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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year Ended: December 31, 2002

 

Commission File Number 1-9853

 


 

EMC CORPORATION

(Exact name of registrant as specified in its charter)

 

Massachusetts


 

04-2680009


(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

176 South Street

Hopkinton, Massachusetts 01748

(Address of principal executive offices, including zip code)

 

(508) 435-1000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class:


 

Name of Each Exchange on Which Registered:


Common Stock, par value $.01 per share

 

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 


 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes x    No ¨

 

The aggregate market value of voting stock held by non-affiliates of the registrant was $16,584,800,093 based upon the closing price on the New York Stock Exchange on the last business day of the registrant’s most recently completed second fiscal quarter (June 28, 2002).

 

The number of shares of the registrant’s Common Stock, par value $.01 per share, outstanding as of January 31, 2003 was 2,185,904,746.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Information required in response to Part III of Form 10-K (Items 10, 11, 12 and 13) is hereby incorporated by reference to the specified portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 7, 2003.

 



 


Table of Contents

EMC CORPORATION

 

         

Page No.


PART I

ITEM 1.

  

Business

  

1

ITEM 2.

  

Properties

  

9

ITEM 3.

  

Legal Proceedings

  

10

ITEM 4.

  

Submission of Matters to a Vote Of Security Holders

  

10

PART II

ITEM 5.

  

Market For Registrant’s Common Equity and Related Stockholder Matters

  

13

ITEM 6.

  

Selected Consolidated Financial Data

  

14

ITEM 7.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

15

ITEM 7A.

  

Quantitative and Qualitative Disclosures About Market Risk

  

35

ITEM 8.

  

Financial Statements and Supplementary Data

  

37

ITEM 9.

  

Changes In and Disagreements With Accountants On Accounting and Financial Disclosure

  

80

PART III

ITEM 10.

  

Directors and Executive Officers of the Registrant

  

80

ITEM 11.

  

Executive Compensation

  

80

ITEM 12.

  

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  

80

ITEM 13.

  

Certain Relationships and Related Transactions

  

80

ITEM 14.

  

Controls and Procedures

  

80

PART IV

ITEM 15.

  

Exhibits, Financial Statement Schedules, and Reports on Form 8-K

  

81

Other Information

  

81

Signatures

  

82

Certifications

  

84


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FACTORS THAT MAY AFFECT FUTURE RESULTS

 

Our prospects are subject to certain uncertainties and risks. This Annual Report on Form 10-K also contains certain forward-looking statements within the meaning of the Federal securities laws. Our future results may differ materially from our current results and actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. Readers should pay particular attention to the considerations described in the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results.”

 

 

PART I

 

ITEM 1.     BUSINESS

 

General

 

EMC Corporation and its subsidiaries design, manufacture, market and support a wide range of networked storage platforms, software and related services. EMC products and services are designed to enable organizations of all types and sizes to manage, protect and share their information in the most efficient and cost-effective manner possible.

 

EMC Automated Networked Storage solutions unify storage networking technologies, systems and software to meet our customers’ storage requirements in Storage Area Network (SAN), Networked Attached Storage (NAS), Content Addressed Storage (CAS) and direct attached storage environments. These technologies enable our customers to manage many different types of information, including transactional, file-based and fixed-content data. As a result, our customers are able to reduce costs, improve business continuity, increase operational flexibility and productively manage their entire storage infrastructures.

 

The customers for our products are located worldwide and represent a cross-section of industries and government agencies. Our customers use EMC products and services in conjunction with a variety of computing platforms, storage systems and software applications that support key business processes, including transaction processing, enterprise resource planning, customer relationship management, data warehousing, electronic commerce and web hosting. EMC solutions enable them to consolidate, network and generate value from their digital information across heterogeneous storage systems, switches, hubs, servers and software.

 

We believe that our products and services enable our customers to realize higher returns on information and achieve competitive advantages.

 

We were incorporated in Massachusetts in 1979. Our corporate headquarters are located at 176 South Street, Hopkinton, Massachusetts.

