EMC CORP, 10-K405, 1999-03-11

EMC CORP
10-K405, 1999-03-11
COMPUTER STORAGE DEVICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 1998 Commission File Number 1-9853

EMC CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
Massachusetts 04-2680009
<S> <C>
(State or other jurisdiction (I.R.S. Employer
<CAPTION>
of organization or incorporation) Identification Number)
</TABLE>

35 Parkwood Drive
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:

<TABLE>
<CAPTION>
Title of Each Class: Name of Each Exchange on Which Registered:
-------------------- ------------------------------------------
<S> <C>
Common Stock, $.01 par value New York Stock Exchange
3 1/4% Convertible Subordinated Notes due
2002 New York Stock Exchange
</TABLE>

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.

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]

The aggregate market value of voting stock held by nonaffiliates of the
registrant was $54,029,635,090 as of January 31, 1999.

The number of shares of Common Stock, $.01 par value, outstanding as of
January 31, 1999 was 504,154,616.

DOCUMENTS INCORPORATED BY REFERENCE

The information required in response to Part III of Form 10-K 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 5, 1999.

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FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company's 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. The Company's
future results may differ materially from its 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 entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Factors that May Affect Future Results." Readers
should also carefully review the risk factors described in the other
documents the Company files from time to time with the Securities and
Exchange Commission.

PART I

ITEM 1. BUSINESS

General

EMC Corporation and its subsidiaries ("EMC" or the "Company") design,
manufacture, market and support a wide range of hardware, software and service
products for the enterprise storage market. EMC introduced its first Symmetrix
system, which provided storage for mainframe computers, in 1991. Since then,
EMC has become the leading supplier of enterprise storage systems and
software. These products are sold as integrated storage solutions for
customers utilizing a variety of the world's most popular computing platforms,
including but not limited to those shown below. These platforms include those
of the Company's resellers and a variety of other platforms, including UNIX,
Windows NT and mainframe.

[GRAPH APPEARS HERE]

[THE GRAPH DEPICTS A PICTURE OF SYMMETRIX UNITS SURROUNDED BY THE FOLLOWING
PLATFORMS: HP, SILICON GRAPHICS, SIEMENS, BULL, NEC, ICL, UNISYS, SEQUENT, NCR,
STRATUS, EMC CELERRA, IBM, DATA GENERAL, INTEL, COMPAQ, SUN, FUJITSU AND
HITACHI.]

Over the past decade, corporate computing environments have evolved from the
use of a single proprietary system to numerous systems in a network running a
variety of third party software applications. These disparate systems,
including servers using UNIX and Windows NT operating systems and mainframes,
continue to grow in number and scope, requiring corporations to simultaneously
manage, share and protect ever increasing amounts of mission critical
information from a wide range of computing platforms. Rather than placing the
server at the center of their information systems environment, customers are
now focusing on the information and the ability to access and use that
information, regardless of platform or location. The consolidated information-
centric computing model shown above defines the enterprise storage market, a
market which EMC believes to have
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significant growth opportunities. An enterprise storage system stores and
retrieves data from all major computing platforms and acts as a central
information repository.

To address the market opportunity defined above, in November 1998, the
Company announced EMC's Enterprise Storage Network ("EMC ESN"). An EMC ESN is
a dedicated network connecting enterprise storage systems to all major
computing platforms. An EMC ESN extends the benefits and capabilities of the
storage provided by a Symmetrix system beyond the data center, by
consolidating a variety of different types of information technology ("IT")
resources from remote locations within the enterprise and in the data center.
It also provides customers flexibility by allowing them the option to keep
servers and applications close to the user. The Company believes that its
Connectrix systems (introduced in March 1999) combined with its Symmetrix
systems with fibre channel connectivity facilitate the implementation of the
EMC ESN. Through development of these storage networks, EMC is helping to
build environments in which a single pool of storage will handle all
information storage requirements of even the largest, most complex
organizations.

The Company's objective is to extend its position as the enterprise storage
solutions leader in the IT industry and to establish the EMC ESN as the
standard for networked storage. EMC develops its products by integrating
technologically advanced, industry standard components with Company-designed
hardware and software. The Company differentiates its products by
incorporating hardware and software that the Company believes provide
competitive advantage for its customers. These products feature high
performance, high availability, heterogeneous connectivity and centralized
management, sharing and protection of information.

The customers for the Company's products are located worldwide and represent
a cross section of industries and government agencies that range in size from
FORTUNE 100 companies to small businesses, and national to local governments.
EMC products continue to be accepted widely by both existing customers and new
accounts in all major industries worldwide.

EMC, a Massachusetts corporation, was incorporated in 1979 and has its
corporate headquarters at 35 Parkwood Drive, Hopkinton, Massachusetts.

Company Strategies

The Company's business is focused on four major strategies: 1) Products and
Offerings; 2) Markets and Channels; 3) New Business Development; and 4)
Operational Effectiveness and Efficiency.

Products and Offerings

The objective of the Company's Products and Offerings Strategy is to
identify and deliver superior enterprise storage solutions that the Company
believes will widen its lead over its competitors. The Company believes that
competitive advantages in its products directly result from a combination of
its innovative hardware and software.

Enterprise Storage Hardware

The Company's common hardware architecture on which its principal products
are based, called MOSAIC:2000, is based upon a modular design and interfaces
that allow new technologies to be incorporated more rapidly than with
traditional architectures. This hardware architecture enables the Company to
deliver advanced technologies to market quickly while maintaining a consistent
platform upon which its customers can expand capacity, performance,
connectivity and functionality. This architectural hardware design has enabled
the Company to expand its products into existing markets and to enter new,
strategic markets quickly with proven storage products and services.

EMC delivered the first Symmetrix series for the IBM and IBM-compatible
mainframe storage market in 1991. Symmetrix was the first commercially
available intelligent disk storage system for this marketplace that integrated
highly sophisticated controller software with large amounts of cache memory
and arrays of industry

2
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standard disk drives. This combination continues to provide customers with
unique advantages and capabilities, including high performance disk storage;
operating system independence for easy integration into existing computer
environments; built-in redundancy and availability features allowing for
higher data availability and continuous operations; and small footprint and
low environmental requirements for low cost of ownership.

Since the introduction of the first Symmetrix model, EMC has continued to
enhance and increase the capabilities of the Symmetrix family of enterprise
storage systems, including increasing the host connectivity capabilities. The
various models in this family of products share a common architecture and
components, with the main differentiator being capacity. The Company believes
that the Symmetrix enterprise storage systems offer storage with the highest
performance and availability in the enterprise storage market. The Company
intends to continue to introduce new versions of the Symmetrix system with
increased performance and other capabilities. The Company furthermore
continues to engage in research and development of new hardware technology for
the enterprise storage market.

McDATA Corporation, a subsidiary of the Company ("McDATA"), designs,
manufactures, markets and supports high performance fibre channel information
switching products, which are key components of the EMC ESN. McDATA also
produces the ESCON Director series of products, high-speed fiber-optic-based
network switches that connect computers and peripherals within the data
center. The ESCON Director series is marketed by International Business
Machines Corporation ("IBM") under an exclusive original equipment
manufacturer ("OEM") agreement with McDATA.

Revenues from enterprise storage hardware represented approximately 79.7%,
85.0% and 86.3% of EMC's revenues in 1998, 1997 and 1996, respectively.

Enterprise Storage Software

A major strategic asset of the Company is its highly innovative software
that provides customers with superior information management, sharing and
protection through an information-centric model. Software-based capabilities
include enhanced backup/restore, disaster recovery, business continuance, data
migration and data movement. The Company's enterprise storage software is
intended to be used with all Symmetrix models.

EMC's information management software includes: EMC PowerPath, EMC Volume
Logix and Symmetrix Manager. Examples of information sharing software are
Symmetrix Enterprise Storage Platform (ESP), EMC InfoMover and DataReach. The
Company's information protection software includes: Symmetrix Remote Data
Facility (SRDF), EMC TimeFinder and EMC Data Manager (EDM).

In August 1998, the Company acquired Conley Corporation of Cambridge,
Massachusetts ("Conley"), a leader in high-availability, high-performance
storage management software for UNIX, Windows NT and other platforms. The
Company expects that these acquired technologies will contribute to the
further development and deployment of the EMC ESN. Conley's operations have
become the EMC Cambridge Software Development Center.

EMC continues to engage in research and development of software for the
enterprise storage market in the areas of information management, sharing and
protection. During 1998, the Company introduced several new software products
and enhancements to existing products. The Company believes that its
investment in software development will accelerate adoption of EMC's
enterprise storage and Enterprise Storage Network models and facilitate
consolidation and sharing of information.

Revenues from enterprise storage software represented approximately 11.2%,
6.0% and 3.4% of EMC's revenues in 1998, 1997 and 1996, respectively.

3
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Network Attached Storage

Network attached storage systems connect directly to local and wide area
networks without the use of a host computer. These systems combine EMC-
developed proprietary software and network director hardware components with
Symmetrix. This enables users on disparate systems to access and use central
files of information, including video and audio. EMC has introduced several
network attached storage products and is currently engaging in research and
development of additional features for the network attached storage market.

Manufacturing and Quality

EMC's products are assembled and tested primarily at the Company's
facilities in Massachusetts and Cork, Ireland. Product components manufactured
by subcontractors in the United States and Europe are assembled in accordance
with production standards and quality controls established by EMC. During
1998, the Company consolidated its North American manufacturing operations
into a new, state-of-the-art, 715,000 square foot manufacturing facility in
Franklin, Massachusetts and more than doubled the size of its manufacturing
facility in Cork, Ireland, to a total of 470,000 square feet. See
"Properties."

The Company employs a corporate-wide Total Quality Management philosophy to
ensure the quality of its designs, manufacturing processes and suppliers. The
Company's manufacturing operations in Massachusetts currently hold an ISO 9001
Certificate of Registration. This internationally recognized endorsement of
ongoing quality management represents the highest level of certification
available. The Company's manufacturing operations in Ireland currently hold an
ISO 9002 Certificate of Registration and ISO 14001 Environmental Management
Standard Certification. In addition, EMC sites in the United Kingdom, Italy,
France, Australia, New Zealand and South Africa hold ISO certifications.

Markets and Channels

The Company's Markets and Channels strategy is focused on developing and
implementing a highly differentiated corporate identity and enhancing
marketing and sales channels to grow the Company's worldwide enterprise
storage market leadership. Specific targeted storage markets include the UNIX
and Windows NT market segments, the IBM and IBM-compatible mainframe storage
market and the network attached storage market. In addition, the Company has
adopted a multi-channel distribution approach to sell its products in those
large geographic markets of the world which the Company believes have a demand
for its products.

Enterprise Storage Market

During 1998, the Company focused on the three major sectors of the
enterprise storage market described below: UNIX, Windows NT and mainframe.

UNIX Market

The UNIX market continues to demonstrate rapid growth in storage
requirements primarily driven by continued deployment of new client/server
applications. This market is characterized by a broad mix of computing
platforms that offer customers the ability to quickly develop new applications
required for today's highly competitive business environment.

Windows NT Market

The Company believes that the storage requirements are growing rapidly for
systems running the Windows NT operating system in enterprise computing
environments. This market is characterized by a wide-range of servers,
typically with their own storage devices, that enable users to perform
numerous large and small computing tasks. As the information generated by
these servers continues to grow, the Company believes that customers will
centralize the information from different systems to simplify its management,
sharing and protection.

4
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Mainframe Market

The Company's enterprise storage products have achieved a significant
presence in the mainframe storage market. The Company believes that mainframes
will continue to play an important role as enterprise information servers and
are a key element of enterprise computing due to the recent emergence of
information-centric computing models; the need for customers to leverage
investments in legacy applications, processes and personnel; and new
developments in lower-cost hardware technology. The Company believes this will
increase the need for enterprise storage products in this market.

Enterprise Storage Services

Professional Services

EMC's Enterprise Storage Professional Services business, formed in 1997,
designs and delivers world-class professional services to its global customer
base. Such professional services assist customers in assessing, designing and
implementing enterprise storage solutions customized to maximize their return
on information assets.

Internet Services

EMC's Internet Services Group, formed in 1997, provides a comprehensive Web
site management service, leveraging the Company's resources, including its
Symmetrix systems and its suite of enterprise storage software. Through this
service, the Company develops, implements, maintains and monitors all the
technical aspects of a customer's internet presence, including management of
internet-based electronic commerce and database applications as well as Web
and online advertising.

Marketing and Customers

EMC markets its products through multiple distribution channels, including
its direct sales force and selected distributors, resellers and OEMs. The
Company has a direct sales presence throughout North America, Latin America,
Europe, the Middle East, South Africa and the Asia Pacific region and uses
distributors as its primary distribution channel in other areas of the world.
Over the past three years, the Company has expanded its sales and marketing
organizations significantly in all major geographies of the world. During
1998, the Company established a direct sales presence in Eastern Europe,
strengthened its direct sales in Latin America and continued broadening its
direct sales presence worldwide. The Company increased its sales channel
capabilities by signing agreements with a number of resellers, value added
resellers and distributors during 1998.

During 1998, the Company derived 60.5% of its revenue from North America;
1.3% from Latin America; 31.0% from Europe, the Middle East and Africa; and
7.2% from the Asia Pacific region.

In 1998, the Company initiated a new marketing campaign, focusing on "The
EMC Effect," to communicate the strategic impact of EMC's information
management solutions to senior business and technology executives around the
world. This program includes a series of new sponsorships, advertising
campaigns and marketing programs designed to increase the Company's worldwide
visibility.

Reseller and OEM Channels

The Company believes its products are well suited for sale by resellers and
OEMs and that its revenues from resellers and OEMs will continue to represent
a significant portion of its total revenues.

The Company has reseller or OEM agreements with nine systems vendors. These
agreements enable the reseller or OEM to market and resell certain of the
Company's Symmetrix systems worldwide, subject to certain terms and
conditions, for connection to certain of the reseller or OEM's respective
computing platforms. The Company's principal reseller and OEM agreements are
with Hewlett-Packard Company ("HP"), NEC Corporation ("NEC"), Siemens Nixdorf
Informationssysteme AG, Unisys Corporation, Sequent Computer Systems, Inc. and
Compagnie des Machines Bull S.A.

5
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In May 1998, EMC and HP expanded their reseller relationship, enabling HP to
resell Symmetrix enterprise storage systems with its Windows NT systems, in
addition to its UNIX-based platforms. In January 1999, EMC and HP extended
their reseller agreement for another three years. In November 1998, the
Company entered into a reseller agreement with NEC, under which NEC markets
and resells Symmetrix enterprise storage systems for connection to its UNIX
and Windows NT systems.

Revenues from reseller and OEM channels represented approximately 28%, 27%
and 19% of EMC's product revenues in 1998, 1997 and 1996, respectively.

Alliances

The Company has alliances with leading software, relational database and
enterprise application companies, including BMC Software, Inc., Microsoft
Corporation, SAP AG, Oracle Corporation and other major independent software
applications vendors. EMC intends to continue to form additional strategic
alliances. EMC's strategy is to work closely with leading software companies
to provide added value to its customers by integrating enterprise storage with
software applications that customers rely on to manage their day-to-day
business operations.

Customer Service

EMC's Customer Service organization, which includes over 1,500 technical,
field and support personnel, monitors 24 hours a day, seven days a week, 365
days a year, the Company's Symmetrix products and enterprise storage software
sold to its customers. Such EMC products contain remote support capabilities,
thereby enabling EMC customer service personnel to continuously monitor,
diagnose and resolve issues, wherever the product is located, often without
the need for on-site service.

New Business Development

The Company's New Business Development Strategy's focus is to develop new
business aligned to the enterprise storage market. This will be accomplished
by maintaining a long-term view on the storage industry's potential and
continually assessing the market. Key objectives are to identify and close
significant business development opportunities (mergers, acquisitions and
investments) that are aligned with the Company's strategic direction,
including businesses with technologies that complement and augment the
Company's hardware and software, and to manage and integrate such new
businesses into EMC.

Operational Effectiveness and Efficiency

The Company's Operational Effectiveness and Efficiency Strategy provides
EMC's business with focused attention on service-related functions within the
Company, including Finance, Legal, Human Resources, Information Systems and
Facilities. Collectively, these functions provide a flexible infrastructure
that supports EMC's highly evolutionary business model that the Company
believes has enabled its continued financial and operational excellence.

