<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended: March 31, 1998 Commission File Number 1-9853
EMC CORPORATION
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2680009
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
organization or incorporation)
35 Parkwood Drive
Hopkinton, Massachusetts 01748-9103
------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(508) 435-1000
-----------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Common Stock, par value $.01 per share 497,667,753
- ----------------------------------------- ---------------------------------
Class Outstanding as of March 31, 1998
<PAGE>
-2-
EMC CORPORATION
Page No.
Part I - Financial Information
Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997...........................3
Consolidated Statements of Income
for the Three Months Ended
March 31, 1998 and 1997........................................4
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1998 and 1997........................................5
Notes to Interim Consolidated Financial Statements...............6-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations..................10-12
Part II - Other Information..............................................13
Signatures...............................................................14
Exhibit Index............................................................15
<PAGE>
-3-
EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................ $ 1,206,327 $ 954,595
Short-term investments ................................................... 348,081 419,262
Trade and notes receivable less allowance for doubtful accounts of $7,233
and $6,733, in 1998 and 1997, respectively ............................. 745,906 788,869
Inventories .............................................................. 425,990 404,660
Deferred income taxes .................................................... 36,225 37,095
Other assets ............................................................. 48,087 22,545
----------- -----------
Total current assets ........................................................ 2,810,616 2,627,026
Long-term investments ....................................................... 256,924 276,776
Notes receivable, net ....................................................... 13,519 20,013
Property, plant and equipment, net .......................................... 422,851 396,511
Deferred income taxes ....................................................... 15,832 14,174
Intangible and other assets, net ............................................ 150,217 155,609
----------- -----------
Total assets .................................................. $ 3,669,959 $ 3,490,109
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations ................................. $ 8,624 $ 7,665
Accounts payable ......................................................... 216,088 187,117
Accrued expenses ......................................................... 143,985 151,216
Income taxes payable ..................................................... 151,048 151,088
Deferred revenue ......................................................... 18,706 8,784
----------- -----------
Total current liabilities ................................................... 538,451 505,870
Deferred income taxes ....................................................... 45,688 45,353
Long-term obligations:
3 1/4% convertible subordinated notes due 2002 ........................... 517,500 517,500
Notes payable ............................................................ 33,338 40,954
Other liabilities ........................................................... 3,330 4,131
----------- -----------
Total liabilities ............................................ 1,138,307 1,113,808
----------- -----------
Commitments and contingencies
Stockholders' equity:
Series Preferred Stock, par value $.01; authorized 25,000,000 shares, none
outstanding ........................................................... -- --
Common Stock, par value $.01; authorized 750,000,000 shares; issued
497,667,753 and 496,792,608, in 1998 and 1997, respectively ........... 4,977 4,968
Additional paid-in capital ............................................... 684,344 670,297
Deferred compensation .................................................... (16,828) (12,738)
Unrealized loss on investments ........................................... (400) (9)
Retained earnings ........................................................ 1,857,471 1,711,356
Cumulative translation adjustment ........................................ 2,088 2,427
----------- -----------
Total stockholders' equity .................................... 2,531,652 2,376,301
----------- -----------
Total liabilities and stockholders' equity ................ $ 3,669,959 $ 3,490,109
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
-4-
EMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
Revenues:
Net sales ............................ $ 805,933 $ 600,900
Service and rental ................... 22,418 17,537
--------- ---------
828,351 618,437
Costs and expenses:
Cost of sales and service ............ 431,136 335,985
Research and development ............. 65,675 48,091
Selling, general and administrative .. 153,496 97,624
--------- ---------
Operating income ............................. 178,044 136,737
Investment income ............................ 22,507 11,684
Interest expense ............................. (4,730) (1,402)