 

Products and Offerings

 

We operate in the following segments: information storage products and information storage services, which are our principal segments, and other businesses. Information storage products are comprised of information storage systems and information storage software.

 

Information Storage Systems

 

Symmetrix Systems

 

We believe that our Symmetrix family of networked storage systems offers the highest levels of functionality, performance and availability in the information storage market. Our operating software for

 

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Symmetrix is Enginuity, which delivers advanced functionality in areas such as performance management; data integrity; system availability; security; and information protection, replication and sharing within the Symmetrix environment.

 

Since the introduction of the first Symmetrix model in 1991, we have continued to enhance and increase the capabilities of the Symmetrix family of systems, including increasing server and switch connectivity capabilities, improving performance, increasing capacity and adding advanced software functionality. In February 2003, we introduced a complete new line of Symmetrix systems, the Symmetrix DMX series. The new Symmetrix series is based upon our Direct Matrix Architecture that enables us to significantly and cost-effectively increase performance, availability and functionality of our Symmetrix systems. We believe that this architecture will enable us to continue to significantly increase the capabilities of our Symmetrix systems.

 

In addition to large-scale integrated systems, the Symmetrix DMX series also includes a modular high-end storage model, the Symmetrix DMX800. With the Symmetrix DMX800, customers are able to purchase Symmetrix storage capabilities in smaller increments and are able to deploy the systems outside data centers, thereby reducing acquisition costs, environmental costs and total cost of ownership. All of our Symmetrix DMX systems operate in conjunction with our open software products.

 

We intend to continue to enhance the Symmetrix family of systems with additional features and capabilities.

 

CLARiiON Systems

 

We believe that our CLARiiON family of networked storage systems, which is based on a modular design, delivers the highest levels of functionality, performance and availability in systems designed for the mid-tier market. Our operating software for CLARiiON is FLARE, which provides capabilities for managing, protecting and replicating information while improving total system availability within the CLARiiON environment.

 

Since our acquisition of Data General Corporation (“Data General”) and its CLARiiON products in 1999, we have continued to enhance and increase the capabilities of the CLARiiON family of systems, including increasing the server and switch connectivity capabilities, improving performance, increasing capacity and adding advanced software functionality. In 2002, we introduced a complete new series of CLARiiON systems, which includes the CLARiiON CX200, CX400 and CX600. With the CLARiiON CX series, we improved the speed, capacity and connectivity of our CLARiiON systems. This new series of CLARiiON systems allows us to address the requirements of a broader segment of the information storage market.

 

We intend to continue to enhance the CLARiiON family of systems with additional features and capabilities.

 

Celerra Systems

 

We believe that our Celerra family of NAS products offers the highest levels of performance and functionality in the NAS market. Our Celerra products allow users of an internet protocol (IP) network to store, access and update files. Our operating software for Celerra is Data Access in Real Time (DART), designed exclusively for high performance network files access.

 

Our Celerra products can either serve as a front end NAS connection for an externally attached Symmetrix or CLARiiON storage system, referred to as a Celerra CNS (Clustered Network Server), or can be integrated in a single enclosure with a CLARiiON storage system, referred to as a Celerra NS (Network Server). In 2002, we introduced the first Celerra NS model, the Celerra NS600.

 

We intend to continue to enhance the Celerra family of systems with additional features and capabilities.

 

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Centera Systems

 

In 2002, we introduced the Centera CAS system. We believe Centera is the world’s first storage system specifically designed for the requirements of “fixed content.” We define fixed content as information whose value lies in part on its unchanging nature, such as digital x-rays and other medical records, movies, check images and e-mail correspondence. Our operating software for Centera, CentraStar, incorporates content addressing intelligence that calculates a unique address derived from the content of every stored object. Centera eliminates the need for applications to be aware of the physical location of information, regardless of scale, from single-digit terabytes to petabytes, thereby simplifying the task of having applications access and manage huge numbers of objects. Centera ensures verifiable accuracy of the content for data integrity, authentication and other purposes.

 

Centera is integrated by third parties with their applications and generally sold as part of an integrated solution. As of December 31, 2002, we had more than 100 partners in the Centera developers program and more than 40 applications available to be used with Centera.