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Raw Materials

EMC's products utilize the Company's engineering designs, with industry
standard and semi-custom components and subsystems. Among the most important
components that EMC uses are disk drives, high density memory components and
power supplies. See "Factors that May Affect Future Results-Dependence on
Suppliers."

Patents

EMC has been granted or owns by assignment over 200 patents. The Company
also has approximately 400 patent applications pending relating to its
hardware and software products for the enterprise storage market.

6
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Backlog

The Company manufactures its products on the basis of its forecast of near-
term demand and maintains inventory in advance of receipt of firm orders from
customers. Products are configured to customer specifications and are
generally shipped by the Company shortly after receipt of the order. Customers
may reschedule orders with little or no penalty. For these reasons, the
Company's backlog at any particular time is not meaningful because it is not
necessarily indicative of future sales levels.

Competition

In the UNIX market, EMC competes primarily with Sun Microsystems, Inc.
("Sun"), IBM and Compaq Computer Corporation ("Compaq"). In the Windows NT
market, the Company competes primarily with Compaq. In the mainframe market,
EMC competes primarily with IBM and Hitachi, Limited ("Hitachi"). In the
Company's opinion, these companies compete based on their overall market
presence and their ability to sell both computer systems and storage systems.
The Company believes that its major independent storage competitor in the UNIX
and Windows NT markets is Data General Corporation ("DG").

The Company believes that it has a number of competitive advantages over
these companies, encompassing product, distribution and customer service. The
Company believes the advantages in its products include performance, capacity,
availability, connectivity, value-added software, time to market enhancements
and total cost of ownership. The Company believes its advantages in
distribution include its direct sales force, its reseller or OEM agreements
with most of the major server vendors and its broad network of distributors.
The Company believes its advantages in customer service include its ability to
effectively monitor and provide service (which is often remote and without
interruption to a company's business) for its Symmetrix products and
enterprise storage software 24 hours a day, seven days a week, 365 days a
year.

Environment

The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment, particularly from wastes
generated as a result of assembling certain EMC products. The cost of
compliance with such regulations has not to date involved a significant
expense or had a material effect on the capital expenditures, earnings or
competitive position of the Company.

Employees

As of January 31, 1999, EMC had approximately 9,700 employees worldwide.
None of the Company's domestic employees is represented by a labor union, and
the Company has never suffered an interruption of business as a result of a
labor dispute. The Company considers its relations with its employees to be
good.

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

The Company is active in primarily one business segment: designing,
manufacturing and marketing high performance enterprise storage products.
Sales and marketing operations outside the United States are conducted through
sales subsidiaries and branches located principally in Europe and the Asia
Pacific region. The Company has two manufacturing facilities, one in
Massachusetts which provides product to the North American markets and one in
Ireland which provides product to markets in the rest of the world. Total
exports, in millions, from both of these facilities amounted to approximately
$1,634, $1,306 and $985 in 1998, 1997 and 1996, respectively. (See Note O to
the Company's Consolidated Financial Statements.)

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ITEM 2. PROPERTIES

The Company's operations are conducted at several locations in the United
States and abroad. The following table provides certain information on the
Company's principal offices and manufacturing facilities:

<TABLE>
<CAPTION>
Location Use Approx. Sq. Ft. Property Interest
- --------------------- --------------------------------- --------------- -----------------
<S> <C> <C> <C>
50 Constitution Blvd. Manufacturing 715,000 Owned
Franklin, MA
35 Parkwood Dr. Corporate, Administration, Sales 160,000 Leased
Hopkinton, MA and Marketing
42 South St. Customer Briefing Center, 125,000 Owned
Hopkinton, MA Administration, Marketing
80 South St. Research and Development, 155,000 Owned
Hopkinton, MA Manufacturing
171 South St. Research and Development, 285,000 Owned
Hopkinton, MA Manufacturing
5-9 Technology Dr. Customer Service, Research and 265,000 Leased
Milford, MA Development, Administration,
Manufacturing
Cork, Ireland Manufacturing 470,000 Owned
McDATA Corporation Research and Development, 90,000 Leased
Manufacturing
</TABLE>

The Company is currently constructing a 165,000 square foot building in
Hopkinton, MA for research and development use. The Company also leases space
for its sales and services offices and certain research and development
facilities worldwide, and owns land in the Hopkinton, Massachusetts area for
possible expansion purposes. The Company believes its present level of
manufacturing and other capacity, along with its plans for expansion, will be
sufficient to accommodate its requirements.

ITEM 3. 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 filed by TM and TM Creditors, L.L.C., the plaintiffs alleged
infringement as to only one of the two patents originally at issue. Trial of
this matter began in February 1999. The parties reached a negotiated
resolution of this matter in February 1999, during the second week of trial.
As part of the resolution, EMC will obtain a license under the one patent at
issue and a covenant from the plaintiffs not to sue under any and all patents
owned or controlled by either of the plaintiffs. All claims in the lawsuit
will be dismissed with prejudice as a result of this agreement.

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.

8
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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 was infringing a patent covering virtual
tape and seeking preliminary and permanent injunctions and unspecified
damages. The Company's response raised as an affirmative defense that EMC was
licensed to promote the use of, market, sell and make virtual tape products
pursuant to a patent license agreement between EMC and STK dated April 11,
1996 (the "License Agreement"). After a trial held in August 1998, the court
ruled that EMC is licensed to promote the use of, market, sell and make
virtual tape products pursuant to the License Agreement. The Court found that
STK's suit was without foundation and awarded costs to EMC. In October 1998,
STK filed an appeal of the Court's ruling.

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 operations or financial condition.

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

No matter was submitted to a vote of the Company's stockholders during the
fourth quarter of the fiscal year covered by this report.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Richard J. Egan.................. 63 Chairman of the Board of Directors
Michael C. Ruettgers............. 56 President, Chief Executive Officer and
Director
Robert M. Dutkowsky.............. 44 Executive Vice President, Markets and
Channels
Paul E. Noble, Jr................ 43 Executive Vice President, Products and
Offerings
Colin G. Patteson................ 50 Senior Vice President, Chief Administrative
Officer and Treasurer
Paul T. Dacier................... 41 Vice President and General Counsel
William J. Teuber, Jr............ 47 Vice President and Chief Financial Officer
</TABLE>

Richard J. Egan is a founder of the Company and has served as a Director of
the Company since its inception in 1979. He was elected Chairman of the Board
of the Company in January 1988. Prior to January 1988, he was also President
of EMC. From 1979 to January 1992, he was Chief Executive Officer of the
Company. He is also a Director of BEC Energy Company, a public utility.

Michael C. Ruettgers served as Executive Vice President, Operations of EMC
from July 1988 to October 1989, when he became President. From October 1989 to
January 1992, Mr. Ruettgers served as Chief Operating Officer of EMC. In
January 1992, he became Chief Executive Officer and in May 1992, he was
elected a Director of the Company. Before joining EMC, he was Chief Operating
Officer at Technical Financial Services, Incorporated, a high technology
consulting company, from February 1987 to July 1988. He is also a director of
Commonwealth Energy System, a public utility, and EG&G Inc., a diversified
technology company.

Robert M. Dutkowsky joined EMC in October 1997 as Executive Vice President,
Markets and Channels. Prior to joining EMC, he held several senior level
management positions at IBM, a computer manufacturer, from 1977 to 1997, most
recently as Vice President of Worldwide Sales and Marketing for IBM's RS/6000
business.

Paul E. Noble, Jr. served as Vice President of Customer Service of EMC from
March 1987 through May 1989, Vice President of Sales Operations from June 1989
through May 1992, Vice President and General Manager of OEM Operations from
June 1992 to January 1998 and Senior Vice President, New Business Development
of EMC from January 1998 to September 1998. In September 1998, Mr. Noble
became Executive Vice President, Products and Offerings of the Company.

Colin G. Patteson served as European Controller of EMC from January 1989 to
March 1991, Corporate Controller from March 1991 to February 1993, Vice
President and Corporate Controller from February 1993 to April 1995, and Vice
President, Chief Financial Officer and Treasurer from April 1995 to February
1997. In February 1997, Mr. Patteson became Senior Vice President, Chief
Administrative Officer and Treasurer of the Company.

Paul T. Dacier joined EMC in March 1990 as General Counsel and became Vice
President and General Counsel in February 1993. Prior to joining EMC, he was
Senior Counsel, Corporate Operations at Apollo Computer Inc., a computer
manufacturer, from January 1987 to January 1990.

William J. Teuber, Jr. joined EMC in August 1995 as Vice President and
Controller and became Vice President and Chief Financial Officer in February
1997. From 1988 to August 1995, Mr. Teuber was a partner at Coopers & Lybrand
L.L.P., an accounting firm.

----------------

Richard J. Egan, Chairman of the Board of Directors, is the husband of
Maureen E. Egan, a Director of the Company. He is also the brother-in-law of
W. Paul Fitzgerald, a Director of the Company. W. Paul Fitzgerald is

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the brother of Maureen E. Egan. John R. Egan, a Director of the Company, is
the son of Richard J. and Maureen E. Egan. Paul E. Noble, Jr., Executive Vice
President, Products and Offerings of the Company, is the nephew of Richard J.
and Maureen E. Egan and of W. Paul Fitzgerald.

----------------

The President and Treasurer are elected annually to serve until the first
meeting of the Board of Directors following the next annual meeting of
stockholders and until their successors are elected and qualified. The other
executive officers are appointed to serve in such positions and serve at the
pleasure of the Board of Directors.

----------------

EMC/2/, EMC, Celerra, Connectrix, DataReach, EDM, The EMC Effect, InfoMover,
MOSAIC:2000, PowerPath, Symmetrix, SRDF, TimeFinder and Volume Logix are
either registered trademarks or trademarks of the Company. Other trademarks
and logos are either registered trademarks or trademarks of their respective
owners.

11
<PAGE>

PART II

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

EMC's common stock, $0.01 par value (the "Common Stock"), began trading on
the over-the-counter market on April 4, 1986 under the NASDAQ symbol EMCS. On
March 22, 1988, the Company's stock began trading on the New York Stock
Exchange (the "NYSE") under the symbol EMC.

During the last five fiscal years, the following stock split was effected in
the form of a stock dividend: a two-for-one stock split effective November 17,
1997, for stockholders of record on October 31, 1997.

On February 24, 1999, the Company's Board of Directors approved a two-for-
one stock split, subject to stockholder approval of an increase in the number
of shares of authorized common stock at the Company's Annual Meeting of
Stockholders to be held on May 5, 1999. If stockholder approval is received,
the stock split will be payable on or about May 28, 1999 to stockholders of
record as of the close of business on May 14, 1999. Because stockholder
approval is pending, financial information contained in this Annual Report on
Form 10-K has not been adjusted to reflect the impact of the proposed stock
split.

The following table sets forth the range of high and low prices on the NYSE
for the past two years during the fiscal periods shown, adjusted to reflect
the effect of the November 17, 1997 stock split.

<TABLE>
<CAPTION>
Fiscal 1998 High Low
----------- ------ ------
<S> <C> <C>
First Quarter........................... $38.69 $25.19
Second Quarter.......................... 46.94 36.00
Third Quarter........................... 61.88 44.50
Fourth Quarter.......................... 85.00 45.19
<CAPTION>
Fiscal 1997 High Low
----------- ------ ------
<S> <C> <C>
First Quarter........................... $19.81 $16.06
Second Quarter.......................... 20.31 16.25
Third Quarter........................... 30.88 19.59
Fourth Quarter.......................... 32.50 23.63
</TABLE>

As of January 31, 1999, there were approximately 5,400 holders of record of
Common Stock.

The Company has never paid cash dividends on its Common Stock. While subject
to periodic review, the current policy of its Board of Directors is to retain
all earnings primarily to provide funds for the continued growth of the
Company.

12
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

FIVE YEAR SELECTED CONSOLIDATED FINANCIAL DATA

EMC Corporation

(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------
December 31, December 31, December 31, December 30, December 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Revenues................ $3,973,735 $2,937,860 $2,273,652 $1,921,275 $1,377,492
Operating income........ 981,804 661,912 496,541 435,779 350,532
Net income.............. 793,363 538,528 386,229 326,845 250,668
Net income per weighted
average share, basic... $ 1.59 $ 1.09 $ 0.83 $ 0.73 $ 0.65
Net income per weighted
average share,
diluted(1) ............ $ 1.49 $ 1.04 $ 0.79 $ 0.67 $ 0.55
Weighted average shares,
basic.................. 499,978 493,698 463,548 450,629 387,939
Weighted average shares,
diluted(1)............. 539,176 525,500 498,590 496,537 467,177
Balance Sheet Data:
Working capital......... $2,451,620 $2,121,156 $1,336,634 $ 959,595 $ 600,341
Total assets............ 4,568,571 3,490,109 2,293,546 1,745,729 1,317,500
Long-term
obligations(2)......... 538,896 558,454 191,234 245,845 286,106
Stockholders' equity.... $3,324,136 $2,376,301 $1,636,789 $1,140,301 $ 727,641
</TABLE>
- --------

(1) In addition to common stock equivalents, diluted earnings per share
reflects the dilutive effects of the Company's debt securities as
outstanding for the respective periods reported above. All share and per
share amounts have been restated to reflect the stock split effective
November 17, 1997 for all periods presented.
(2) Excludes current portion of long-term debt.

13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This 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" beginning on page 18. All dollar amounts in this MD&A
and in Item 7A are in millions.

The following table presents certain consolidated statement of operations
information stated as a percentage of total revenues.

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Enterprise storage hardware............ 79.7% 85.0% 86.3%
Enterprise storage software............ 11.2 6.0 3.4
Enterprise switching products
(McDATA).............................. 4.5 6.4 7.9
Service and rental..................... 4.6 2.6 2.4
----- ----- -----
Total revenue.......................... 100.0% 100.0% 100.0%
Cost and expenses
Cost of sales and service.............. 48.6 53.5 54.9
Research and development............... 7.9 7.5 7.1
Selling, general and administrative.... 18.8 16.5 16.2
----- ----- -----
Operating income....................... 24.7 22.5 21.8
Investment income and interest expense,
net................................... 2.0 1.9 1.0
----- ----- -----
Income before income taxes............. 26.7 24.4 22.8
Provision for income taxes............. 6.7 6.1 5.8
----- ----- -----
Net income............................. 20.0% 18.3% 17.0%
===== ===== =====
</TABLE>

Revenues

Total revenues were $3,973.7, $2,937.9 and $2,273.7 in 1998, 1997 and 1996,
respectively; an increase of $1,035.8 or 35% from 1997 to 1998, and $664.2 or
29% from 1996 to 1997.

Enterprise systems revenues from products sold directly and through OEMs and
resellers were $3,167.1, $2,496.7 and $1,961.3 in 1998, 1997 and 1996,
respectively; an increase of $670.4 or 27% from 1997 to 1998, and $535.4 or
27% from 1996 to 1997. The increase in enterprise systems revenues was
primarily due to the continued strong demand for the Company's Symmetrix
series of products. These products address the growing demand for enterprise-
wide storage solutions, allowing users to move, store and protect mission
critical information in UNIX, Windows NT and mainframe environments.

Enterprise software revenues from products sold directly and through OEMs
and resellers were $445.4, $176.9 and $76.4 in 1998, 1997 and 1996,
respectively; an increase of $268.5 or 152% from 1997 to 1998, and an increase
of $100.5 or 131% from 1996 to 1997. The increase in software revenues was
primarily due to increased licenses of enterprise storage software on
Symmetrix systems, both newly shipped and already installed, and the
successful introduction of new software products.

Revenues from products sold by McDATA, primarily the ESCON Director series
of products, were $178.8, $189.1 and $180.5 in 1998, 1997 and 1996,
respectively; a decrease of $10.3 or 5% from 1997 to 1998, and an increase of
$8.6 or 5% from 1996 to 1997. The decrease from 1997 to 1998 was primarily due
to the product transition from ESCON-based to fibre-channel-based directors.

14
<PAGE>

Service and rental revenues were $182.4, $75.2 and $55.4 in 1998, 1997 and
1996, respectively; an increase of $107.2 or 143% from 1997 to 1998, and an
increase of $19.8 or 36% from 1996 to 1997. The increase from 1997 to 1998 was
primarily a result of the growth in EMC professional services and the
acquisitions of the professional services businesses Groupe MCI and Millennia
III, Inc. in the second and third quarters of 1998, respectively.