Other income/(expense), net .................. (1,001) 2,097
--------- ---------
Income before taxes .......................... 194,820 149,116
Income tax provision ......................... 48,705 38,248
--------- ---------
Net income ................................... $ 146,115 $ 110,868
========= =========
Net income per weighted average share, basic.. $ 0.29 $ 0.23
========= =========
Net income per weighted average share, diluted $ 0.28 $ 0.22
========= =========
Weighted average shares, basic ............... 497,234 491,592
Weighted average shares, diluted ............. 535,120 509,706
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
-5-
EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 146,115 $ 110,868
Adjustments to reconcile net income to net cash provided/(used) by
operating activities:
Depreciation and amortization ................................ 43,530 26,241
Deferred income taxes ........................................ (453) 829
Net loss on disposal of property and equipment ............... 163 142
Tax benefit from stock options exercised ..................... 3,925 --
Changes in assets and liabilities:
Trade and notes receivable ............................... 49,295 (18,305)
Inventories .............................................. (21,330) (105,716)
Other assets ............................................. (25,650) (13,693)
Accounts payable ......................................... 29,193 42,534
Accrued expenses ......................................... (7,116) (18,830)
Income taxes payable ..................................... (65) 17,553
Other liabilities ........................................ 9,155 (2,644)
----------- -----------
Net cash provided by operating activities ............ 226,762 38,979
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment ....................... (54,974) (36,121)
Proceeds from sales of property and equipment .................... 4 135
Capitalized software development costs ........................... (8,014) (6,200)
Maturity/sale/(purchase) of short-term and long-term investments,
net ............................................................ 90,642 (294,542)
----------- -----------
Net cash provided/(used) by investing activities ..... 27,658 (336,728)
----------- -----------
Cash flows from financing activities:
Issuance of common stock ......................................... 4,469 4,087
Redemption of 4 1/4% convertible subordinated notes due 2001 ..... -- (65)
Issuance of 3 1/4% convertible subordinated notes due 2002, net of
issuance costs ................................................. -- 506,671
Payment of long-term and short-term obligations .................. (7,881) (7,814)
Issuance of long-term and short-term obligations ................. 1,224 124
----------- -----------
Net cash provided/(used) by financing activities .... (2,188) 503,003
----------- -----------
Effect of exchange rate changes on cash ............................. (500) (1,105)
Net increase in cash and cash equivalents ........................... 252,232 205,254
Cash and cash equivalents at beginning of period .................... 954,595 496,377
----------- -----------
Cash and cash equivalents at end of period .......................... $ 1,206,327 $ 700,526
=========== ===========
Non-cash activity--conversions of notes ............................. -- $ 140,682
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
-6-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
1. BASIS OF PRESENTATION
COMPANY
EMC Corporation and its subsidiaries ("EMC" or the "Company") design,
manufacture, market and support a wide range of enterprise systems and
software products and related services for the enterprise storage market
worldwide. EMC's products provide solutions for a wide range of customer
information storage requirements, from the highest performance mission
critical applications to extremely high capacity business support
applications. EMC's solutions integrate with major open systems operating
systems such as UNIX, Microsoft Corporation's Windows NT and International
Business Machines Corporation's ("IBM") OS400 as well as major mainframe
operating systems such as IBM's MVS. EMC's products are sold as storage
solutions for customers utilizing a variety of computer system platforms
including, but not limited to, IBM and IBM-compatible mainframe, Unisys
Corporation, Compagnie des Machines Bull S.A., Hewlett-Packard Company
("HP"), NCR Corporation, Sequent Computer Systems, Inc., Siemens Nixdorf
Informationssysteme AG, Silicon Graphics, Inc. ("SGI") and other open
systems and mainframe platforms.
ACCOUNTING
The accompanying consolidated interim financial statements are unaudited
and have been prepared in accordance with generally accepted accounting
principles. These statements include the accounts of EMC and its
subsidiaries. Certain information and footnote disclosures normally
included in the Company's annual consolidated financial statements have
been condensed or omitted. The interim consolidated financial statements,
in the opinion of management, reflect all adjustments (consisting only of
normal recurring accruals) necessary for a fair statement of the results
for the interim periods ended March 31, 1998 and 1997.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the entire
fiscal year. It is suggested that these interim consolidated financial
statements be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1997, which are contained in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 6, 1998.