 

We intend to continue to enhance and improve the Centera system with additional features and capabilities, as well as add new partners to expand the number of applications integrated with Centera.

 

Connectrix Systems

 

Our Connectrix family includes high-end directors as well as departmental switches. These fibre-channel based systems significantly increase the connectivity between servers and storage systems in a SAN and provide the ability to centralize monitoring and control of information in a SAN. In 2002, we introduced several new Connectrix models, including three 2- gigabit directors and four switches, increasing the performance and connectivity choices of our Connectrix family.

 

Our Connectrix family of directors and switches are manufactured by certain third party original equipment manufacturers (“OEMs”).

 

We intend to continue to enhance the Connectrix family of switches and directors with additional features and capabilities.

 

Information Storage Systems Revenue

 

Revenue from information storage systems (including Symmetrix, CLARiiON, Celerra, Centera and Connectrix products) represented approximately 55%, 61% and 70% of revenues in 2002, 2001 and 2000, respectively.

 

Information Storage Software

 

Introduction

 

We offer highly innovative software that provides customers with superior information management, sharing and protection capabilities. EMC software includes: (i) platform-based software; and (ii) open software that manages EMC and other vendors’ products.

 

We support our software research and development efforts through a state-of-the art software development lab in Massachusetts and at other facilities around the world, and, from time to time, through acquisitions of complementary businesses or products. For example, in 2002, we acquired Prisa Networks, Inc., a developer of SAN management software (“Prisa”).

 

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Platform-based Software

 

Our platform-based software generally controls and enables functions that take place within the EMC system, such as replication, optimization and data movement. Examples of such software include TimeFinder, Symmetrix Remote Data Facility (SRDF), Navisphere, SnapView, MirrorView and Symmetrix Optimizer. In 2002, we introduced enhancements to our Navisphere, SnapView and MirrorView software products. EMC is the leading supplier of platform-based software in areas such as local and remote replication, which customers use to protect and share data.

 

We intend to continue to enhance our platform-based software with additional features and capabilities.

 

Open Software

 

Our open software strategy, AutoIS, focuses on the automation, simplification and openness of heterogeneous storage infrastructures. Our open software provides management and other capabilities for multi-vendor storage infrastructures. These products are designed to operate either with or without EMC storage systems.

 

During 2002, we introduced a new version of our ControlCenter family of intelligent supervision software and several new and enhanced software products for management of EMC and third party storage systems and network devices. Automated Resource Manager is the first multi-vendor end-to-end automated provisioning software, which currently automates the provisioning of storage for Symmetrix, CLARiiON and certain other storage systems. Additional ControlCenter application enhancements in 2002 include those to our SAN Manager, StorageScope, Common Array Manager and Replication Manager software. We also introduced PowerPath management software support for CLARiiON, expanding our comprehensive line of open software products (i.e. StorageScope and SAN Manager) that support Symmetrix, CLARiiON and other third party storage systems.

 

As a result of our acquisition of Prisa, we offer the VisualSAN family of intelligent supervision software for management of EMC and third party storage systems and networks devices, targeted primarily at the mid-tier market.

 

We intend to continue to enhance our open software with additional features and capabilities, introduce new open software products and broaden the scope of our open software products to manage additional non-EMC products.

 

Interoperability

 

We actively participate in the development of standards through our work with and support for the Storage Network Industry Association (“SNIA”) and other organizations. In 2002, we announced our commitment to make all of our software and systems compliant with the emerging Storage Management Initiative specifications through our work with SNIA. We also develop and offer a wide range of application programming interfaces (“APIs”), as well as underlying software technologies, which are used to improve heterogeneous management of storage and networked resources in a networked storage environment.

 

The EMC Developers Program makes many of our APIs available to third-parties to facilitate the development and sale of software optimized to interoperate with EMC and third party storage systems and software. Customers are then able to select from a wider range of software tools when deploying multivendor storage networks.