In May 1998, EMC and HP expanded their reseller relationship, enabling HP to
resell Symmetrix enterprise storage systems with its Windows NT systems, in
addition to its UNIX-based platforms. In January 1999, EMC and HP extended
their worldwide reseller agreement for another three years. Revenues for 1998,
1997 and 1996 under the Company's reseller agreement with HP were $718.0,
$504.1 and $287.4, respectively, representing 18%, 17% and 13% of total
revenues, respectively.

In November 1998, the Company entered into a reseller agreement with NEC,
under which NEC markets and resells Symmetrix enterprise storage systems
worldwide for connection to its UNIX and Windows NT computers.

Revenues on sales into the North American markets were $2,403.9, $1,682.1
and $1,330.9 in 1998, 1997 and 1996, respectively; an increase of $721.8 or
43% from 1997 to 1998, and $351.2 or 26% from 1996 to 1997. The revenue growth
reflects continued strong demand for the Company's products and services.

Revenues on sales into the markets of Europe, the Middle East and Africa
were $1,231.7, $951.8 and $720.8 in 1998, 1997 and 1996, respectively; an
increase of $279.9 or 29% from 1997 to 1998, and $231.0 or 32% from 1996 to
1997. The Company incorporated direct sales subsidiaries in Spain and Poland
during 1998, in Austria during 1997, and in Israel during 1996.

Revenues on sales into the markets in the Asia Pacific region were $284.8,
$279.5 and $206.6 in 1998, 1997 and 1996, respectively; an increase of $5.3 or
2% from 1997 to 1998, and $72.9 or 35% from 1996 to 1997. The reduced growth
rate in 1998 was principally attributable to a downturn in economic trends in
the Asia Pacific market.

Revenues on sales into the markets of Latin America were $53.3, $24.4 and
$15.4 in 1998, 1997 and 1996, respectively; an increase of $28.9 or 118% from
1997 to 1998, and $9.0 or 59% from 1996 to 1997. The increase in both periods
was primarily due to the Company's efforts to expand its business in this
region. The Company incorporated a direct sales subsidiary in Brazil during
1996.

Gross Margins

Gross margins increased to 51.5% in 1998, compared to 46.5% in 1997 and
45.1% in 1996. The increase in both periods is primarily attributable to
increased licensing of the Company's enterprise software, which has higher
gross margins than sales of enterprise systems. Software revenue as a
percentage of total revenues increased to 11.2% in 1998 from 6.0% in 1997 and
3.4% in 1996. Other factors affecting gross margins in 1998 include the impact
of component cost declines being greater than the impact of product price
declines. The Company currently believes that product price declines will
continue.

Research and Development

Research and development ("R&D") expenses were $315.2, $220.9 and $161.1 in
1998, 1997 and 1996, respectively. As a percentage of revenues, R&D expenses
were 7.9%, 7.5% and 7.1% in 1998, 1997 and 1996, respectively. The increase in
R&D spending levels from 1997 to 1998 reflects the Company's ongoing research
and development efforts in a variety of areas, including EMC ESN technologies,
enhancements to the Symmetrix family of products, new enterprise storage
software products and fibre channel connectivity. R&D for 1998 also includes
costs associated with the integration of Conley, acquired in August 1998,
which became the EMC Cambridge Software Development Center. The increase in
R&D spending levels from 1996 to 1997 reflects the cost of technical staff and
equipment to support a variety of projects, including both fibre channel
connectivity and enterprise storage software.

15
<PAGE>

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses were $747.5, $484.1
and $367.1 in 1998, 1997 and 1996, respectively. As a percentage of revenues,
SG&A expenses were 18.8%, 16.5% and 16.2% in 1998, 1997 and 1996,
respectively. The increase in spending levels in both periods is primarily due
to continued investment in additional sales and support personnel and their
related overhead costs, both domestically and internationally, in connection
with the Company's increased revenue levels. The increase from 1997 to 1998
primarily reflects the Company's objective of building an infrastructure to
achieve broader coverage and greater account depth around the world and to
expand its technical sales organization to support the current and expected
growth in software sales. The increase from 1996 to 1997 primarily reflects
the Company's expansion of its international direct sales force, particularly
in the Asia Pacific region, as well as OEM, reseller, alliance and partnership
programs.

Investment Income and Interest Expense

Investment income increased to $101.4 in 1998, from $70.5 in 1997 and $34.5
in 1996. Investment income was earned primarily from investments in cash
equivalents and short and long-term investments. Investment income increased
in 1998 and 1997 primarily due to higher average cash and investment balances
which were derived from operations and proceeds from the Company's 3 1/4%
Convertible Subordinated Notes due 2002 issued in March of 1997 (the "3 1/4%
Notes").

Interest expense increased to $20.2 in 1998, from $15.5 in 1997 and $12.0 in
1996. The increase in 1998 from 1997 and in 1997 from 1996 is primarily due to
the 3 1/4% Notes. Interest expense in 1996 was primarily due to the Company's
4 1/4% Convertible Subordinated Notes due 2001 (the "4 1/4% Notes"), all of
which were redeemed or converted into Common Stock by January 1997.

Other Income/(Expense), Net

The net other expense was $5.2 in 1998 compared with the net other income of
$1.1 in 1997 and $0.4 in 1996. The increase in the net expense from 1997 to
1998 is primarily attributable to costs associated with a bond offering which
was cancelled during the third quarter, gains and losses on foreign exchange
transactions and losses on sales of fixed assets.

Provision for Income Taxes

The provision for income taxes was $264.5 in 1998, $179.5 in 1997 and $133.2
in 1996, which resulted in effective tax rates of 25.0%, 25.0% and 25.7% in
1998, 1997 and 1996, respectively. The effective tax rate is mainly
attributable to the realization of benefits associated with the Company's
various tax strategies and benefits related to offshore manufacturing.

Financial Condition

Cash and cash equivalents and short and long-term investments were $2,092.8
and $1,650.6 at December 31, 1998 and 1997, respectively, an increase of
$442.2. In 1998, cash and cash equivalents decreased by $249.4 and short and
long-term investments increased by $691.6. This reflects the Company's
continued efforts to invest excess cash in short and long-term investments,
which generate a higher yield than cash and cash equivalents.

Cash provided by operating activities was $855.2. This was primarily
generated from net income, offset by an increase in working capital, primarily
attributed to an increase in accounts receivable and an increase in inventory,
consistent with the growth of the business. Cash used by investing activities
was $1,156.0, principally for additions to property, plant and equipment and
the purchase of short and long-term investments. The year-over-year increase
in additions to property, plant and equipment is primarily attributable to the
construction of manufacturing facilities in Franklin, Massachusetts and Cork,
Ireland.

Cash provided by financing activities was $54.9, principally from the
issuance of Common Stock from stock option exercises.

16
<PAGE>

The Company has available for use a credit line of $50.0 and may elect to
borrow at any time. In March 1997, the Company sold $517.5 of the 3 1/4%
Notes. The 3 1/4% Notes are generally convertible into shares of Common Stock
at any time prior to the redemption date at a conversion price of $22.655 per
share. As of December 31, 1998, none of the 3 1/4% Notes have been converted
into Common Stock. 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.

To date, inflation has not had a material impact on the Company's financial
results.

New Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. SFAS 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
either current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. For fair-value hedge transactions in which the
Company is hedging changes in fair value of an asset, liability or firm
commitment, changes in the fair value of the derivative instrument will
generally be offset in the income statement by changes in the fair value of
the hedged item. For cash-flow hedge transactions, in which the Company is
hedging the variability of cash flows related to a variable-rate asset,
liability or a forecasted transaction, changes in the fair value of the
derivative instrument will be reported in other comprehensive income. The
gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the periods in which
earnings are impacted by the variability of the cash flows of the hedged item.
The ineffective portion of all hedges will be recognized in current earnings.

The Company adopted SFAS 133 as of January 1, 1999. The Company believes
that the adoption of this Statement will not have a material effect on its
financial statements. In connection with the adoption of SFAS 133, the Company
intends to reclassify its held-to-maturity securities to available for sale
securities.

17
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company's 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. The Company's future
results may differ materially from its current results and 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 those set
forth below, other one-time events and other important factors disclosed
previously and from time to time in EMC's other filings with the Securities
and Exchange Commission.

Dependence on Suppliers

The Company purchases certain components and products from one or a limited
number of qualified suppliers that meet its requirements. In addition, certain
of the Company's suppliers are competitors of the Company. Among the most
important components that EMC uses are disk drives, high density memory
components and power supplies. A failure by any supplier of components to meet
EMC's delivery or quality requirements for an extended period of time could
have a material adverse effect on the Company's business, results of
operations or financial condition. The Company periodically transitions its
product line to new disk drive technologies. These transitions may intensify
the above risks. From time to time, because of high industry demand or the
inability of certain vendors to consistently meet on a timely basis the
Company's component quality standards, the Company has experienced delays in
deliveries of components needed to satisfy orders for its products. The
Company is currently working with such vendors to proactively maintain or
improve component quality standards and also continues to seek alternative
sources of supply. If such shortages or performance problems were to
intensify, the Company could lose some time-sensitive customer orders which
could adversely affect quarterly revenues or earnings. The adverse effect of a
supplier's failure to meet EMC's requirements may be intensified by the uneven
pattern of the Company's sales and the necessity of meeting critical
manufacturing schedules.

New Products

Technology and user needs change rapidly in the computer storage industry,
which requires ongoing market research, development of highly complex hardware
and software and introduction of new products. Sales of the Symmetrix series
of products constitute the principal source of revenues for EMC and such sales
are expected to continue to be the principal source of its revenues in the
near future. There is strong competition in the computer storage market and
there can be no assurance that the Symmetrix series of products will continue
to be properly positioned in the market or receive customer acceptance.
Furthermore, there can be no assurance that EMC will be able to continue to
develop new hardware or software on a timely basis even with significant
additional investments.

Risks inherent in the transition to new products include the difficulty in
forecasting customer demand accurately, the Company's inability to expand
production capacity fast enough to meet customer demand, the impact of
customer demand for new products on the products being replaced and delays in
initial shipments of new products. Further risks inherent in new product
introductions include the uncertainty of price-performance relative to
products of competitors, competitors' responses to the introductions and the
desire by customers to evaluate new products for longer periods of time. There
can be no assurance that the Company will be able to effectively manage the
transitions to new products or new technologies.

Competition

There is strong competition in the computer storage industry. EMC competes
with many companies, certain of which have substantially greater financial,
marketing and technological resources, larger distribution capabilities,
earlier access to customers and a greater overall market presence than EMC. In
the UNIX market, EMC competes primarily with Sun, IBM and Compaq. In the
Windows NT market, the Company competes primarily with Compaq. In the
mainframe market, EMC competes primarily with IBM and Hitachi. In the
Company's opinion, these companies compete based on their overall market
presence and their ability to sell

18
<PAGE>

both computer systems and storage systems. The Company believes that its major
independent storage competitor in the UNIX and Windows NT markets is DG. EMC's
business may be adversely affected by the announcement or introduction of new
products by its competitors, price reductions of its competitors' equipment or
services and the implementation of certain marketing strategies by its
competitors. As a significant number of EMC's products are designed to be
fully compatible with IBM computers and IBM operating systems, EMC's business
could also be adversely affected by modifications in the design or
configuration of IBM computer systems.

Pricing

Competitive pricing pressures exist in the computer storage market, and have
had and may in the future have an adverse effect on the Company's revenues and
earnings. There also has been and may continue to be a willingness on the part
of certain competitors to reduce prices in order to preserve or gain market
share, which cannot be foreseen by the Company. The Company currently believes
that pricing pressures are likely to continue.

To date, the Company has been able to manage its component and product
design costs. However, there can be no assurance that the Company will be able
to continue to achieve reductions in component and product design costs. The
relative and varying rates of product price and component cost declines could
have a material adverse effect on the Company's earnings.

International Sales

A substantial portion of the Company's revenues is derived from sales
outside the United States. In addition, a substantial portion of the Company's
products are manufactured outside of the United States. Accordingly, the
Company's future results could be adversely affected by a variety of factors,
including changes in foreign currency exchange rates, changes in a specific
country's or region's political or economic conditions, trade restrictions,
import or export licensing requirements, the overlap of different tax
structures or changes in international tax laws, changes in regulatory
requirements, compliance with a variety of foreign laws and regulations and
longer payment cycles in certain countries.

Indirect Channels of Distribution

The Company derives a significant percentage of its product revenues from
reseller and OEM channels. A substantial portion of these reseller and OEM
revenues stems from the Company's reseller agreement with HP. The Company's
financial results could be adversely affected if its contracts with HP or
other resellers or OEMs were terminated, if the Company's relationship with
such resellers or OEMs were to deteriorate or if the financial condition of
its resellers or OEMs were to weaken. In addition, as the Company's business
grows, the Company may have an increased reliance on indirect channels of
distribution. There can be no assurance that the Company will be successful in
maintaining or expanding these indirect channels of distribution. If the
Company is not successful, the Company may lose certain sales opportunities.
Furthermore, the partial reliance on indirect channels of distribution may
materially reduce the visibility to management of potential orders, thereby
making it more difficult to accurately forecast such orders.

Uneven Pattern of Quarterly Sales

There has been a historic and recurring uneven pattern of the Company's
quarterly sales, by which a disproportionate percentage of a quarter's total
sales occur in the last month and weeks and days of each quarter, making
prediction of revenues, earnings and working capital for each financial period
especially difficult and uncertain and increasing the risk of unanticipated
variations in quarterly results and financial condition.

This pattern of sales is itself believed to be the result of many factors.
These include the significant size of EMC's average product price in relation
to its customers' budgets, resulting in long lead times for customers'
budgetary approval, which tends to be given late in a quarter; the tendency of
customers to wait until late in a quarter to commit to purchase in the hope of
obtaining more favorable pricing from one or more competitors

19
<PAGE>

seeking their business; and, at times, seasonal influences; as well as the
fourth quarter influence of customers spending their remaining capital budget
authorization prior to new budget constraints in the first quarter of the
following year.

The uneven pattern of the Company's sales also makes it extremely difficult
to predict near-term demand and adjust manufacturing capacity accordingly.
Substantial variance of orders from the predicted demand may limit the
Company's ability to assemble, test and ship orders received in the last weeks
and days of each quarter, which could adversely affect quarterly revenues and
earnings.

In addition, revenues in any quarter are substantially dependent on orders
booked and shipped in that quarter and the Company's backlog at any particular
time is not necessarily indicative of future sales levels. This is because the
Company manufactures its products on the basis of its forecast of near-term
demand and maintains inventory in advance of receipt of firm orders from
customers; orders are generally shipped by the Company shortly after receipt
of the order; and customers may reschedule orders with little or no penalty.
These are additional factors making the prediction of revenues extremely
difficult. Further, any unexpected decline in revenues without a corresponding
and timely slowdown in expenses could have a material adverse effect on the
Company's business, results of operations or financial condition.

Management of Growth

The Company's continued growth and future operating results will depend on
management's ability to manage such growth, including but not limited to
hiring and retaining significant numbers of qualified employees, forecasting
revenues, controlling expenses, managing its manufacturing capacity and other
assets and executing on its plans. An unexpected decline in the growth rate of
revenues without a corresponding and timely reduction in expense growth or a
failure to manage other aspects of growth could have a material adverse effect
on the Company's business, results of operations or financial condition.

Dependence Upon Key Personnel

The Company's continued growth and success depends to a significant extent
on the continued service of senior management and other key employees, the
development of additional management personnel and the hiring of new qualified
employees. Competition for highly-skilled personnel is intense in the high
technology industry. There can be no assurance that the Company will be
successful in recruiting new personnel or in retaining existing personnel. The
loss of one or more key employees or other employees or the Company's
inability to attract additional qualified employees could have a material
adverse effect on the Company's business, results of operations or financial
condition.

Manufacturing

EMC's products operate near the limits of electronic and physical
performance and are designed and manufactured with relatively small
tolerances. If flaws in design, production, assembly or testing were to occur
by EMC or its suppliers, EMC could experience a rate of failure in its
products that would result in substantial repair or replacement costs and
potential damage to EMC's reputation. Continued improvement in manufacturing
capabilities and control of material and manufacturing quality and costs are
critical factors in the future growth of EMC. EMC frequently revises and
updates manufacturing and test processes to address engineering and component
changes to its products and evaluates the reallocation of manufacturing
resources among its facilities. There can be no assurance that the Company's
efforts to monitor, develop and implement appropriate test and manufacturing
processes for its products, especially the Symmetrix series of products, will
be sufficient to permit EMC to avoid a rate of failure in its products that
results in substantial delays in shipment, significant repair or replacement
costs and potential damage to EMC's reputation, any of which could have a
material adverse effect on the Company's business, results of operations or
financial condition.