2. INVENTORY
Inventories consist of:
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
Purchased parts....................... $ 25,677 $ 24,641
Work-in-process....................... 274,343 240,845
Finished goods........................ 125,970 139,174
-------- --------
$425,990 $404,660
======== ========
<PAGE>
-7-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
3. LONG-TERM OBLIGATIONS
In March 1997, the Company sold $517,500 of 3 1/4% convertible
subordinated notes due 2002 (the "Notes") . The Notes are generally
convertible into shares of Common Stock at a conversion price of $22.655
per share, subject to adjustment in certain events. Interest is payable
semiannually and the Notes are redeemable at the option of the Company at
set redemption prices (which range from 100.65% to 101.30% of principal),
plus accrued interest, commencing March 15, 2000.
4. NET INCOME PER SHARE
Net income for computation of diluted earnings per share includes an add
back of $2,523 and $533 for the three months ended March 31, 1998 and
1997, respectively, representing interest expense on the Company's
convertible debt securities outstanding in each period, net of its tax
effect.
Calculation of earnings per share is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
MARCH 31, MARCH 31,
1998 1997
------------- -------------
<S> <C> <C>
Basic:
Net income ............................................. $ 146,115 $ 110,868
Weighted average shares, basic ......................... 497,234,497 491,591,994
Net income per share, basic ............................ $ 0.29 $ 0.23
============= =============
Diluted:
Net income ............................................. $ 146,115 $ 110,868
Add back of interest expense on convertible notes ...... 4,205 888
Less tax effect of interest expense on convertible notes (1,682) (355)
------------- -------------
Net income for calculating diluted earnings per share .. $ 148,638 $ 111,401
Weighted average shares ................................ 497,234,497 491,591,994
Weighted common stock equivalents ...................... 37,885,113 18,113,918
------------- -------------
Total weighted average shares, diluted ................. 535,119,610 509,705,912
Net income per share, diluted .......................... $ 0.28 $ 0.22
============= =============
</TABLE>
<PAGE>
-8-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
5. ADOPTION OF NEW ACCOUNTING PRINCIPLE
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains and losses) in a full
set of general-purpose financial statements. This Statement requires the
classification of items of comprehensive income by their nature in a
financial statement and the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet. Financial statements for prior
periods must be restated.
The Company's total comprehensive income was as follows:
FOR THE THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
Net income ............................. $ 146,115 $ 110,868
Other comprehensive expense, net of tax:
Unrealized loss on investments ...... (293) --
Cumulative translation adjustment ... (254) (790)
--------- ---------
Total other comprehensive expense ...... (547) (790)
--------- ---------
Total comprehensive income ............. $ 145,568 $ 110,078
========= =========
6. LITIGATION
In August 1997, TM Patents, L.P. ("TM") filed suit against the Company in
the United States District Court for the Southern District of New York
alleging that the Company is infringing two patents and seeking
unspecified damages. The Company filed a motion to transfer the case to
the United States District Court for the District of Massachusetts and a
motion to dismiss the suit. The Company's motion to transfer was granted
with leave for the plaintiff to amend the complaint to overcome the
grounds for dismissal. In the amended complaint, TM alleged infringement
only as to one of the two patents originally at issue. A trial is set for
January 1999. The Company believes TM's claims are without merit.
<PAGE>
-9-
EMC CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
In December 1997, NewFrame Corporation Ltd. ("NewFrame") filed suit
against the Company in the United States District Court for the District
of Massachusetts. The suit contains a variety of allegations relating to
the Company's use of NewFrame's software developments, including various
contract claims and breach of fiduciary duty, and seeks monetary damages
relating primarily to lost future profits. The Company filed a motion to
dismiss the complaint, which was granted in part. The Company believes
NewFrame's claims are without merit.
In January 1998, Storage Technology Corporation ("STK") filed suit against
the Company in the United States District Court for the Northern District
of California alleging that the Company is infringing one patent and
seeking unspecified damages. The Company has answered and counterclaimed.