 

In 2002, we agreed to cross-license certain storage system APIs with Hewlett-Packard Company to facilitate each company’s development of management software. We also introduced three new APIs that support a wide range of EMC and third party storage systems and software. We also introduced a new API to enable other vendors’ software to use information managed by our StorageScope software regarding storage systems and

 

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other devices on a storage network. In 2003, we agreed with Veritas Software Corporation to exchange APIs for each party’s products. In 2003, we also agreed on a framework with Hitachi, Ltd. and its subsidiaries for exchanging technology in the form of storage-related APIs.

 

Through our multi-year investments in interoperability testing capabilities, open standards, software APIs and cooperative service agreements, we believe that we lead the industry in delivering open and multi-platform, dependable storage solutions for customers.

 

Information Storage Software Revenue

 

Revenues from information storage software represented approximately 23%, 22% and 16% of revenues in 2002, 2001 and 2000, respectively.

 

Information Storage Services

 

In 2002, our Services organization included professional services, customer support and global technical training, to offer customers a full range of expertise before, during and after their purchase of storage solutions from EMC or other storage vendors. With a worldwide staff of approximately 7,500 professionals, EMC Services, together with our global authorized services partners, provide consulting, assessments, implementations, integration, operations management, day-to-day support, maintenance, education and training to our customers.

 

Professional Services

 

Our Professional Services organization provides the expertise and services customers need to maximize their return on information assets. Areas of focus include networked storage, open storage management, data migration, business continuity and project management. Our consultants, technology experts and authorized services partners deliver to customers operational, financial and business impact analyses. They also design, integrate and implement information storage infrastructures. In July 2002, we expanded our professional services capabilities to include platform-independent, open storage consulting.

 

Customer Support

 

Our Customer Support organization supports EMC information storage solutions at worldwide customer sites 24 hours a day, seven days a week, 365 days a year. This is delivered through a combination of remote and onsite service, direct through us and our global authorized services partners. Automated remote support features designed into our information storage systems enable customer support personnel to continuously monitor, diagnose and resolve issues, wherever the product is located, often without the need for onsite service. Other remote support capabilities are also provided on certain of our software products.

 

To ensure that customers with multi-vendor storage network environments receive the highest level of support and the fastest issue resolution possible, we have, as of December 31, 2002, entered into cooperative support agreements with more than 120 vendors, including hardware and software companies.

 

Global Technical Training

 

Our Global Technical Training organization delivers instruction on our technology, our products and storage management job functions as part of the EMC Proven Professional Certification program. Courses and the certification program are available to customers, prospects and partners. Multi-vendor certification training is also available to employees. Training is worldwide in scope and employs e-learning and geographically dispersed classrooms, labs and testing centers.

 

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Information Storage Services Revenue

 

Revenue from information storage services represented approximately 20%, 14% and 7% of revenues in 2002, 2001 and 2000, respectively.

 

Other Businesses

 

Following our acquisition of Data General in 1999, we sold AViiON server products. In 2001, as part of our restructuring program, we stopped selling such products. However, we continue to support AViiON servers.

 

Revenue from other businesses represented approximately 2%, 4% and 7% of revenues in 2002, 2001 and 2000, respectively.

 

Markets and Distribution Channels

 

Markets

 

During 2002, we focused primarily on high-end and mid-tier markets. These markets are characterized by their varying requirements for storage-related features, functions and performance.

 

Distribution Channels

 

We market our products through multiple distribution channels. We have a direct sales presence throughout North America, Latin America, Europe, the Middle East, South Africa and the Asia Pacific region. We also have agreements in place with many distributors, systems integrators, resellers and OEMs in certain areas of the world. These agreements, subject to certain terms and conditions, enable these companies to market and resell certain of our systems and software.

 

Alliances

 

We have strategic alliances with leading software, networking and services companies. We intend to continue to form additional alliances. Our strategy is to work closely with these and other companies to provide added value to our customers by integrating our solutions with software and networking applications that customers rely on to manage their day-to-day business operations.