20
<PAGE>

Acquisitions

As part of its business strategy, the Company makes acquisitions of, and
investments in, businesses that offer complementary products, services or
technologies. Any such acquisitions or investments are accompanied by the
risks commonly encountered in an acquisition of a business. Such risks
include, among other things, the failure of such acquired business to further
the Company's strategies, the difficulty of integrating the acquired business
with EMC, the effect of such acquisition on the financial and strategic
position of the Company, the maintenance of uniform company-wide standards,
procedures and policies and the impairment of relationships with employees and
customers of the acquired business. These factors could have a material
adverse effect on the Company's business, results of operations or financial
condition. The Company expects that the consideration paid for future
acquisitions, if any, could be in the form of cash, stock, rights to purchase
stock or a combination thereof. Dilution to existing stockholders and to
earnings per share may result to the extent that shares of stock or other
rights to purchase stock are issued in connection with any such future
acquisitions.

Alliances

The Company has alliances with leading software, relational database and
enterprise application companies, and the Company plans to continue its
strategy of developing key alliances. The Company works with these companies
to integrate its enterprise storage systems with their software applications.
There can be no assurance that the Company will be successful in its ongoing
strategic alliances or that the Company will be able to find further suitable
business relationships as it develops new products. Any failure to continue or
expand such relationships could have a material adverse effect on the
Company's business, results of operations or financial condition.

There can be no assurance that the Company's distributors and companies with
which it has strategic alliances, certain of which have substantially greater
financial, marketing and technological resources than the Company, will not
develop or market products in competition with the Company in the future,
discontinue their alliances with the Company or form competing alliances with
the Company's competitors.

Enforcement of the Company's Intellectual Property Rights

The Company generally relies upon patent, copyright, trademark and trade
secret laws and contract rights in the United States and in other countries to
establish and maintain its proprietary rights in its technology and products.
However, there can be no assurance that any of such proprietary rights of the
Company will not be challenged, invalidated or circumvented. In addition, the
laws of certain countries do not protect the Company's proprietary rights to
the same extent as do the laws of the United States. Therefore, there can be
no assurance that the Company will be able to adequately protect its
proprietary technology against unauthorized third party copying or use, which
could adversely affect the Company's competitive position. Further, there can
be no assurance that the Company will be able to obtain licenses to any
technology that it may require to conduct its business or that, if obtainable,
such technology can be licensed at a reasonable cost.

From time to time, the Company receives notices from third parties claiming
infringement by the Company's products of third party patent or other
intellectual property rights. Responding to any such claim, regardless of its
merit, could be time-consuming, result in costly litigation, divert
management's attention and resources and cause the Company to incur
significant expenses. In the event there is a temporary or permanent
injunction entered prohibiting the Company from marketing or selling certain
of its products or a successful claim of infringement against the Company
requiring the Company to pay royalties to a third party, and the Company fails
to develop or license a substitute technology, the Company's business, results
of operations or financial condition could be materially adversely affected.

Year 2000 Issues

The information provided below constitutes a "Year 2000 Readiness
Disclosure" under the Year 2000 Information and Readiness Disclosure Act.

21
<PAGE>

Certain computer hardware and software is unable to appropriately interpret
the upcoming calendar year 2000. These systems and software refer to years in
terms of their final two digits only and may interpret the year 2000 as the
year 1900 in error. Therefore, they will need to be modified prior to the year
2000 in order to remain functional. The Company has established a Year 2000
program that involves assessing the Company's key hardware and software,
assessing Year 2000 compliance by third parties with which the Company has a
material relationship, assessing Year 2000 compliance of the Company's
products, and modifying and testing hardware and software in the Company's
internal systems and products, where necessary.

The Company has completed an assessment of the hardware and software in its
core business information systems and has substantially completed the
necessary modifications. The Company has extended the assessment and
remediation process to the hardware and software in other information systems
used in its operations. The Company has also extended its assessment and
remediation to other areas of its business to include hardware and software
not supported by the Company's information systems department. The Company has
designated certain individuals within key business organizations to ensure
that the assessment of such hardware and software is complete within their
respective organizations.

The Company has contacted key vendors and suppliers and other third parties
whose systems failures could potentially have a significant impact on the
Company's operations. The Company has received certifications of Year 2000
compliance from certain key vendors and suppliers. The Company continues to
make progress in receiving certifications of Year 2000 compliance from other
key vendors and suppliers and in assessing questionnaire responses and related
information from such third parties.

The Company has designed and tested the current versions of its Symmetrix
series of products and the current versions of its other products to be Year
2000 compliant. Some of the Company's customers are running earlier versions
of its Symmetrix series of products and other products that have not been
tested for Year 2000 compliance. The Company has made upgrades available for
the older versions of its Symmetrix series of products and for certain other
of its older products so that such products will test as Year 2000 compliant.

The Company currently anticipates that the assessment and remediation phases
of its Year 2000 conversion program will be substantially complete by the
middle of 1999, although the testing phase and the contingency planning phase,
if any, will continue extensively throughout 1999. The Company does not
anticipate that the total cost of such program will have a material effect on
its business, results of operations or financial condition.

The most reasonably likely worst case scenarios regarding the Year 2000
issue would include a hardware failure, the corruption or loss of data
contained in the Company's internal information systems, a failure affecting
the Company's key vendors, suppliers or customers, the failure of
infrastructure services provided by government agencies or other third
parties, and customer dissatisfaction related to the performance of the
Company's products.

The Company continues to assess the need for a Year 2000 contingency plan.
However, the Company anticipates that its Year 2000 conversion program will be
completed far enough in advance of January 1, 2000 so as to formulate a
contingency plan at such time, if necessary. The Company expects its
contingency plan, if developed, would include, among other things, manual
"work-arounds" for hardware and software failures, as well as substitution of
systems, if required.

Further information about the Company's Year 2000 readiness is available at
the Company's website at
http://www.emc.com/challenges/supplmts/complnc/y2k_comp.htm.

There can be no assurance that conversion of the Company's hardware and
software will be successful, that key third parties will have successful
conversion programs, that the Company's products do not contain undetected
errors or defects associated with Year 2000 date functions, or that other
factors relating to Year 2000 compliance, including but not limited to
litigation, will not have a material adverse effect on the Company's business,
results of operations or financial condition.

22
<PAGE>

Euro Conversion

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the Euro. The Euro is currently the common legal currency in
such countries. The Euro trades on currency exchanges and is available for
non-cash transactions. The participating countries are issuing sovereign debt
exclusively in Euros, and have redenominated outstanding sovereign debt. The
participating countries no longer control their own monetary policies by
directing independent interest rates for the legacy currencies. Instead, the
authority to direct monetary policy, including money supply and official
interest rates for the Euro, is exercised by the European Central Bank.

The legacy currencies will remain legal tender in the participating
countries as denominations of the Euro between January 1, 1999 and January 1,
2002 ( the "transition period"). During the transition period, public and
private parties may pay for goods and services using either the Euro or the
participating country's legacy currency on a "no compulsion, no prohibition"
basis. However, conversion rates are no longer computed directly from one
legacy currency to another. Instead, a triangular process is applied whereby
an amount denominated in one legacy currency is first converted into the Euro.
The resultant Euro-denominated amount is then converted into the third legacy
currency.

The Company has developed and implemented the necessary modifications for
the technical adaptation of its internal IT and other systems to accommodate
Euro-denominated transactions. The Company is currently assessing certain
business implications of conversion to the Euro, including the long term
competitive implications of the conversion and the impact on market risk with
respect to financial instruments. At this time, management is also in the
process of evaluating other impacts of this conversion on the Company,
including the potential actions which may or may not be taken by the Company's
competitors and suppliers.

Litigation

In the ordinary course of its business, the Company may become involved in
certain litigation, administrative proceedings and governmental proceedings.
Such matters can be time-consuming, divert management's attention and
resources and cause the Company to incur significant expenses. Furthermore,
there can be no assurance that the results of any of these actions will not
have a material adverse effect on the Company's business, results of
operations or financial condition.

Change in Regulations

The Company's business, results of operations or financial condition could
be adversely affected if laws, regulations or standards relating to the
Company or its products were newly implemented or changed.

Volatility of Stock Price

The Company's stock price, like that of other technology companies, is
subject to significant volatility. The announcement of new products, services
or technological innovations by the Company or its competitors, quarterly
variations in the Company's results of operations, changes in revenue or
earnings estimates by the investment community and speculation in the press or
investment community are among the factors affecting the Company's stock
price. In addition, the stock price may be affected by general market
conditions and domestic and international economic factors unrelated to the
Company's performance. Because of these reasons, recent trends should not be
considered reliable indicators of future stock prices or financial results.

23
<PAGE>

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The Company is exposed to market risk, including changes in interest rates
and currency exchange rates. To manage the volatility relating to these
exposures, the Company enters into various derivative transactions pursuant to
the Company's policies to hedge against known or forecasted market exposures.

Foreign Exchange Risk Management

As a multinational corporation, the Company is exposed to changes in foreign
exchange rates. As the Company's international sales grow, exposure to
volatility in exchange rates could have a material adverse impact on the
Company's financial results. The Company's risk from exchange rate changes is
primarily related to non-dollar denominated sales in Europe and Japan.

The Company uses foreign currency forward and option contracts to manage the
risk of exchange rate fluctuations. The Company uses these derivative
instruments to reduce its foreign exchange risk by essentially creating
offsetting market exposures. The instruments held by the Company are not
leveraged and are not held for trading purposes.

The Company uses forward exchange contracts to hedge its net asset (balance
sheet) position and uses a combination of option and forward contracts to
hedge a portion of anticipated but not committed cash flows and firm
commitments. The Company employs a variance/covariance model to calculate
value-at-risk for its combined foreign exchange position. The model measures
the potential loss in fair value or earnings that could arise from changes in
market conditions, using a 95% confidence level and assuming a one day holding
period. The value-at-risk on the combined foreign exchange position as of
December 31, 1998 was $4.7.

The success of the hedging program depends on forecasts of transaction
activity in the various currencies. To the extent that these forecasts are
over or understated during periods of currency volatility, the Company could
experience unanticipated currency gains or losses.

Interest Rate Risk

The Company maintains an investment portfolio consisting of debt securities
of various issuers, types and maturities. A portion of the securities are
classified as held-to-maturity, and consequently are recorded on the balance
sheet at amortized cost. The remainder of the investments are classified as
available for sale. These securities are recorded on the balance sheet at
market value, with any unrealized gain or loss recorded in comprehensive
income. These instruments are not leveraged, and are not held for trading
purposes. The Company employs a variance/covariance model to calculate value-
at-risk for its combined investment portfolios (held-to-maturity and available
for sale). The model measures the potential loss in fair value that could
arise from changes in market conditions, using a 95% confidence level and
assuming a one day holding period. The value at risk on the investment
portfolios as of December 31, 1998 was $2.2.

24
<PAGE>

EMC CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS

<TABLE>
<CAPTION>
Form 10-K
---------
<S> <C>
Report of Independent Accountants.................................... p. 26
Consolidated Balance Sheets at December 31, 1998 and 1997............ p. 27
Consolidated Statements of Income for the years ended December 31,
1998, 1997 and 1996................................................. p. 28
Consolidated Statements of Cash Flows for the years ended December
31, 1998, 1997 and 1996............................................. p. 29
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996.................................... p. 30
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1998, 1997 and 1996.................................... p. 31
Notes to Consolidated Financial Statements........................... pp. 32-50
Schedule:
Schedule II--Valuation and Qualifying Accounts..................... p. S-1
</TABLE>

Note: All other financial statement schedules are omitted because they are not
applicable or the required information is included in the financial
statements or notes thereto.

25
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and the
Board of Directors of EMC Corporation:

In our opinion, the consolidated financial statements listed in the
accompanying index on page 25 present fairly in all material respects, the
financial position of EMC Corporation at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule listed in the accompanying index on page 25 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and the financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts
January 22, 1999

26
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EMC CORPORATION
CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 705,177 $ 954,595
Short-term investments............................. 825,298 419,262
Trade and notes receivable less allowance for
doubtful accounts of $6,562 and $6,773, in 1998
and 1997, respectively............................ 984,412 788,869
Inventories........................................ 485,844 404,660
Deferred income taxes.............................. 49,682 37,095
Other assets....................................... 54,400 22,545
---------- ----------
Total current assets................................. 3,104,813 2,627,026
Long-term investments................................ 562,360 276,776
Notes receivable, net................................ 34,870 20,013
Property, plant and equipment, net................... 637,534 396,511
Deferred income taxes................................ 7,974 14,174
Intangible and other assets, net..................... 221,020 155,609
---------- ----------
Total assets..................................... $4,568,571 $3,490,109
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations........... $ 29,361 $ 7,665
Accounts payable................................... 173,285 187,117
Accrued expenses................................... 246,894 151,216
Income taxes payable............................... 167,580 151,088
Deferred revenue................................... 36,073 8,784
---------- ----------
Total current liabilities............................ 653,193 505,870
Deferred income taxes................................ 50,591 45,353
Long-term obligations:
3 1/4% convertible subordinated notes due 2002..... 517,500 517,500
Notes payable...................................... 21,396 40,954
Other liabilities.................................... 1,755 4,131
---------- ----------
Total liabilities................................ 1,244,435 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 503,633,490 and
496,792,608, in 1998 and 1997, respectively....... 5,036 4,968
Additional paid-in capital......................... 830,238 670,297
Deferred compensation.............................. (17,022) (12,738)
Retained earnings.................................. 2,504,719 1,711,356
Unrealized gain/(loss) on investments............. 979 (9)
Cumulative translation adjustment................. 186 2,427
---------- ----------
Accumulated other comprehensive income............. 1,165 2,418
---------- ----------
Total stockholders' equity....................... 3,324,136 2,376,301
---------- ----------
Total liabilities and stockholders' equity..... $4,568,571 $3,490,109
========== ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

27
<PAGE>

EMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Year Ended
--------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Net sales............................ $3,791,291 $2,862,646 $2,218,292
Service and rental................... 182,444 75,214 55,360
---------- ---------- ----------
3,973,735 2,937,860 2,273,652
Costs and expenses:
Cost of sales and service............ 1,929,208 1,571,012 1,248,950
Research and development............. 315,188 220,884 161,088
Selling, general and administrative.. 747,535 484,052 367,073
---------- ---------- ----------
Operating income....................... 981,804 661,912 496,541
Investment income...................... 101,420 70,506 34,476
Interest expense....................... (20,191) (15,463) (11,967)
Other income/(expense), net............ (5,215) 1,082 424
---------- ---------- ----------
Income before taxes.................... 1,057,818 718,037 519,474
Income tax provision................... 264,455 179,509 133,245
---------- ---------- ----------
Net income............................. $ 793,363 $ 538,528 $ 386,229
========== ========== ==========
Net income per weighted average share,
basic................................. $ 1.59 $ 1.09 $ .83
========== ========== ==========
Net income per weighted average share,
diluted............................... $ 1.49 $ 1.04 $ .79
========== ========== ==========
Weighted average shares, basic......... 499,978 493,698 463,548
Weighted average shares, diluted....... 539,176 525,500 498,590
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

