to the problem in Europe. While we don't break out Europe per se, EMEA itself, Europe, Africa, Middle East, was down 1%. And if you look at the constant currency, it was up 5%. And we also said, Toni, that we did much better in the north than we did in the south. So where is it? So if you'll bring that down, where is the real problem? The real problem's in Southern Europe. And why is that a little bit different than VMware? I'd say you can always, on something like storage, push it off a bit. And there was a good question: So how long do you think customers can push it off? It's not forever because, eventually, information is going to grow, you need a place to put it. You need a place for it to live. You need it to be managed. So you can only put that off so long. But I think, on the shorter jam down the -- you can say, "Look, I'm just going to get a little -- I'm just going to push it a little harder, get a little higher, raise the -- always cause -- get productivity tools and make sure you raise your utilization rates. And that's what we're seeing. So it really is that one spot in the world that's causing our problem.

Thanks, Toni. We have time for one more question, and then we'll have a few concluding comments from Joe..

Final question comes from Steve Milunovich with UBS.

Regarding the cost and expenses, could you talk a bit about what you expect in second half component cost and particularly what's going on with disk drives? And do you expect R&D to continue to grow at about a 25% year-over-year rate?

Steve, on drives, good news is that the supply shortages are completely behind us at this point in time. We do start to expect price reductions in drives to start appearing in the second half, but it'll be a while before they get back to what I'll call pre-flood levels. But the good news is that we're beyond the availability shortages certainly when we look at our TAM and our needs. Relative to OpEx, we do expect that the R&D growth will continue to outpace revenue growth, but probably a little lower rate than we saw in the second quarter. But investment there is still critical for us. And as we said, this is a technology game, so that's what we're focusing our investment dollars this year versus the SG&A.

Thanks, Steve. Joe?

Well, thanks, everybody, for attending. We really do appreciate it. In summary, we've been very open. We said the economic headwinds in Europe are going to remain choppy at best and we expect this to continue for a while. But globally and on the IT front, we think we're strategically very well positioned and we have momentum. The customers are -- all importantly, are giving us permission to play in our extended strategic areas that we've talked about today. We are really blessed to have a great and dedicated leadership team with us with a really solid depth. And the people of EMC and VMware very much believe in the opportunity and in our future. So I thank you very much for being with us again, and I'll be -- we'll be talking to you soon.

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