 

Manufacturing and Quality

 

Our information storage systems are assembled and tested primarily at our facilities in the United States and abroad. See “Properties.” We work closely with our suppliers to design, assemble and test product components in accordance with production standards and quality controls established by us. Our information storage software products are designed, developed and tested primarily at our facilities in the United States and abroad. The products are tested to meet quality standards established by us.

 

We employ a company-wide Total Quality Management and Continuous Improvement philosophy and have adopted Six Sigma and other quality methodologies to ensure that the quality of our designs, manufacturing, test processes and supplier relationships follow the same methodologies. Our manufacturing and test facilities in Massachusetts, North Carolina and Ireland are ISO 9000 certified. We also hold 12 additional certifications worldwide covering ISO 9000, ISO 14000 Environmental Management Standard Certification and Support Center Practices (SCP) certification for our software customer support centers. These internationally recognized endorsements of ongoing quality management represent the highest levels of certifications available.

 

Raw Materials

 

We purchase many sophisticated components and products from one or a limited number of qualified suppliers, including some of our competitors. Our products utilize industry standard and semi-custom

 

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components and subsystems. Among the most important components that we use are disk drives, high density memory components and power supplies. While such components are generally available, we have experienced delivery delays from time to time because of high industry demand or the inability of some vendors to consistently meet our quality or delivery requirements.

 

Research and Development

 

We continually enhance our existing products and develop new products to meet changing customer requirements. In 2002, 2001 and 2000, our research and development expenses totaled $781.5 million, $928.7 million and $783.2 million, respectively.

 

Backlog

 

We manufacture our systems on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from customers. We configure to customer specifications and generally ship systems shortly after receipt of the order. Customers may reschedule or cancel orders with little or no penalty. For these reasons, we believe that our backlog at any particular time is not meaningful because it is not necessarily indicative of future sales levels.

 

Competition

 

We compete with many established companies in the markets we serve. We believe that most of these companies compete based on their overall market presence and their ability to address customers’ broad information technology requirements. Certain of these companies also compete by offering information storage products or services, together with other products or services, at minimal or no additional cost in order to preserve or gain market share. We also compete with many smaller, less established companies in specific product segments.

 

We believe that we have a number of competitive advantages over these companies, including product, distribution and service. We believe the advantages in our products include performance, functionality, scalability, availability, interoperability, connectivity, time to market enhancements and total value of ownership. We believe our advantages in distribution include the world’s largest storage-focused direct sales force and our broad network of channel partners. We believe our advantages in service include our ability to provide our customers with a complete set of storage service solutions, encompassing both professional services and customer service for our information storage systems and software.

 

Seasonality

 

Although we do not consider our business to be highly seasonal, we generally experience the greatest demand for our products and services in the last quarter of the year.

 

Intellectual Property

 

We generally rely on patent, copyright, trademark and trade secret laws and contract rights to establish and maintain our proprietary rights in our technology and products. While our intellectual property rights are important to our success, we believe that our business as a whole is not materially dependent on any particular patent, trademark, license or other intellectual property right.

 

We have been granted or own by assignment approximately 700 patents issued by, and have over 600 patent applications pending with, the U.S. Patent and Trademark Office, as well as a corresponding number of international patents and patent applications. While the duration of our patents varies, we believe that the duration of our patents is adequate relative to the expected lives of our products.

 

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We have used, registered or applied to register certain trademarks and copyrights in the United States and in other countries. We also license certain technology from third parties for use in our products and processes and license certain of our technology to third parties.

 

Employees

 

As of December 31, 2002, we had approximately 17,400 employees worldwide. None of our domestic employees are represented by a labor union, and we have never suffered an interruption of business as a result of a labor dispute. We consider our relations with our employees to be good.

 

Financial Information About Segments, Foreign and Domestic Operations and Export Sales

 

We operate in three business segments: information storage products, information storage services and other businesses. Sales and marketing operations outside the United States are conducted through sales subsidiaries and branches located principally in Europe, Latin America and the Asia Pacific region. We have three primary manufacturing facilities: one in Massachusetts, which manufactures Symmetrix and Celerra systems for the North American markets; one in Ireland, which manufactures Symmetrix, CLARiiON and Celerra systems for markets outside of North America; and one in North Carolina, which manufactures CLARiiON systems for the North American markets and Centera systems for worldwide markets. See Note P to our Consolidated Financial Statements.