28
<PAGE>

EMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 793,363 $538,528 $386,229
Adjustments to reconcile net income to
net cash provided/(used) by operating
activities:
Depreciation and amortization.......... 203,289 136,257 86,949
Deferred income taxes.................. (1,149) 8,167 39,178
Net loss on disposal of property and
equipment............................. 868 728 1,125
Tax benefit from stock options
exercised............................. 43,670 18,540 17,746
Minority interest...................... (499) (337) --
Changes in assets and liabilities:
Trade and notes receivable............ (208,516) (161,066) (69,103)
Inventories........................... (81,210) (68,239) (6,480)
Other assets.......................... (19,089) (52,997) (24,433)
Accounts payable...................... (13,289) 14,382 61,458
Accrued expenses...................... 95,722 28,757 (9,955)
Income taxes payable.................. 16,512 46,434 (2,836)
Deferred revenue...................... 25,499 (2,132) 3,497
---------- -------- --------
Net cash provided by operating
activities.......................... 855,171 507,022 483,375
---------- -------- --------
Cash flows from investing activities:
Additions to property, plant and
equipment............................. (372,657) (210,797) (125,973)
Proceeds from sales of property and
equipment............................. 6 313 1,441
Capitalized software development
costs................................. (38,794) (27,185) (24,693)
Purchase of patents.................... -- -- (6,333)
Purchase of short and long-term held-
to-maturity securities................ (782,969) (696,049) (425,266)
Maturity of short and long-term held-
to-maturity securities................ 686,213 534,711 206,061
Purchase of short and long-term
available for sale securities......... (1,758,564) (192,818) --
Sales of short and long-term available
for sale securities................... 1,164,688 2,590 --
Business acquisitions.................. (53,903) -- --
---------- -------- --------
Net cash used by investing
activities.......................... (1,155,980) (589,235) (374,763)
---------- -------- --------
Cash flows from financing activities:
Issuance of common stock............... 52,789 34,049 33,181
Purchase of treasury stock............. -- -- (27,457)
Redemption of 4 1/4% convertible
subordinated notes due 2001........... -- (65) --
Proceeds from investment in new
McDATA................................ -- 10,000 --
Issuance of 3 1/4% convertible
subordinated notes due 2002, net of
issuance costs -- 506,671 --
Payment of long-term and short-term
obligations........................... (12,413) (11,683) (1,295)
Issuance of long-term and short-term
obligations........................... 14,551 4,730 4,289
---------- -------- --------
Net cash provided by financing
activities.......................... 54,927 543,702 8,718
---------- -------- --------
Effect of exchange rate changes on
cash................................... (3,536) (3,271) (581)
Net (decrease)/increase in cash and cash
equivalents............................ (245,882) 461,489 117,330
Cash and cash equivalents at beginning
of period.............................. 954,595 496,377 379,628
---------- -------- --------
Cash and cash equivalents at end of
period................................. $ 705,177 $954,595 $496,377
========== ======== ========
Non-cash activity-conversions of
debentures and notes................... -- $140,682 $ 85,636
-patents acquired by notes and
other payables................... -- -- $ 37,416
-business acquisitions............ $ 51,755 -- --
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

29
<PAGE>

EMC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

<TABLE>
<CAPTION>
For the three years ended December 31, 1998
--------------------------------------------------------------------------------------------------------------
Common Stock Unrealized Treasury Stock
------------------ Additional Deferred Gain/(Loss) Cumulative ------------------- Total
Par Paid-in Compen- on Retained Translation Stockholders'
Shares Value Capital sation Investments Earnings Adjustment Shares Cost Equity
----------- ------ ---------- -------- ------------ ---------- ----------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
30, 1995........ 465,035,690 $4,650 $348,664 $ (2,140) -- $ 786,599 $3,766 5,292,906 $(1,238) $1,140,301
Exercise of
stock options.. 2,685,792 27 2,408 -- -- -- -- (7,892,906) 28,695 31,130
Tax benefit from
stock options
exercised...... -- -- 17,746 -- -- -- -- -- -- 17,746
Grant of stock
options........ -- -- 6,938 (6,938) -- -- -- -- -- --
Issuance of
common stock
pursuant to
bond
conversions.... 8,757,862 88 85,548 -- -- -- -- -- -- 85,636
Amortization of
deferred
compensation... -- -- -- 2,051 -- -- -- -- -- 2,051
Purchase of
treasury
stock.......... -- -- -- -- -- -- -- 2,600,000 (27,457) (27,457)
Cumulative
translation
adjustment..... -- -- -- -- -- -- 1,153 -- -- 1,153
Net income...... -- -- -- -- -- 386,229 -- -- -- 386,229
----------- ------ -------- -------- ---- ---------- ------ ---------- ------- ----------
Balance, December
31, 1996........ 476,479,344 4,765 461,304 (7,027) -- 1,172,828 4,919 -- -- 1,636,789
----------- ------ -------- -------- ---- ---------- ------ ---------- ------- ----------
Exercise of
stock options.. 5,932,618 59 33,990 -- -- -- -- -- -- 34,049
Tax benefit from
stock options
exercised...... -- -- 18,540 -- -- -- -- -- -- 18,540
Grant of stock
options........ -- -- 9,300 (9,300) -- -- -- -- -- --
Issuance of
common stock
pursuant to
bond
conversions.... 14,380,646 144 140,538 -- -- -- -- -- -- 140,682
Amortization of
deferred
compensation... -- -- -- 3,589 -- -- -- -- -- 3,589
Proceeds in
excess of
minority
interest in new
McDATA......... -- -- 6,625 -- -- -- -- -- -- 6,625
Unrealized
gain/(loss) on
investments.... -- -- -- -- (9) -- -- -- -- (9)
Cumulative
translation
adjustment..... -- -- -- -- -- -- (2,492) -- -- (2,492)
Net income...... -- -- -- -- -- 538,528 -- -- -- 538,528
----------- ------ -------- -------- ---- ---------- ------ ---------- ------- ----------
Balance, December
31, 1997........ 496,792,608 4,968 670,297 (12,738) (9) 1,711,356 2,427 -- -- 2,376,301
----------- ------ -------- -------- ---- ---------- ------ ---------- ------- ----------
Exercise of
stock options.. 5,733,716 57 52,732 -- -- -- -- -- -- 52,789
Tax benefit from
stock options
exercised...... -- -- 43,670 -- -- -- -- -- -- 43,670
Grant of stock
options........ -- -- 12,353 (12,353) -- -- -- -- -- --
Amortization of
deferred
compensation... 8,069 8,069
Business
acquisitions... 1,107,166 11 51,186 -- -- -- -- -- -- 51,197
Unrealized
gain/(loss) on
investments.... -- -- -- -- 988 -- -- -- -- 988
Cumulative
translation
adjustment..... -- -- -- -- -- -- (2,241) -- -- (2,241)
Net income...... -- -- -- -- -- 793,363 -- -- -- 793,363
----------- ------ -------- -------- ---- ---------- ------ ---------- ------- ----------
Balance, December
31, 1998........ 503,633,490 $5,036 $830,238 $(17,022) $979 $2,504,719 $ 186 -- -- $3,324,136
=========== ====== ======== ======== ==== ========== ====== ========== ======= ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

30
<PAGE>

EMC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net income............................... $793,363 $538,528 $386,229
Other comprehensive income net of tax:
Foreign currency translation
adjustments, net of tax of ($560),
($623), and $296...................... (1,681) (1,869) 857
Unrealized gains/losses on securities:
Unrealized holding gain/(loss) arising
during the period, net of tax of $247,
($2), and $0.......................... 741 (7) 0
-------- -------- --------
Other comprehensive income............... (940) (1,876) 857
-------- -------- --------
Comprehensive income..................... $792,423 $536,652 $387,086
======== ======== ========
</TABLE>

31
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)

A. 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 worldwide enterprise storage
market. 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 as well as major mainframe operating systems. 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,
Hewlett-Packard Company ("HP"), NEC Corporation, Siemens Nixdorf
Informationssysteme AG, Unisys Corporation, Sequent Computer Systems, Inc.,
Compagnie des Machines Bull S.A., and other open systems and mainframe
platforms.

B. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and balances
have been eliminated. The Company treats gains/losses on sales of subsidiary
stock of development stage companies as equity transactions.

Basis of Presentation

On September 23, 1996, EMC elected to change its fiscal year end from a
fiscal basis which would have ended on December 28, 1996 to a calendar year
end basis ending on December 31, 1996. This change was reported on Form 8-K on
October 4, 1996. The effect on the Company's results of operations was not
material.

Certain prior year amounts have been reclassified to conform with the 1998
presentation.

Use of Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
reported amounts of revenues and expenses during the reporting period and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

Acquisitions

The Company has acquired several companies, which have been accounted for
using the purchase method, and are not significant to its financial position
or results of operations. Under the purchase method, the results of operations
of acquired companies are included prospectively from the date of acquisition,
and the acquisition cost is allocated to the acquirees' assets and liabilities
based upon their fair market values at the date of acquisition.

At December 31, 1998 and 1997, the net book value of goodwill associated
with all acquisitions was $102,610 and $7,830, respectively. Goodwill is being
amortized on a straight-line basis over periods ranging from five to ten years
and is included in intangible and other assets, net. Accumulated amortization
was $18,925 and $8,234 on December 31, 1998 and 1997, respectively.

Revenue Recognition

The Company generally recognizes revenue from product sales at the time the
products are shipped provided no significant vendor obligations remain and the
resulting receivable is deemed collectible by management. Upon

32
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

shipment, the Company provides for estimated product returns and the estimated
cost that may be incurred for product warranties. Revenue from rentals is
recorded on a monthly basis over the life of the contracts. Revenue from
sales-type leases is recognized at the net present value of expected future
payments. Service revenue is recognized over the contractual period or as
services are rendered.

Foreign Currency Translation

The local currency is the functional currency of the majority of the
Company's operations. Their assets and liabilities are translated into U.S.
dollars at exchange rates in effect at the balance sheet date and income and
expense items are translated at average rates for the period, except for
property, plant and equipment which is translated at historical exchange
rates. The Company's operations in Ireland, Israel and Hong Kong are generally
dependent on the U.S. dollar and therefore, their functional currency is the
U.S. dollar. Consolidated foreign currency transaction results included in
other income/(expense), net were gains of $5,746 in 1998, $2,959 in 1997, and
$1,044 in 1996.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with a
maturity of ninety days or less at the time of purchase. These investments are
stated at amortized cost plus accrued interest, which approximates market.
Total cash equivalents were $484,090 and $749,693 at December 31, 1998 and
1997, respectively. Cash equivalents consist primarily of commercial paper and
money market securities.

Investments

The Company's investments are comprised primarily of debt securities which
are classified as either held-to-maturity or available for sale at purchase.
Investments with remaining maturities of less than twelve months from the
balance sheet date are classified as short-term investments. Investments with
remaining maturities of more than twelve months from the balance sheet date
are classified as long-term investments.

Derivatives

The Company enters into foreign currency forward and option contracts to
hedge foreign currency cash flows on a continuing basis for periods consistent
with its committed and anticipated exposures. Hedging contracts generally
mature within six months. The Company uses forward exchange contracts to hedge
its net asset (balance sheet) position, and a portion of its firm commitments.
The Company uses option contracts to hedge a portion of anticipated but not
committed cash flows. The gains or losses arising from forward contracts
hedging the Company's net asset position are recorded in other income or
expense as offsets to the gains or losses resulting from the revaluation of
the underlying hedged transactions. The gains or losses from forward contracts
hedging a portion of firm commitments are deferred until the underlying hedged
transaction is realized. Gains or losses from option contracts hedging a
portion of anticipated but not committed cash flows are also deferred until
the underlying hedged transaction is realized. Gains and losses from contracts
hedging a portion of firm commitments or anticipated cash flows are recognized
in net sales in the same periods in which the related revenues are recognized.
The Company may, from time to time, enter into derivative instruments to hedge
against known or forecasted market exposures.

Statement of Cash Flows Supplemental Information

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Cash paid for:
Income taxes................................. $211,091 $106,677 $78,651
Interest..................................... 20,007 15,401 11,428
</TABLE>

33
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

Inventories

Inventories are stated at the lower of cost (first in, first out) or market,
not in excess of net realizable value.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the estimated useful lives of the assets, as
follows:

<TABLE>
<S> <C>
Furniture and fixtures.................................. 7 years
Equipment............................................... 3-10 years
Improvements............................................ 5-10 years
Buildings............................................... 25-31 1/2 years
</TABLE>

When assets are retired or disposed of, the cost and accumulated
depreciation thereon are removed from the accounts and the related gains or
losses are included in the statement of income.

Capitalized Software Development Costs

Research and development costs are expensed as incurred. Software
development costs incurred subsequent to establishment of technological
feasibility through the general release of the software products are
capitalized. Technological feasibility is demonstrated by the completion of a
product design and a working model. Capitalized costs are amortized on a
straight-line basis over two years. Unamortized software development costs
were $41,036 and $30,099 at December 31, 1998 and 1997, respectively, and are
included in intangible and other assets. Amortization expense was $27,857,
$19,594 and $7,185 in 1998, 1997 and 1996, respectively.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse (see Note H). Tax credits are
generally recognized as reductions of income tax provisions in the year in
which the credits arise.

The Company does not provide for U.S. income tax liability on undistributed
earnings of its foreign subsidiaries. The earnings of non-U.S. subsidiaries,
which reflect full provision for non-U.S. income taxes, are indefinitely
reinvested in non-U.S. operations or will be remitted substantially free of
additional tax. Accordingly, no material provision has been made for taxes
that might be payable upon remittance of such non-U.S. earnings.

Earnings Per Share

The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128") beginning with the fiscal year ended
December 31, 1997. This Statement requires the presentation of basic and
diluted net income per share. Basic net income per share is computed using the
weighted average number of common shares outstanding during the period.
Diluted net income per share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Dilutive common equivalent shares consist of
stock options and convertible debt. The Company has restated all prior period
per-share data presented as required by SFAS 128.

Accounting for Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123"), issued in 1995, defined a fair value method
of accounting for stock options and other equity

34
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. As provided for in SFAS
123, the Company elected to apply Accounting Principles Board ("APB") Opinion
No. 25 and related Interpretations in accounting for its stock-based
compensation plans. The required disclosures under SFAS 123 as if the Company
had applied the new method of accounting are included in Note K.

New Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" in 1998. 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.

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"). This
Statement supersedes FASB Statement No. 14, "Financial Reporting for Segments
of a Business Enterprise," but retains the requirement to report information
about major customers. This Statement establishes standards for reporting
information about operating segments in annual financial statements. Operating
segments are defined as components of an enterprise evaluated regularly by the
Company's senior management in deciding how to allocate resources and in
assessing performance. The Company adopted SFAS 131 for the fiscal year ended
December 31, 1998, and has provided the required disclosures in Note O.

The Company adopted Statement of Position 97-2 "Software Revenue
Recognition" in 1998. This Statement supersedes Statement of Position 91-1 on
software revenue recognition. This Statement establishes revenue recognition
criteria for arrangements to deliver software that do not require significant
production, modification or customization of the software. This Statement also
establishes guidelines for recognizing revenue when multiple elements exist in
a software arrangement. The Company believes that the adoption of this
Statement did not have a material effect on its financial statements for 1998.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in either current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair-value hedge transactions in which the Company is hedging
changes in fair value of an asset, liability or firm commitment, changes in
the fair value of the derivative instrument will generally be offset in the
income statement by changes in the fair value of the hedged item. For cash-
flow hedge transactions, in which the Company is hedging the variability of
cash flows related to a variable-rate asset, liability or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be
reclassified as earnings in the periods in which earnings are impacted by the
variability of the cash flows of the hedged item. The ineffective portion of
all hedges will be recognized in current earnings.

The Company has adopted SFAS 133 as of January 1, 1999. The Company believes
that the adoption of this Statement will not have a material effect on its
financial statements. However, in connection with this change, the Company
intends to reclassify its held-to-maturity securities to available for sale
securities.

35
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

C. Investments

The Company's investment portfolio includes held-to-maturity and available
for sale securities. The following tables summarize the composition of the
Company's held-to-maturity short and long-term investments at December 31,
1998 and 1997, respectively.

<TABLE>
<CAPTION>
December 31, 1998
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
U.S. corporate debt securities............................ $493,003 $492,448
U.S. government and agencies.............................. 88,184 88,035
Foreign debt securities................................... 21,388 21,221
-------- --------
Total................................................. $602,575 $601,704
======== ========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1997
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
U.S. corporate debt securities............................ $320,264 $320,186
U.S. government and agencies.............................. 124,415 125,040
Foreign debt securities................................... 61,140 61,201
-------- --------
Total................................................. $505,819 $506,427
======== ========
</TABLE>

The contractual maturities of held-to-maturity investments at December 31,
1998 and 1997 are as follows:

<TABLE>
<CAPTION>
December 31, 1998
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
Due within one year....................................... $602,575 $601,704
======== ========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1997
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
Due within one year....................................... $413,278 $413,231
Due after one year through five years..................... 92,541 93,196
-------- --------
Total................................................. $505,819 $506,427
======== ========
</TABLE>

The net unrealized loss for held-to-maturity securities of $871 at December
31, 1998 consisted of gross unrealized gains of $160 and gross unrealized
losses of $1,031. The net unrealized gain of $608 at December 31, 1997
consisted of gross unrealized gains of $928 and gross unrealized losses of
$320.