A trial date has been set for August 1998. The Company believes STK's
claims are without merit.
The Company is a party to other litigation which it considers routine and
incidental to its business. Management does not expect the results of any
of these actions to have a material adverse effect on the Company's
business, results of operation or financial condition.
7. SUBSEQUENT EVENTS
In April 1998, the Company announced the acquisition of Groupe MCI, a
French information technology professional services firm ("MCI"). This
acquisition is part of the Company's strategy to offer professional
services that help customers better manage, protect and share their
information through the Company's Enterprise Storage. MCI will operate as
a wholly-owned subsidiary of the Company.
In May 1998, the Company announced the expansion of the terms and scope of
its original reseller agreement with HP. This will enable HP to resell the
Company's enterprise systems and software for connection to its
Intel-based HP NetServer Systems, a leading Windows NT platform.
At the Annual Meeting held on May 6, 1998, the Company's stockholders
elected John R. Egan, Joseph F. Oliveri and Michael C. Ruettgers to the
Board of Directors for a three-year term, approved the addition of
3,500,000 shares of common stock to the Company's 1993 Stock Option Plan
and approved an amendment to the Company's 1989 Employee Stock Purchase
Plan as described in the Company's Proxy Statement.
<PAGE>
-10-
EMC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - First Quarter of 1998 compared to First Quarter of 1997
- --------------------------------------------------------------------------------
REVENUES
The Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with "Factors That May Affect
Future Results" set forth on page 12 and in EMC's other filings with the U.S.
Securities and Exchange Commission. All dollar amounts in the MD&A are in
thousands.
Total revenues for the first quarter of 1998 were $828,351 compared to $618,437
for the first quarter of 1997, an increase of $209,914 or 34%.
Enterprise systems revenues from products sold directly and through OEMs and
resellers were $698,755 in the first quarter of 1998, compared to $530,836 in
the first quarter of 1997, an increase of $167,919 or 32%. The increase was due
to continued strong demand for the Company's Symmetrix series of products in all
geographies. These products address the growing demand for enterprise-wide
storage solutions, allowing users to move, store and protect mission critical
information in mainframe, UNIX and Windows NT environments.
Enterprise software revenues from products sold directly and through OEMs and
resellers were $65,994 in the first quarter of 1998 compared to $26,532 in the
first quarter of 1997, an increase of $39,462 or 149%. Enterprise software
products provide primary and extended functionality for the Company's storage
products.
Revenues from products sold by McDATA Corporation, primarily the ESCON Director
series of products, were $41,184 in the first quarter of 1998, compared to
$43,532 in the first quarter of 1997, a decrease of $2,348 or 5%.
Revenues from service and rental income were $22,418 in the first quarter of
1998, compared to $17,537 in the first quarter of 1997, an increase of $4,881 or
28%.
In February 1998, the Company announced a reseller agreement under which SGI
will resell the Company's enterprise systems and software for connection to
SGI's Origin servers and Onyx2 graphics systems.
In May 1998, the Company announced the expansion of the terms and scope of its
original reseller agreement with HP. This will enable HP to resell the Company's
enterprise systems and software for connection to its Intel-based HP NetServer
Systems, a leading Windows NT platform. Revenues for the first quarter of 1998
and 1997 under this agreement were $156,831 and $107,517, or 19% and 17% of
total revenues, respectively.
Revenues on sales into the North American markets were $481,741 in the first
quarter of 1998 compared to $361,646 in the first quarter of 1997, an increase
of $120,095 or 33%.
Revenues on sales into all markets outside North America were $346,610 in the
first quarter of 1998 compared to $256,791 in the first quarter of 1997. This
represented 42% of total revenues for both periods presented. The Company
expects increases in international sales as a percentage of total revenues in
1998.
<PAGE>
-11-
EMC CORPORATION
Revenues on sales into the markets of Europe, Africa and the Middle East were
$262,082 in the first quarter of 1998 compared to $196,215 in the first quarter
of 1997, an increase of $65,867 or 34%.