 

Available Information

 

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge on or through our website at www.emc.com as soon as reasonably practicable after such reports are filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). None of the information posted on our website is incorporated by reference into this Annual Report.

 

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ITEM 2.     PROPERTIES

 

As of December 31, 2002, we owned or leased the facilities described below:

 

Location


  

Approximate Sq. Ft.*


  

Principal Use


Hopkinton, MA

  

owned:

leased:

 

1,832,500

299,900

  

executive and administrative offices, research and development, customer service and sales


  
 
  

Franklin, MA

  

owned:

leased:

 

938,600

97,000

  

manufacturing


  
 
  

Milford, MA

  

owned:

leased:

 

53,200

353,000

  

customer service and research and development


  
 
  

Southborough, MA

  

owned:

 

551,800

  

research and development and customer service


  
 
  

Westborough, MA

  

owned:

leased:

 

285,700

739,970

  

research and development, sales and administrative offices


  
 
  

Apex, NC

  

owned:

 

387,900

  

manufacturing


  
 
  

Research Triangle Park, NC

  

owned:

 

170,900

  

research and development and customer service


  
 
  

Other North American locations

  

leased:

 

2,051,464

  

sales and customer service


  
 
  

Asia Pacific region

  

leased:

 

441,105

  

sales and customer service


  
 
  

Cork, Ireland

  

owned:

leased:

 

555,567

58,370

  

manufacturing, customer service, research and development and administrative offices


  
 
  

Europe, Middle East and Africa (excluding Cork, Ireland)

  

leased:

 

996,478

  

sales and customer service


  
 
  

Latin American region

  

leased:

 

78,900

  

sales and customer service


  
 
  

*   Of the total square feet owned and leased, 2,042,931 square feet was vacant and 510,741 square feet was leased or subleased to non-EMC businesses.

 

We also own land in Massachusetts and Ireland for possible future expansion purposes.

 

While we believe our existing facilities are suitable and adequate for our present purposes, we have and will continue to consolidate space worldwide as part of our restructuring programs implemented during the quarters ended September 30, 2001 and December 31, 2002. For further information regarding our lease obligations, see Note L to our Consolidated Financial Statements.

 

The portion of our business utilizing our manufacturing facilities is reported in our information storage products segment. Substantially all segments of our business jointly utilize our other facilities.

 

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ITEM 3.     LEGAL PROCEEDINGS

 

In April 2002, EMC filed a complaint against Hitachi, Ltd. and Hitachi Data Systems Corporation (together, “Hitachi”) with the International Trade Commission (“ITC”) and in the United States Federal District Court in Worcester, Massachusetts. The ITC complaint alleged that Hitachi engaged in unlawful activities by importing into the United States products that infringed six EMC patents. We asked the ITC to issue an injunction to block importation of Hitachi’s infringing products and in May 2002, the ITC voted to commence an investigation into our claims. The suit in District Court seeks preliminary and permanent injunctions as well as unspecified monetary damages for patent infringement. In June 2002, the suit in District Court was stayed, pending the outcome of the ITC action. Subsequent to the date we filed a complaint against Hitachi, in April 2002, Hitachi and Hitachi Computer Products (America), Inc. (“HICAM”) filed a complaint against us in the United States Federal District Court for the Western District of Oklahoma alleging that certain of our products infringe eight Hitachi patents and seeking preliminary and permanent injunctions as well as unspecified monetary damages for patent infringement. In July 2002, this suit was transferred to the United States Federal District Court in Worcester, Massachusetts. In March 2003, EMC and Hitachi jointly announced that the parties had entered into agreements whereby they agreed (i) to settle all pending patent infringement claims between EMC, Hitachi and HICAM, (ii) to cross-license their respective patents and (iii) to a framework for exchanging technology in the form of storage-related APIs. In accordance with the cross-license agreements, we will receive payments from Hitachi. The cross-license agreements expire at the end of 2007. On February 27, 2003, EMC and Hitachi filed a Joint Motion with the ITC to terminate the ITC investigation on the basis of the above-referenced agreements, and on March 11, 2003, the ITC judge signed an order terminating the ITC investigation. The parties intend to move to dismiss the district court actions referenced above once the ITC judge’s order has been accepted by the ITC.