36
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

The following tables summarize the composition of the Company's available
for sale short and long-term investments at December 31, 1998 and 1997,
respectively.

<TABLE>
<CAPTION>
December 31, 1998
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
Asset and mortgage-backed securities...................... $411,098 $411,251
U.S. government and agencies.............................. 218,855 218,996
U.S. corporate debt securities............................ 153,140 153,823
Foreign debt securities................................... 1,011 1,013
-------- --------
Total................................................. $784,104 $785,083
======== ========
<CAPTION>
December 31, 1997
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
U.S. government and agencies.............................. $140,218 $140,209
U.S. corporate debt securities............................ 30,772 30,772
Asset and mortgage-backed securities...................... 19,238 19,238
-------- --------
Total................................................. $190,228 $190,219
======== ========

The contractual maturities of available-for-sale investments held at
December 31, 1998 and 1997 are as follows:
<CAPTION>
December 31, 1998
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
Due within one year....................................... $222,998 $222,723
Due after one year through five years..................... 561,106 562,360
-------- --------
Total................................................. $784,104 $785,083
======== ========
<CAPTION>
December 31, 1997
---------------------
Amortized Aggregate
Cost Basis Fair Value
---------- ----------
<S> <C> <C>
Due within one year....................................... $ 6,036 $ 6,036
Due after one year through five years..................... 184,192 184,183
-------- --------
Total................................................. $190,228 $190,219
======== ========
</TABLE>

The net unrealized gain on available for sale securities at December 31,
1998 was $979, which consisted of gross unrealized gains of $2,888 and gross
unrealized losses of $1,909. The gross unrealized loss at December 31, 1997
was nine thousand dollars.

Investment income consists principally of interest income, including
interest on notes receivable from sales-type leases.

37
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

D. Inventory

Inventories consist of:

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Purchased parts................................. $ 29,562 $ 24,641
Work-in-process................................. 283,815 240,845
Finished goods.................................. 172,467 139,174
-------- --------
$485,844 $404,660
======== ========
</TABLE>

E. Notes Receivable

Notes receivable are primarily from installment sales and sales type leases
of the Company's products. The payment schedule for such notes at December 31,
1998 is as follows:

<TABLE>
<S> <C>
1999............................................................. $35,505
2000............................................................. 18,154
2001............................................................. 13,303
2002............................................................. 3,736
2003............................................................. 2,093
-------
Face value....................................................... 72,791
Less amounts representing interest............................... 5,843
-------
Present value.................................................... 66,948
Current portion.................................................. 32,078
-------
Long-term portion................................................ $34,870
=======
</TABLE>

Implicit interest rates range from approximately 7% to 8%.

Actual cash collections may differ from amounts shown on the table due to
early customer buyouts, upgrades or refinancings.

The Company may receive proceeds for its sales-type leases through third-
party financing arrangements with various financial institutions on a
nonrecourse basis, which may either be collateralized by a lien on the
equipment, which is returned to the Company at the end of the lease, or title
to the equipment may pass to the funding source at the time of financing.
Residual values recorded by the Company for equipment under leases at December
31, 1998 and 1997 were $21,878 and $34,372, respectively, and are included in
intangible and other assets.

F. Property, Plant and Equipment

Property, plant and equipment consists of:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Furniture and fixtures.......................... $ 29,016 $ 16,978
Equipment....................................... 640,411 459,756
Buildings and improvements...................... 269,092 121,541
Land............................................ 18,700 15,085
Construction in progress........................ 41,023 38,056
--------- ---------
998,242 651,416
Accumulated depreciation........................ (360,708) (254,905)
--------- ---------
$ 637,534 $ 396,511
========= =========
</TABLE>

Depreciation expense was $130,757, $89,631 and $65,921 in 1998, 1997 and
1996, respectively.

38
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

G. Accrued Expenses

Accrued expenses consist of:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Salaries and benefits.......................... $105,172 $ 76,387
Warranty....................................... 36,084 25,315
Other.......................................... 105,638 49,514
-------- --------
$246,894 $151,216
======== ========
</TABLE>

H. Income Taxes

The Company's provision for income taxes consists of:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Federal and state
Current................................... $254,074 $162,323 $ 88,208
Deferred.................................. (1,811) 7,790 39,394
-------- -------- --------
252,263 170,113 127,602
-------- -------- --------
Foreign
Current................................... 11,530 9,019 5,859
Deferred.................................. 662 377 (216)
-------- -------- --------
12,192 9,396 5,643
-------- -------- --------
Total provision for income taxes............ $264,455 $179,509 $133,245
======== ======== ========
</TABLE>

Net undistributed earnings of foreign subsidiaries at December 31, 1998 and
1997 approximated $1,063,806 and $805,236, respectively. Based on the
Company's policy of indefinite reinvestment in non-U.S. operations, it is not
currently practicable to determine the tax liability associated with the
repatriation of these earnings. The Company's manufacturing facility in
Ireland incurs a 10% tax rate on income from manufacturing operations until
the year 2010. Income before income taxes for foreign operations for 1998,
1997 and 1996 approximated $381,031, $269,157 and $163,177, respectively.

A reconciliation of the Company's income tax provision to the statutory
federal tax rate is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
Statutory federal tax rate............................ 35.0% 35.0% 35.0%
State taxes, net of federal tax benefits.............. 1.8 1.9 2.2
International tax benefits............................ (11.4) (11.3) (9.0)
Tax credits........................................... (0.4) (0.7) (0.8)
Other................................................. -- 0.1 (1.7)
----- ----- ----
25.0% 25.0% 25.7%
===== ===== ====
</TABLE>

39
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

The components of the current and noncurrent deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Accounts receivable.......................... $ 10,352 $ 10,819
Inventory.................................... 24,507 16,166
Other liabilities............................ 11,900 6,382
Other assets................................. 2,923 3,728
-------- --------
Total current deferred tax assets.......... $ 49,682 $ 37,095
======== ========
Noncurrent deferred tax assets/(liabilities):
Fixed assets................................. (10,256) (66)
Intangible assets............................ 11,963 7,922
Net operating loss carryforwards............. 4,830 6,552
Research and development credit
carryforward................................ 1,196 1,342
Other........................................ 5,071 3,096
Valuation reserve............................ (4,830) (4,672)
-------- --------
Deferred tax assets.......................... 7,974 14,174
-------- --------
Deferral of lease revenue.................... (33,536) (35,565)
Software development costs................... (14,055) (9,788)
Other........................................ (3,000) --
-------- --------
Deferred tax liabilities..................... (50,591) (45,353)
-------- --------
Total noncurrent deferred tax liabilities,
net....................................... $(42,617) $(31,179)
======== ========
</TABLE>

The valuation allowance at December 31, 1998 and 1997 provided reserves
against non-U.S. operating loss carryforwards which may expire before the
Company can utilize them. The realization of the remaining deferred tax assets
is considered more likely than not.

The Company has net operating loss carryforwards as of December 31, 1998 of
$11,912, all of which are non-U.S. and primarily relate to a wholly-owned
subsidiary of EMC in France.

I. Employee Compensation Plans

The Company has established a deferred compensation program for certain
employees which is qualified under Section 401(k) of the federal tax laws.

At the end of each calendar quarter, the Company makes a contribution that
matches 100% of the employee's contribution up to a maximum of 2% of the
employee's quarterly compensation. Additionally, provided that certain
quarterly profit goals are attained, the Company in succeeding quarters,
provides an additional matching contribution of 1% of the employee's quarterly
compensation up to a maximum quarterly matching contribution not to exceed 5%
of compensation. However, the Company's total matching contribution per
participant has a quarterly limit of $500. The Company's contribution amounted
to approximately $6,880 in 1998, $4,990 in 1997 and $3,836 in 1996, pursuant
to this formula.

Costs associated with certain postretirement or postemployment benefit plans
that exist in certain foreign subsidiaries as required by law are not
significant.

40
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

J. Commitments and Long-Term Obligations

Operating Lease Commitments

The Company leases office and warehouse facilities and other equipment under
various operating leases. Facilities rent expense amounted to $25,832,
$14,432, and $12,196 in 1998, 1997 and 1996, respectively. The Company's
commitments under its operating leases are as follows:

<TABLE>
<CAPTION>
Operating
Fiscal Year Leases
----------- ---------
<S> <C>
1999............................................................ $ 75,772
2000............................................................ 44,988
2001............................................................ 24,818
2002............................................................ 19,297
2003............................................................ 15,047
Thereafter...................................................... 8,840
--------
Total minimum lease payments.................................... $188,762
========
</TABLE>

Lines of Credit

EMC has a line of credit providing a maximum of $50,000. There were no
borrowings outstanding at either December 31, 1998 or 1997. The Company must
maintain certain minimum financial ratios, including a minimum level of
working capital and tangible net worth, upon utilization of the line of
credit.

3 1/4% Notes

In March 1997, the Company sold $517,500 of 3 1/4% convertible subordinated
notes due 2002 (the "3 1/4% Notes"). The 3 1/4% Notes are generally
convertible into shares of Common Stock, $.01 par value, of the Company (the
"Common Stock") at a conversion price of $22.655 per share, subject to
adjustment in certain events. Interest is payable semiannually and the 3 1/4%
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 1/4% Notes

The 4 1/4% Notes, issued by EMC in December 1993 and January 1994 in an
amount totaling $230 million, were generally convertible into shares of Common
Stock at any time prior to the redemption date at a conversion price of $9.92
per share. On January 2, 1997, the Company paid approximately sixty-five
thousand dollars to redeem the 4 1/4% Notes outstanding and converted the
remainder into Common Stock.

Current Portion of Long-Term Obligations

The Company has a $14,000 mortgage collateralized by a U.S. facility. The
mortgage is payable in monthly installments, calculated on a 30-year
amortization schedule at 10.5%, with a lump sum payment of approximately
$12,835 due on April 1, 1999.

IDA Grant

The Industrial Development Authority ("IDA") of Ireland has granted the
Company a total of $5,189 towards the purchase price and improvements to the
Company's facility in Ireland. The grants are included in

41
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

long-term obligations and are amortized over the related estimated useful
lives of the assets purchased of twenty-five years for building improvements
and seven years for equipment. Remaining unamortized grants at December 31,
1998 are $3,906, of which $324 is current and $3,582 is long-term.

Purchase of Patent Portfolio

In February 1996, the Company acquired a patent portfolio valued at $40
million. Payments of $19 million have been made to date with the remainder due
in annual installments over five years. The asset is being amortized over the
remaining estimated useful life of approximately one year and is included in
intangible and other assets, net. Accumulated amortization at December 31,
1998 and 1997 was approximately $28,333 and $16,333, respectively.

Payments remaining on the above commitments and other noncurrent liabilities
(excluding the IDA grant and the 3 1/4% Notes) are as follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1999............................................................. $31,463
2000............................................................. 9,422
2001............................................................. 8,232
2002............................................................. 304
2003............................................................. --
-------
Total minimum payments........................................... 49,421
Less amounts representing interest............................... 2,570
-------
Present value of net payments.................................... 46,851
Current portion.................................................. 29,037
-------
Long-term portion................................................ $17,814
=======
</TABLE>

Minority Interest

On October 1, 1997, the Company reorganized McDATA Corporation ("McDATA"),
acquired by the Company in 1995, into a new McDATA Corporation ("New McDATA")
and McDATA Holdings Corporation ("McDATA Holdings"). New McDATA designs,
develops and markets fibre channel solutions for switched enterprise
environments. McDATA Holdings, a wholly-owned subsidiary of EMC, is currently
the majority shareholder in New McDATA. New McDATA is also currently
performing services under the ESCON OEM Agreement with IBM on behalf of McDATA
Holdings. The minority interest amounts are included in other liabilities and
other income/(expense), net.

K. Stockholders' Equity

Stock Split

On October 21, 1997, the Company announced a 2-for-1 stock split in the form
of a 100% stock dividend with a record date of October 31, 1997 and a
distribution date of November 17, 1997. Share and per share amounts have been
restated to reflect the stock split for all periods presented.

42
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

Net Income Per Share

Calculation of per share earnings is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
Basic:
<S> <C> <C> <C>
Net income.......................... $ 793,363 $ 538,528 $ 386,229
Weighted average common shares
outstanding........................ 499,978,198 493,697,926 463,547,582
Net income per share, basic......... $ 1.59 $ 1.09 $ 0.83
============ ============ ============
<CAPTION>
Diluted:
<S> <C> <C> <C>
Net income.......................... $ 793,363 $ 538,528 $ 386,229
Add back of interest expense on
convertible notes.................. 16,819 13,502 8,827
Less tax effect of interest expense
on convertible notes............... (6,728) (5,401) (3,531)
------------ ------------ ------------
Net income for calculating diluted
earnings per share................. $ 803,454 $ 546,629 $ 391,525
Weighted average common shares
outstanding........................ 499,978,198 493,697,926 463,547,582
Weighted common stock equivalents... 39,198,107 31,801,719 35,042,840
------------ ------------ ------------
Total weighted average shares....... 539,176,305 525,499,645 498,590,422
Net income per share, diluted....... $ 1.49 $ 1.04 $ 0.79
============ ============ ============
</TABLE>

Preferred Stock

The Company's Series Preferred Stock may be issued from time to time in one
or more series, with such terms as the Board of Directors may determine,
without further action by the stockholders of the Company.

Common Stock Repurchase Program

In January 1996, the Company's Board of Directors authorized the repurchase
of up to 30 million shares of Common Stock over a five-year period. In
November 1996, the Company's Board of Directors announced a rescission of the
program. During 1996, the Company repurchased 2.6 million shares of Common
Stock for approximately $27,000, all of which has been reissued in connection
with stock option exercises.

Stock Option Plans

The Board of Directors and stockholders adopted the EMC Corporation 1993 and
1985 Stock Option Plans (the "1993 Plan" and the "1985 Plan," respectively) to
provide qualified incentive stock options and nonqualified stock options to
key employees of the Company. In 1998, the Board of Directors and stockholders
approved an amendment to the 1993 Plan to increase the number of shares
available for grant under such plan by 3.5 million shares. A total of 31.5
million and 72 million shares of Common Stock have been reserved for issuance
under the 1993 Plan and the 1985 Plan, respectively.

Under the terms of the 1993 Plan and the 1985 Plan, the exercise price of
incentive stock options issued must be equal to at least the fair market value
of the Common Stock at the date of grant. In the event that nonqualified stock
options are granted under the 1993 Plan, the exercise price may be less than
the fair market value at the time of grant but not less than par value which
is $.01 per share. In the event that nonqualified stock options are granted
under the 1985 Plan, the exercise price may be less than the fair market value
at the time of grant, but in the case of employees not subject to Section 16
of the Securities Exchange Act of 1934 ("Section 16"), not less than par value
which is $.01 per share, and in the case of employees subject to Section 16,
not

43
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

less than 50% of the fair market value at the time of grant. Since May 1995,
no new incentive stock options have been available for grant under the 1985
Plan.

In 1998, options to purchase an aggregate of 212,222 shares of Common Stock
at $.01 per share were granted to an executive officer and certain other
employees. Also in 1998, an executive officer was granted options to purchase
125,000 shares at $25.94 per share, representing 50% of the per share fair
market value at the date of grant. In 1997, options to purchase 500,000 shares
at $12.23 per share and 400,000 shares at $27.56 per share were granted to
executive officers, representing 50% and 90%, respectively, of the per share
fair market value at the date of grant. In 1996, options to purchase 500,000
shares of Common Stock at $4.625 per share were granted to an executive
officer, representing 50% of the per share fair market value at the date of
grant. Discounts from fair market value have been recorded as deferred
compensation and are being amortized over the vesting periods of the options,
which range from eighteen months to five years.

The EMC Corporation 1992 Stock Option Plan for Directors (the "Directors
Plan") was adopted by the Board of Directors and stockholders. A total of 3.6
million shares of Common Stock have been reserved for issuance under the
Directors Plan. The exercise price for each option granted under the Directors
Plan will be at a price per share determined at the time the option is
granted, but not less than 50% of the per share fair market value of Common
Stock at the date of grant.