Revenues on sales into the markets of the Asia Pacific region were $77,004 in
the first quarter of 1998 compared to $58,925 in the first quarter of 1997, an
increase of $18,079 or 31%.
Revenues on sales into the markets of South America were $7,524 in the first
quarter of 1998 compared to $1,651 in the first quarter of 1997, an increase of
$5,873 or 356%.
GROSS MARGINS
Gross margins increased to 48.0% of revenues in the first quarter of 1998,
compared to 45.7% of revenues in the first quarter of 1997. This increase is
primarily attributable to increasing sales of software which have a higher gross
margin than hardware sales. Other factors affecting gross margins to a lesser
extent in the first quarter of 1998 include the rates of price declines in the
marketplace and of component cost declines. The Company currently believes that
price declines will continue.
RESEARCH AND DEVELOPMENT
Research and development ("R&D") expenses were $65,675 and $48,091 in the first
quarters of 1998 and 1997, respectively, an increase of $17,584 or 37%. R&D
expenses were 7.9% and 7.8% of revenues in the first quarters of 1998 and 1997,
respectively. The dollar increase was partially due to the cost of additional
technical staff to support a variety of projects including both fibre channel
connectivity and enterprise software products. This increase is also
attributable to expenses associated with computer equipment acquired to
facilitate this development. The Company expects to continue to spend
substantial amounts for R&D for the balance of 1998 and thereafter.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses were $153,496 and $97,624
in the first quarters of 1998 and 1997, respectively, an increase of $55,872 or
57%. SG&A expenses were 18.5% and 15.8% of revenues in the first quarters of
1998 and 1997, respectively. The dollar increase is due primarily to costs
associated with a continued investment in additional worldwide sales and support
personnel and their related overhead costs with the objective of achieving
broader coverage and greater account depth around the world. SG&A expenses are
expected to increase in dollar terms for the balance of 1998 and thereafter.
INVESTMENT INCOME AND INTEREST EXPENSE
Investment income was $22,507 in the first quarter of 1998 compared with $11,684
in the same period a year ago. Interest income was earned from investments in
cash equivalents, and short and long-term investments. Investment income
increased in the first quarter of 1998 primarily due to higher cash and
investment balances which were derived from operations and the Notes issued in
March 1997.
Interest expense increased by $3,328 to $4,730 in the first quarter of 1998 from
$1,402 in the first quarter of 1997. The increase was attributable to the Notes.
<PAGE>
-12-
EMC CORPORATION
PROVISION FOR INCOME TAXES
The provision for income taxes was $48,705 and $38,248 in the first quarters of
1998 and 1997, respectively, which resulted in an effective tax rate of 25.0% in
the first quarter of 1998 and 25.6% in the first quarter of 1997. The decrease
in the effective tax rate is mainly attributable to the realization of benefits
associated with the continued progress on the Company's various tax strategies.
FINANCIAL CONDITION
Cash and cash equivalents and short and long-term investments were $1,811,332
and $1,650,633 at March 31, 1998 and December 31, 1997, respectively, an
increase of $160,699.
Cash provided by operating activities for the first three months of 1998 was
$226,762, generated primarily from net income and by lower accounts
receivable balances. Cash provided by investing activities was $27,658,
principally from the net maturity of short and long-term investments and offset
by additions to property, plant and equipment. Cash used by financing activities
was $2,188, principally for payments of short and long-term obligations.