 

On September 30, 2002, EMC filed a complaint against Hewlett-Packard Company (“HP”) in the United States Federal District Court in Worcester, Massachusetts alleging that certain HP products infringe six EMC patents. The suit seeks a permanent injunction as well as unspecified monetary damages for patent infringement. On September 30, 2002, HP filed a complaint against us in the United States Federal District Court for the Northern District of California alleging that certain of our products infringe seven HP patents. The suit seeks a permanent injunction as well as unspecified monetary damages for patent infringement. We believe that HP’s claims are without merit, and on October 1, 2002, we filed an amended complaint asking the court to declare that the seven HP patents are invalid and not infringed.

 

We are a party to other litigation which we consider routine and incidental to our business. Management does not expect the results of any of these actions to have a material adverse effect on our business, results of operations or financial condition.

 

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No matter was submitted to a vote of our stockholders during the fourth quarter of 2002.

 

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EXECUTIVE OFFICERS OF THE REGISTRANT

 

Our executive officers are as follows:

 

Name


  

Age


  

Position


Michael C. Ruettgers

  

60

  

Executive Chairman of the Board of Directors

Joseph M. Tucci

  

55

  

President, Chief Executive Officer and Director

David A. Donatelli

  

37

  

Executive Vice President, Storage Platforms Operations

David I. Goulden

  

43

  

Executive Vice President, Global Marketing and Business Development

Frank M. Hauck

  

43

  

Executive Vice President, Customer Operations

Mark S. Lewis

  

40

  

Executive Vice President, New Ventures and Chief Technology Officer

Erez Ofer

  

40

  

Executive Vice President, Open Software Operations

William J. Teuber, Jr.

  

51

  

Executive Vice President and Chief Financial Officer

Paul T. Dacier

  

45

  

Senior Vice President and General Counsel

 

Michael C. Ruettgers has been our Executive Chairman of the Board of Directors since January 2001. Mr. Ruettgers served as our Chief Executive Officer from January 1992 to January 2001 and has been a Director since May 1992. He also served as our President and Chief Operating Officer from October 1989 to January 2000, and as Executive Vice President, Operations, from July 1988 to October 1989. Mr. Ruettgers is also a director of Raytheon Company, a global technology and electronics company, and PerkinElmer, Inc., a diversified technology company.

 

Joseph M. Tucci has been our Chief Executive Officer and a Director since January 2001 and has served as our President since January 2000. He also served as Chief Operating Officer from January 2000 to January 2001. Prior to joining EMC, Mr. Tucci served as Deputy Chief Executive Officer of Getronics N.V., an information technology services company, from June 1999 through December 1999 and as Chairman of the Board and Chief Executive Officer of Wang Global, an information technology services company, from December 1993 to June 1999. Getronics acquired Wang Global in June 1999. Mr. Tucci joined Wang Global in 1990 as its Executive Vice President, Operations. Mr. Tucci is also a director of Paychex, Inc., a provider of payroll, human resources and benefits outsourcing solutions.

 

David A. Donatelli has been our Executive Vice President, Storage Platforms Operations, since November 2001. Mr. Donatelli served as Senior Vice President, Corporate Marketing and New Business Development, from April 2001 to November 2001, Senior Vice President, New Business Development, from February 2000 to April 2001 and as Vice President, New Business Development, from April 1999 to February 2000. He has also held a number of other executive positions since he joined EMC in 1987, including serving most recently as Vice President, General Manager of our EDM business from September 1996 to April 1999 and as Vice President of Global Alliances from February 1996 to November 1998.