In 1998, options to purchase 120,000 shares of Common Stock at $21.125 per
share were granted to three directors, representing 50% of the per share fair
market value at the date of grant. In 1997, options to purchase 160,000 shares
of Common Stock at $12.23 per share were granted to two directors,
representing 50% of the per share fair market value at the date of grant. In
1996, options to purchase one million shares of Common Stock at $4.625 per
share were granted to a director, representing 50% of the per share fair
market value at the date of grant. Discounts from fair market value have been
recorded as deferred compensation and are being amortized over the three-year
vesting period of the options.

Generally, when shares acquired pursuant to the exercise of incentive stock
options are sold within one year of exercise or within two years from the date
of grant, the Company derives a tax deduction measured by the amount that the
fair market value exceeds the option price at the date the options are
exercised. When nonqualified stock options are exercised, the Company derives
a tax deduction measured by the amount that the fair market value exceeds the
option price at the date the options are exercised.

As of December 31, 1998, options exercisable under the 1993 Plan, the 1985
Plan and the Directors Plan (the "Plans") approximated 8,472,348 and shares
available for future option grants approximated 7,521,973. Options generally
become exercisable in equal annual installments over either three or five
years after the date of grant and expire after ten years.

The Company has, in connection with the acquisition of various companies,
assumed the stock option plans of these companies.

44
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

Supplemental Disclosures for Stock-Based Compensation

Activity under the Plans and option activity relating to business
acquisitions for the three years ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
Wtd. Avg.
Number of Exercise
Shares Price
---------- ---------
<S> <C> <C>
Outstanding, December 30, 1995...................... 27,028,694 $ 4.83
Granted........................................... 8,427,938 8.64
Canceled.......................................... (1,371,122) 8.68
Exercised......................................... (9,220,344) 2.35
---------- ------
Outstanding, December 31, 1996...................... 24,865,166 6.80
Granted........................................... 8,406,194 23.42
Canceled.......................................... (930,650) 9.66
Exercised......................................... (5,329,276) 4.95
---------- ------
Outstanding, December 31, 1997...................... 27,011,434 12.24
---------- ------
Options relating to business acquisitions......... 214,366 13.33
Granted........................................... 4,898,358 47.19
Canceled.......................................... (398,417) 20.39
Exercised......................................... (5,287,431) 7.23
---------- ------
Outstanding, December 31, 1998...................... 26,438,310 $19.60
========== ======
</TABLE>

Summarized information about stock options outstanding at December 31, 1998
is as follows:

<TABLE>
<CAPTION>
Exercisable
--------------------
Weighted
Avg. Weighted Weighted
Range of Number of Remaining Avg. Avg.
Exercise Options Contractual Exercise Number of Exercise
Prices Outstanding Life Price Options Price
- -------------- ----------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.01 - 5.72 3,537,691 5.43 $ 2.54 2,646,754 $ 2.27
6.21 - 10.44 7,867,718 6.59 8.78 3,596,663 8.45
10.66 - 17.75 3,410,970 6.96 11.70 1,164,333 11.37
18.13 - 27.56 6,424,026 8.37 23.77 904,596 23.89
29.69 - 42.25 1,406,877 8.83 32.94 160,002 30.56
50.76 - 61.50 3,791,028 9.45 53.09 -- --
</TABLE>

Options exercisable at December 31, 1998, 1997 and 1996 were 8,472,348,
7,402,806 and 4,559,994, respectively.

The fair value of each option granted during 1998, 1997 and 1996 is estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dividend yield.......................................... none none none
Expected volatility..................................... 52.0% 45.0% 45.0%
Risk-free interest rate................................. 5.4% 6.1% 6.5%
Expected life........................................... 5.0 5.0 5.0
</TABLE>

45
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

<TABLE>
<S> <C>
Weighted average fair value of options granted at fair market value
during:
1998................................................................. $26.08
======
1997................................................................. $11.53
======
1996................................................................. $ 4.58
======
Weighted average fair value of options granted below fair market value
during:
1998................................................................. $33.64
======
1997................................................................. $16.17
======
1996................................................................. $ 6.32
======
</TABLE>

Had compensation cost for the Company's 1998, 1997 and 1996 stock option
grants and employee stock purchase plan issuances been determined consistent
with SFAS 123, the Company's net income and net income per share would
approximate the pro forma amounts below:

<TABLE>
<CAPTION>
Net income per Net income per
Net income share, diluted share, basic
---------- -------------- --------------
<S> <C> <C> <C>
As reported:
1998........................... $793,363 $1.49 $1.59
1997........................... $538,528 $1.04 $1.09
1996........................... $386,229 $0.79 $0.83
Pro forma:
1998........................... $759,508 $1.43 $1.52
1997........................... $520,506 $1.01 $1.05
1996........................... $378,336 $0.77 $0.82
</TABLE>

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards made prior to
1995. Additional awards in future years are anticipated.

Employee Stock Purchase Plan

The Board of Directors and stockholders adopted the 1989 Employee Stock
Purchase Plan (the "1989 Plan"). Under the 1989 Plan, eligible employees of
the Company may purchase shares of Common Stock, through payroll deductions,
at the lower of 85% of fair market value of the stock at the time of grant or
85% of fair market value at the time of exercise. A total of 9.8 million
shares have been reserved for issuance under the 1989 Plan. Options to
purchase shares are granted twice yearly, on January 1 and July 1, and are
exercisable on the succeeding June 30 or December 31. The Company issued
489,438, 603,342 and 1,358,354 shares in 1998, 1997 and 1996, respectively.
The weighted average fair values of options granted under the 1989 Plan during
1998, 1997 and 1996 were $10.65, $5.15 and $2.32, respectively.

L. Litigation

46
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

this matter in February 1999, during the second week of trial. As part of the
resolution, EMC will obtain a license under the one patent at issue and a
covenant from the plaintiffs not to sue under any and all patents owned or
controlled by either of the plaintiffs. All claims in the lawsuit will be
dismissed with prejudice as a result of this agreement.

M. Financial Instruments

Off-Balance-Sheet Risk

The Company enters into foreign currency forward and option contracts to
hedge foreign currency cash flows on a continuing basis for periods consistent
with its committed and anticipated exposures. The Company does not engage in
currency speculation. The maximum amount of foreign currency contracts
outstanding during 1998 and 1997 was $499,714 and $531,166, respectively.

The Company uses forward exchange contracts to hedge its net asset (balance
sheet) position and a portion of its firm commitments. At December 31, 1998
and 1997, the Company had $389,049 and $309,970, respectively, of forward
exchange contracts outstanding.

The Company uses option contracts to hedge a portion of anticipated but not
committed cash flows. The Company defers the recording of any gain or loss
from these hedges until the underlying transaction has been realized. Deferred
unrealized losses were not material at December 31, 1998. At December 31, 1998
and 1997, the Company had $10,000 and $90,000, respectively, of foreign
currency options outstanding.

Fair Value

The carrying amounts reflected in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, current portion of long-term debt
and accounts payable approximate fair value due to the short maturities of
these instruments.

47
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

The carrying and estimated fair values of the 3 1/4% Notes at December 31,
1998 were $517,500 and $1,941,570, respectively. The fair value of the 3 1/4%
Notes was based on the closing price of the Common Stock as of December 31,
1998.

N. Risks and Uncertainties

The Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from expectations include,
but are not limited to, dependence on suppliers, new products, competition,
competitive pricing pressures, international sales, reliance on indirect
channels of distribution, the uneven pattern of quarterly sales, management of
growth, dependence upon key personnel, manufacturing risks, acquisitions,
alliances, enforcement of the Company's intellectual property rights, Year
2000 issues, conversion to the Euro, litigation and changes in regulations.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments, short and long-term investments and trade and notes receivable.
The Company places its temporary cash investments and short and long-term
investments in investment grade instruments and limits the amount of
investment with any one financial institution. The credit risk associated with
trade receivables is minimal due to the large number of customers and their
broad dispersion over many different industries and geographic areas.

HP represented 18%, 17% and 13% of the Company's total revenues in 1998,
1997 and 1996, respectively.

O. Segment Information

The Company has adopted SFAS 131 for the fiscal year ended December 31,
1998. The Company operates exclusively in the enterprise storage market.
Substantially all of the Company's revenues are generated from the sale of
storage-related hardware and software products and related services. The
classes of products and services are included in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Enterprise storage hardware............. $3,167,125 $2,496,697 $1,961,315
Enterprise storage software............. 445,350 176,859 76,437
Enterprise switching products........... 178,816 189,090 180,540
Service and rental...................... 182,444 75,214 55,360
---------- ---------- ----------
Total revenue........................... $3,973,735 $2,937,860 $2,273,652
========== ========== ==========
</TABLE>

48
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

The Company's reportable segments are based on geographic area and sales are
attributed to the geographic areas according to the location of the customers.
Intercompany transfers between geographic areas are accounted for at prices
which are designed to be representative of unaffiliated party transactions.

<TABLE>
<CAPTION>
Europe,
Middle
North/Latin East, Asia Intercompany Consolidated
America Africa Pacific Eliminations Total
----------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1998
Sales................... $2,457,232 $1,231,701 $284,802 $ -- $3,973,735
Transfers between
areas.................. 27,895 214,218 -- (242,113) --
---------- ---------- -------- -------- ----------
Total sales............. 2,485,127 1,445,919 284,802 (242,113) 3,973,735
Identifiable assets at
year end............... 3,162,263 1,437,871 147,379 (178,942) 4,568,571
1997
Sales................... $1,706,551 $ 951,831 $279,478 $ -- $2,937,860
Transfers between
areas.................. 49,494 155,214 -- (204,708) --
---------- ---------- -------- -------- ----------
Total sales............. 1,756,045 1,107,045 279,478 (204,708) 2,937,860
Identifiable assets at
year end............... 2,653,063 977,996 124,075 (265,025) 3,490,109
1996
Sales................... $1,346,222 $ 720,792 $206,638 $ -- $2,273,652
Transfers between
areas.................. 72,813 159,605 -- (232,418) --
---------- ---------- -------- -------- ----------
Total sales............. 1,419,035 880,397 206,638 (232,418) 2,273,652
Identifiable assets at
year end............... 1,749,221 703,929 104,210 (263,814) 2,293,546
</TABLE>

P. Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
Q1 1998 Q2 1998 Q3 1998 Q4 1998
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Net sales, service and rental.......... $828,351 $952,002 $1,002,541 $1,190,841
Gross profit........................... 397,215 484,522 524,354 638,436
Net income............................. 146,115 189,496 201,290 256,462
Net income per share, (diluted)........ $ 0.28 $ 0.36 $ 0.38 $ 0.48
<CAPTION>
Q1 1997 Q2 1997 Q3 1997 Q4 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
1997
Net sales, service and rental.......... $618,437 $713,461 $ 732,570 $ 873,392
Gross profit........................... 282,452 328,916 341,292 414,188
Net income............................. 110,868 128,799 132,622 166,239
Net income per share, (diluted)........ $ 0.22 $ 0.25 $ 0.25 $ 0.32
</TABLE>

Q. Subsequent Event (unaudited)

On February 24, 1999, the Company's Board of Directors approved a two-for-
one stock split in the form of a 100% stock dividend. Implementation of the
stock split is subject to stockholder approval of an increase in the number of
shares of authorized common stock from 750,000,000 shares to 3,000,000,000
shares at the Company's Annual Meeting of Stockholders to be held on May 5,
1999. If stockholder approval is received, the stock split will be payable on
or about May 28, 1999 to stockholders of record as of the close of business on

49
<PAGE>

EMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share amounts)

May 14, 1999. Because stockholder approval is pending, financial information
contained elsewhere in this Annual Report on Form 10-K has not been adjusted
to reflect the impact of the proposed stock split.

Earnings per share amounts, after giving retroactive effect to the two-for-
one stock split, are presented below for all of the per share amounts
disclosed in the financial statements and the notes to the financial
statements (full-year information).

<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C> <C>
Annual Data
Net income per weighted average
share, basic........................ $0.79 $0.55 $0.42
Net income per weighted average
share, diluted...................... $0.75 $0.52 $0.39
Weighted average shares, basic....... 999,956,396 987,395,852 927,095,164
Weighted average shares, diluted..... 1,078,352,610 1,050,999,290 997,180,844
<CAPTION>
Q1 1998 Q2 1998 Q3 1998 Q4 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Quarterly Data
Net income per weighted
average share, basic.. $0.15 $0.19 $0.20 $0.25
Net income per weighted
average share,
diluted............... $0.14 $0.18 $0.19 $0.24
Weighted average
shares, basic......... 994,468,994 997,295,858 1,002,221,654 1,005,750,512
Weighted average
shares, diluted........ 1,070,239,220 1,075,099,288 1,080,597,672 1,085,629,360
</TABLE>

50
<PAGE>

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company will furnish to the Securities and Exchange Commission a
definitive Proxy Statement (the "Proxy Statement") not later than 120 days
after the close of the fiscal year ended December 31, 1998. The information
required by this item is incorporated herein by reference to the Proxy
Statement. Also see "Executive Officers of the Registrant" in Part I of this
form.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to
the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference to
the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to
the Proxy Statement.

51
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a)

1. Financial Statements

The financial statements listed in the Index to Consolidated Financial
Statements and Schedule on page 25 are filed as part of this report.

2. Schedule

The schedule listed in the Index to Consolidated Financial Statements and
Schedule on page 25 is filed as part of this report.

3. Exhibits

See Index to Exhibits on page 55 of this report.

The exhibits are filed with or incorporated by reference in this report.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the fourth quarter
of the fiscal year covered by this report.

52
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, EMC Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 11, 1999.

EMC CORPORATION

By: /s/ Richard J. Egan
_______________________________
Richard J. Egan
Chairman of the Board of
Directors

53
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of EMC
Corporation and in the capacities indicated as of March 11, 1999.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Richard J. Egan Chairman of the Board of Directors
- -------------------------------------------- (Principal Executive Officer)
Richard J. Egan

/s/ Michael C. Ruettgers President and Chief Executive Officer
- -------------------------------------------- and Director
Michael C. Ruettgers

/s/ Colin G. Patteson Senior Vice President, Chief Administrative
- -------------------------------------------- Officer and Treasurer
Colin G. Patteson (Principal Financial Officer)

/s/ William J. Teuber, Jr. Vice President and Chief Financial Officer
- -------------------------------------------- (Principal Accounting Officer)
William J. Teuber, Jr.

/s/ Michael J. Cronin Director
- --------------------------------------------
Michael J. Cronin

/s/ John F. Cunningham Director
- --------------------------------------------
John F. Cunningham

/s/ John R. Egan Director
- --------------------------------------------
John R. Egan

/s/ Maureen E. Egan Director
- --------------------------------------------
Maureen E. Egan

/s/ W. Paul Fitzgerald Director
- --------------------------------------------
W. Paul Fitzgerald

/s/ Joseph F. Oliveri Director
- --------------------------------------------
Joseph F. Oliveri
</TABLE>

54
<PAGE>

The exhibits listed below are filed with or incorporated by reference in this
report.

<TABLE>
<C> <S>
3.1 Articles of Organization of EMC Corporation./1/
3.2 Articles of Amendment filed February 26, 1986./1/
3.3 Articles of Amendment filed April 2, 1986./1/
3.4 Articles of Amendment filed May 13, 1987./2/
3.5 Articles of Amendment filed June 19, 1992./3/
3.6 Articles of Amendment filed May 12, 1993./4/
3.7 Articles of Amendment filed November 12, 1993./5/
3.8 Articles of Amendment filed May 10, 1995./6/
3.9 Articles of Amendment filed May 7, 1997./7/
3.10 Amended and Restated By-laws of EMC Corporation (filed herewith).
4.1 Form of Stock Certificate./8/
4.2 Indenture, dated as of March 11, 1997 between EMC Corporation and
State Street Bank and Trust Company, Trustee./9/
4.3 Form of 3 1/4% Convertible Subordinated Note due 2002./9/
10.1 EMC Corporation 1985 Stock Option Plan, as amended (filed herewith).
10.2 EMC Corporation 1992 Stock Option Plan for Directors, as amended
(filed herewith).
10.3 EMC Corporation 1993 Stock Option Plan, as amended (filed herewith).
21.1 Subsidiaries of Registrant (filed herewith).
23.1 Consent of Independent Accountants dated March 11, 1999 (filed
herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
- --------
/1/ Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-3656).
/2/ Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-17218).
/3/ Incorporated by reference to the Company's Annual Report on Form 10-K filed
February 12, 1993.
/4/ Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-67224).
/5/ Incorporated by reference to the Company's Current Report on Form 8-K filed
November 19, 1993.
/6/ Incorporated by reference to the Company's Current Report on Form 8-K filed
May 26, 1995.
/7/ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 14, 1997.
/8/ Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 31, 1988.
/9/ Incorporated by reference to the Company's Registration Statement on Form
S-3 (No. 333-24901).