At March 31, 1998, the Company had available for use its credit line of $50,000
and may elect to borrow at any time. Based on its current operating and capital
expenditure forecasts, the Company believes that the combination of funds
currently available, funds generated from operations and its available line of
credit will be adequate to finance its ongoing operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements as
defined under the Federal Securities Laws. Actual results could differ
materially from those projected in the forward-looking statements as a result of
certain risk factors, including but not limited to: (i) a failure by any
supplier of high density DRAMs, disk drives or other components to meet EMC's
requirements for an extended period of time; (ii) the transition to new
products; (iii) the historic and recurring "hockey stick" pattern of the
Company's sales by which a disproportionate percentage of a quarter's total
sales occur in the last month and weeks and days of each quarter; (iv) the
"hockey stick" pattern of the Company's sales, making it extremely difficult to
predict near-term demand and adjust production capacity accordingly; (v)
competitive factors, including but not limited to pricing pressures, in the
computer storage market; (vi) fluctuating currency exchange rates; (vii) the
relative and varying rates of product price and component cost declines; (viii)
termination of the agreements with certain of the Company's OEMs or resellers;
(ix) delays in the development of new technology; (x) Year 2000 issues; (xi)
other one-time events and other important factors disclosed previously and from
time to time in EMC's other filings at the U.S. Securities and Exchange
Commission.
<PAGE>
-13-
EMC CORPORATION
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
In August 1997, TM Patents, L.P. ("TM") filed suit against the Company
in the United States District Court for the Southern District of New
York alleging that the Company is infringing two patents and seeking
unspecified damages. The Company filed a motion to transfer the case to
the United States District Court for the District of Massachusetts and a
motion to dismiss the suit. The Company's motion to transfer was granted
with leave for the plaintiff to amend the complaint to overcome the
grounds for dismissal. In the amended complaint, TM alleged infringement
only as to one of the two patents originally at issue. A trial is set
for January 1999. The Company believes TM's claims are without merit.
In December 1997, NewFrame Corporation Ltd. ("NewFrame") filed suit
against the Company in the United States District Court for the District
of Massachusetts. The suit contains a variety of allegations relating to
the Company's use of NewFrame's software developments, including various
contract claims and breach of fiduciary duty, and seeks monetary damages
relating primarily to lost future profits. The Company filed a motion to
dismiss the complaint, which was granted in part. The Company believes
NewFrame's claims are without merit.
In January 1998, Storage Technology Corporation ("STK") filed suit
against the Company in the United States District Court for the Northern
District of California alleging that the Company is infringing one
patent and seeking unspecified damages. The Company has answered and
counterclaimed. A trial date has been set for August 1998. The Company
believes STK's claims are without merit.
The Company is a party to other litigation which it considers routine
and incidental to its business. Management does not expect the results
of any of these actions to have a material adverse effect on the
Company's business, results of operation or financial condition.
Item 5. Other Information
Subsequent Events. See Note 7 to the Notes to Interim Consolidated
Financial Statements in Part I of this report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company for the quarter ended
March 31, 1998.
<PAGE>
-14-
EMC CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMC CORPORATION
Date: May 13, 1998 By: /s/ Colin G. Patteson
----------------------
Colin G. Patteson
Senior Vice President, Chief Administrative
Officer and Treasurer (Principal Financial
Officer)
By: /s/ William J. Teuber, Jr.
---------------------------
William J. Teuber, Jr.
Vice President and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
-15-
EMC CORPORATION
EXHIBIT INDEX
Exhibit 27 Financial Data Schedule (filed herewith)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EMC
CORPORATION FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,206,327
<SECURITIES> 348,081
<RECEIVABLES> 745,906
<ALLOWANCES> 7,233
<INVENTORY> 425,990
<CURRENT-ASSETS> 2,810,616
<PP&E> 422,851
<DEPRECIATION> 43,530
<TOTAL-ASSETS> 3,669,959
<CURRENT-LIABILITIES> 538,451
<BONDS> 517,500
0
0
<COMMON> 4,977
<OTHER-SE> 2,526,675
<TOTAL-LIABILITY-AND-EQUITY> 3,669,959
<SALES> 805,933
<TOTAL-REVENUES> 828,351
<CGS> 431,136
<TOTAL-COSTS> 650,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,730
<INCOME-PRETAX> 0
<INCOME-TAX> 48,705
<INCOME-CONTINUING> 146,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,115
<EPS-PRIMARY> .29
<EPS-DILUTED> .28
</TABLE>