 

David I. Goulden has been our Executive Vice President, Global Marketing and Business Development since July 2002. Prior to joining EMC, Mr. Goulden served as a member of the Board of Management, President and Chief Operating Officer for the Americas and Asia Pacific of Getronics N.V., an information technology services company, from April 2000 to July 2002, as President and Chief Operating Officer for the Americas of Getronics from June 1999 to April 2000, and in a number of executive positions at Wang Global, an information technology services company, from September 1990 to June 1999. Getronics acquired Wang Global in June 1999. Prior to joining Wang Global in 1990, Mr. Goulden spent ten years at Unisys Corporation in a number of international sales and marketing positions.

 

Frank M. Hauck has been our Executive Vice President, Customer Operations, since November 2001. Mr. Hauck served as Executive Vice President, Global Sales and Services, from April 2001 to November 2001 and as Executive Vice President, Products and Offerings, from June 2000 to April 2001. He served as Senior Vice President and Chief Information Officer from January 2000 to June 2000, as Senior Vice President,

 

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Business Integration, from July 1999 to January 2000, and as Senior Vice President, Customer Service, from November 1997 to July 1999. Mr. Hauck has also held a number of other executive positions since he joined EMC in 1990.

 

Mark S. Lewis has been our Executive Vice President, New Ventures and Chief Technology Officer since July 2002. Prior to joining EMC, Mr. Lewis served as Vice President of Worldwide Marketing and Solutions in the Network Storage Solutions Group at Hewlett-Packard Company, a provider of information technology products, services and solutions for enterprise customers. Prior to Hewlett-Packard’s acquisition of Compaq Computer Corporation, Mr. Lewis served as Vice President and General Manager of Compaq’s Enterprise Storage Group from January 2001 to April 2002. Prior to joining Compaq, Mr. Lewis spent 14 years at Digital Equipment Corporation, where he helped develop the StorageWorks product line.

 

Erez Ofer has been our Executive Vice President, Open Software Operations, since November 2001. Mr. Ofer served as Senior Vice President and Chief Software Architect from June 2000 to November 2001 and as Vice President, Open Systems Development, from September 1998 to June 2000. He also served as Principal Design Engineer from 1995 to September 1998. Mr. Ofer has also held a number of other engineering positions since he joined EMC in 1993.

 

William J. Teuber, Jr. has been our Executive Vice President and Chief Financial Officer since November 2001. Mr. Teuber served as Senior Vice President and Chief Financial Officer from February 2000 to November 2001. Mr. Teuber served as Vice President and Chief Financial Officer from February 1997 to February 2000. He also served as Vice President and Controller from August 1995 to February 1997.

 

Paul T. Dacier has been our Senior Vice President and General Counsel since February 2000. Mr. Dacier served as Vice President and General Counsel from February 1993 to February 2000 and as General Counsel of EMC from March 1990 to February 1993.

 


 

Our President is elected annually to serve until the first meeting of the Board of Directors following the next annual meeting of stockholders and until such person’s successor is elected and qualified.

 


 

EMC2, EMC, AutoIS, Automated Resource Manager, AViiON, CLARiiON, Celerra, Centera, CentraStar, Connectrix, Direct Matrix Architecture, DMX, EDM, EMC ControlCenter, EMC Developers Program, EMC Proven, Enginuity, FLARE, MirrorView, Navisphere, PowerPath, SAN Manager, SnapView, SRDF, StorageScope, Symmetrix, TimeFinder, VisualSAN and WideSky are either registered trademarks or trademarks of EMC Corporation. Other trademarks are either registered trademarks or trademarks of their respective owners.

 

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PART II

 

ITEM 5.     MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our common stock, par value $.01 per share, trades on the New York Stock Exchange under the symbol EMC.

 

The following table sets forth the range of high and low sales prices of our common stock on the New York Stock Exchange for the past two years during the fiscal periods shown.

 

Fiscal 2002


  

High


  

Low


First Quarter

  

$

17.97

  

$

10.60

Second Quarter

  

 

12.25

  

 

5.90

Third Quarter

  

 

9.40

  

 

4.45

Fourth Quarter

  

 

7.70