55
<PAGE>

EMC CORPORATION AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1998 Allowance for
doubtful accounts..... $6,773 $2,502 -- $(2,713) $6,562
Year ended December 31,
1997 Allowance for
doubtful accounts..... $7,368 $1,842 -- $(2,437) $6,773
Year ended December 31,
1996 Allowance for
doubtful accounts..... $7,062 $1,927 -- $(1,621) $7,368
</TABLE>

S-1

<PAGE>

EXHIBIT 3.10

AMENDED AND RESTATED BYLAWS
---------------------------

EMC CORPORATION

(as amended 2-26-86, 3-10-86, 10-28-86,
1-26-87, 9-19-89, 10-16-92, 7-21-95, 7-22-98 and 1-20-99)

SECTION 1. ARTICLES OF ORGANIZATION

The name and purposes of the corporation shall be as set forth in the
articles of organization. These bylaws, the powers of the corporation and of
its directors and stockholders, or of any class of stockholders if there shall
be more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the corporation shall be subject to
such provisions in regard thereto, if any, as are set forth in the articles of
organization as from time to time in effect.

SECTION 2. STOCKHOLDERS

2.1. Annual Meeting. The annual meeting of stockholders of the
--------------
corporation for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held on such date and
at such time as shall be determined by the board of directors each year, which
date and time may subsequently be changed at any time, including the year any
such determination occurs.

2.2. Special Meetings. Except as provided in the articles of organization
----------------
with respect to the ability of holders of preferred stock to call a special
meeting in certain circumstances, special meetings of the stockholders may be
called by the president at the direction of the chairman of the board or by a
majority of the directors, and shall be called by the clerk, or in case of the
death, absence, incapacity or refusal of the clerk, by any other officer upon
the written application of stockholders who hold eighty-five percent (85%) in
interest of the capital stock of the corporation entitled to be voted at the
proposed meeting. Such request shall state the purpose or purposes of the
proposed meeting and may designate the place, date and hour of such meeting;
provided, however, that no such request shall designate a date not a full
business day or an hour not within normal business hours as the date or hour of
such meeting.

As used in these bylaws, the expression "business day" means a day other than a
day which, at a particular place, is a public holiday or a day other than a day
on which banking institutions at such place are allowed or required, by law or
otherwise, to remain closed.
<PAGE>

2.3. Place of Meeting; Adjournment. Meetings of the stockholders may be
-----------------------------
held at the principal office of the corporation in the Commonwealth of
Massachusetts, or at such places within or without the Commonwealth of
Massachusetts as may be specified in the notices of such meetings; provided,
that, when any meeting is convened, the chairman of the board or other presiding
officer may adjourn the meeting for a period of time not to exceed 30 days if
(a) no quorum is present for the transaction of business or (b) the chairman of
the board or other presiding officer determines that adjournment is necessary or
appropriate to enable the stockholders (i) to consider fully information which
such officer determines has not been made sufficiently or timely available to
stockholders or (ii) otherwise to exercise effectively their voting rights. The
chairman of the board or other presiding officer in such event shall announce
the adjournment and date, time and place of reconvening and shall cause notice
thereof to be posted at the place of meeting designated in the notice which was
sent to the stockholders, and if such date is more than 10 days after the
original date of the meeting, the clerk shall give notice thereof in the manner
provided in Section 2.4.

2.4. Notice of Meetings. A written or electronic notice of each meeting
------------------
of stockholders, stating the place, date and hour and the purposes of the
meeting, shall be given at least seven days before the meeting to each
stockholder entitled to vote thereat and to each stockholder who, by law, by the
articles of organization or by these bylaws, is entitled to notice, by leaving
such notice with him or at his residence or usual place of business, by mailing
it, postage prepaid, addressed to such stockholder at his address as it appears
in the records of the corporation or by sending such notice electronically to
such stockholder's e-mail address as it appears in the records of the
corporation. Such notice shall be given by the clerk or an assistant clerk or
by an officer designated by the directors. Whenever notice of a meeting is
required to be given to a stockholder under any provision of the Business
Corporation Law of the Commonwealth of Massachusetts or of the articles of
organization or these bylaws, a written waiver thereof, executed before or after
the meeting by such stockholder or his attorney thereunto authorized and filed
with the records of the meeting, shall be deemed equivalent to such notice.

No business may be transacted at a meeting of the stockholders except that
(a) specified in the notice thereof, or in a supplemental notice given also in
compliance with the provisions hereof, (b) brought before the meeting by or at
the direction of the board of directors or the presiding officer, or (c)
properly brought before the meeting by or on behalf of any stockholder who shall
have been a stockholder of record at the time of giving of notice provided for
in this Section 2.4 and who shall continue to be entitled to vote thereat and
who complies with the notice procedures set forth in this Section 2.4 or, with
respect to the election of directors, Section 3.2 of these bylaws. In addition
to any other applicable requirements, for business to be properly brought before
a meeting by a stockholder (other than a stockholder proposal included in the
corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the stockholder must have
given timely notice thereof in writing to the clerk of the corporation. In
order to be timely given, a

2
<PAGE>

stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation (a) not less than 95 nor more
than 125 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders of the corporation or (b) in the case of a special
meeting or in the event that the annual meeting is called for a date (including
any change in a date determined by the board pursuant to Section 2.1) not within
30 days before or after such anniversary date, notice by the stockholder to be
timely given must be so received not later than the close of business on the
10th day following the day on which notice of the date of such meeting was
mailed or public disclosure of the date of such meeting was made, whichever
first occurs. Such stockholder's notice to the clerk shall set forth as to each
matter the stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and record
address of the stockholder proposing such business, (c) the class and number of
shares of capital stock of the corporation held of record, owned beneficially
and represented by proxy by such stockholder as of the record date for the
meeting (if such date shall then have been made publicly available) and as of
the date of such notice by the stockholder, and (d) all other information which
would be required to be included in a proxy statement or other filings required
to be filed with the Securities and Exchange Commission if, with respect to any
such item of business, such stockholder were a participant in a solicitation
subject to Regulation 14A under the Exchange Act (the "Proxy Rules").

Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at any meeting except in accordance with the procedures set forth
in this Section 2.4; provided, however, that nothing in this Section 2.4 shall
-------- -------
be deemed to preclude discussion by any stockholder of any business properly
brought before such meeting.

The chairman of the board or other presiding officer of the meeting may, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the foregoing procedures,
and if he or she should so determine, he or she shall so declare to the meeting
and that business shall be disregarded.

2.5. Quorum of Stockholders. At any meeting of the stockholders, a quorum
----------------------
shall consist of a majority in interest of all stock issued and outstanding and
entitled to vote at the meeting, except when a larger quorum is required by law,
by the articles of organization or by these bylaws. Stock owned directly or
indirectly by the corporation, if any, shall not be deemed outstanding for this
purpose. Any meeting may be adjourned from time to time by a majority of the
votes properly cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.

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<PAGE>

2.6. Action by Vote. When a quorum is present at any meeting, a plurality
--------------
of the votes properly cast for election to any office shall elect to such
office, and a majority of the votes properly cast upon any question other than
an election to an office shall decide the question, except when a larger vote is
required by law, by the articles of organization or by these bylaws. No ballot
shall be required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.

2.7. Voting. Stockholders entitled to vote shall have one vote for each
------
share of stock entitled to vote held by them of record according to the records
of the corporation, unless otherwise provided by the articles of organization.
The corporation shall not, directly or indirectly, vote any share of its own
stock.

2.8. Action by Writing. Any action required or permitted to be taken at
-----------------
any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consents shall be treated for all purposes as a vote at a meeting.

2.9. Proxies. To the extent permitted by law, stockholders entitled to
-------
vote may vote either in person or by proxy (which proxy may be authorized in
writing, by telephone or by electronic means). No proxy dated more than six
months before the meeting named therein shall be valid. Unless otherwise
specifically limited by their terms, such proxies shall entitle the holders
thereof to vote at any adjournment of such meeting but shall not be valid after
the final adjournment of such meeting.

SECTION 3. BOARD OF DIRECTORS

3.1. Number. The number of directors shall be fixed at any time or from
------
time to time only by the affirmative vote of a majority of the directors then in
office, but shall be not less than three, except that whenever there shall be
only two stockholders the number of directors shall be not less than two and
whenever there shall be only one stockholder there shall be at least one
director; no decrease in the number of directors shall shorten the term of any
incumbent director. No director need be a stockholder.

3.2. Nominations for Director. Only persons who are nominated in
------------------------
accordance with the following procedures shall be eligible for election as
directors, except as provided in the articles of organization with respect to
nominations by holders of preferred stock in certain circumstances. Nominations
of persons for election to the board of directors at the annual meeting may be
made at the annual meeting of stockholders (a) by or at the direction of the
board of directors by any nominating committee or person appointed by the board
or (b) by any stockholder of record at the time of giving of notice provided for
in this Section 3.2 and who shall continue to be entitled to vote thereat and
who complies

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<PAGE>

with the notice procedures set forth in this Section 3.2. Nominations by
stockholders shall be made only after timely notice in writing to the clerk of
the corporation. In order to be timely given, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 95 nor more than 125 days prior to the anniversary
date of the immediately preceding annual meeting of stockholders of the
corporation; provided, however, that in the event that the meeting is called for
-------- -------
a date, including any change in a date determined by the board pursuant to
Section 2.1, not within 30 days before or after such anniversary date, notice by
the stockholder to be timely given must be so received no later than the close
of business on the 10th day following the day on which notice of the date of the
meeting was mailed or public disclosure of the date of the meeting was made,
whichever first occurs. Such stockholder's notice to the clerk shall set forth
(a) as to each person whom the stockholder proposes to nominate for election or
reelection as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of the
corporation, if any, which are beneficially owned by the person, (iv) any other
information regarding the nominee as would be required to be included in a proxy
statement or other filings required to be filed pursuant to the Proxy Rules, and
(v) the consent of each nominee to serve as a director of the corporation if so
elected; and (b) as to the stockholder giving the notice, (i) the name and
record address of the stockholder, (ii) the class and number of shares of
capital stock of the corporation which are beneficially owned by the stockholder
as of the record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such notice, (iii) a representation
that the stockholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (iv) a representation
that the stockholder (and any party on whose behalf such stockholder is acting)
is qualified at the time of giving such notice to have such individual serve as
the nominee of such stockholder (and any party on whose behalf such stockholder
is acting) if such individual is elected, accompanied by copies of any
notification or filings with, or orders or other actions by, and governmental
authority which are required in order for such stockholder (and any party on
whose behalf such stockholder is acting) to be so qualified, (v) a description
of all arrangements or understandings between such stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by such stockholder, and (vi)
such other information regarding such stockholder as would be required to be
included in a proxy statement or other filings required to be filed pursuant to
the Proxy Rules. The corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee to serve as director. No
person shall be eligible for election as a director unless nominated in
accordance with the provisions set forth herein.

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<PAGE>

The chairman of the board or other presiding officer of the meeting may, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedures, and if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.

3.3. Powers. Except as reserved to the stockholders by law, by the
------
articles of organization or by these bylaws, the business of the corporation
shall be managed by the directors who shall have and may exercise all the powers
of the corporation. In particular, and without limiting the generality of the
foregoing, the directors may at any time issue all or from time to time any part
of the unissued capital stock of the corporation from time to time authorized
under the articles of organization and may determine, subject to any
requirements of law, the consideration for which stock is to be issued and the
manner of allocating such consideration between capital and surplus.

3.4 Resignation and Removal. Any director may resign at any time by
-----------------------
delivering his resignation in writing to the president, the treasurer or the
clerk or to a meeting of the directors. Such resignation shall be effective
upon receipt unless specified to be effective at some other time. Any director
or directors or the entire board of directors may be removed from office (a)
only for Cause (as defined in Section 50A of the Business Corporation Law of the
Commonwealth of Massachusetts) by the affirmative vote of a majority of the
shares entitled to vote at an election of directors and (b) only after
reasonable notice and an opportunity to be heard by the stockholders. No
director resigning, and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the corporation)
no director removed, shall have the right to any compensation as such director
for any period following his removal, or any right to damages on account of such
removal, whether his compensation be by the month or by the year or otherwise,
unless in the case of a resignation, the directors, or in case of a removal, the
stockholders, shall in their discretion provide for compensation.

3.5 Vacancies. Vacancies and newly created directorships, whether
---------
resulting from an increase in the size of the board of directors, the death,
resignation, disqualification or removal of a director or otherwise, shall be
filled solely by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the board of directors. Any
director elected in accordance with this Section 3.5 shall hold office for the
remainder of the full term of the class of directors in which the vacancy
occurred or the new directorship was created and until such director's successor
shall have been elected and qualified.

3.6. Committees. The directors may, by vote of a majority of the
----------
directors then in office, elect from their number an executive committee and
other committees and delegate to any such committee or committees some or all of
the power of the directors except those which by law, by the articles of
organization or by these bylaws they are prohibited from delegating. Except as
the directors may otherwise determine, any such

6
<PAGE>

committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or such rules, its business shall be conducted as
nearly as may be in the same manner as is provided by these bylaws for the
conduct of business by the directors.

3.7. Regular Meetings. Regular meetings of the directors may be held
----------------
without call or notice at such places and at such times as the directors may
from time to time determine, provided that reasonable notice of the first
regular meeting following any such determination shall be given to absent
directors. A regular meeting of the directors may be held without call or
notice immediately after and at the same place as the annual meeting of the
stockholders.

3.8. Special Meetings. Special meetings of the directors may be held
----------------
at any time and at any place designated in the call of the meeting, when called
by the president or the treasurer or by two or more directors, reasonable notice
thereof being given to each director by the secretary or an assistant secretary,
or, if there be none, by the clerk or an assistant clerk, or by the officer or
one of the directors calling the meeting.

3.9. Notice. It shall be sufficient notice to a director to send notice
------
by mail or express overnight courier at least forty-eight hours or by facsimile
at least twenty-four hours before the meeting addressed to him at this usual or
last known business or residence address or to give notice to him in person or
by telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.

3.10. Quorum. At any meeting of the directors a majority of the directors
------
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.

3.11. Action by Vote. When a quorum is present at any meeting, a
--------------
majority of the directors present may take any action, except when a larger vote
is required by law, by the articles of organization or by these bylaws.

3.12. Action by Writing. Unless the articles of organization otherwise
-----------------
provide, any action required or permitted to be taken at any meeting of the
directors may be taken without a meeting if all the directors consent to the
action in writing and the written consents are filed with the records of the
meetings of the directors. Such consents shall be treated for all purposes as a
vote taken at a meeting.

3.13. Presence Through Communications Equipment. Unless otherwise
-----------------------------------------
provided by law or by the articles of organization, members of the board of
directors may participate in a meeting of such board by means of a conference
telephone or similar

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<PAGE>

communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.

SECTION 4. OFFICERS AND AGENTS

4.1. Enumeration; Qualification. The officers to the corporation shall
--------------------------
be a president, a treasurer, a clerk, and such other officers, if any, as the
incorporators at their initial meeting, or the directors from time to time, may
in their discretion elect or appoint. The corporation may also have such agents,
if any, as the incorporators at their initial meeting, or the directors from
time to time, may in their discretion appoint. Any officer may be but none need
be a director or stockholder. The clerk shall be a resident of Massachusetts
unless the corporation has a resident agent appointed for the purpose of service
of process. Any two or more offices may be held by the same person. Any officer
may be required by the directors to give bond for the faithful performance of
his duties to the corporation in such amount and with such sureties as the
directors may determine.

4.2. Powers. Subject to law, to the articles of organization and to
------
the other provisions of these bylaws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such duties and powers as the directors may from time
to time designate.

4.3. Election. The president, the treasurer and the clerk shall be
--------
elected annually by the directors at their first meeting following the annual
meeting of the stockholders. Other officers, if any, may be elected or
appointed by the board of directors at said meeting or at any other time.

4.4. Tenure. Except as otherwise provided by law or by the articles
------
of organization or by these bylaws, the president, the treasurer and the clerk
shall hold office until the first meeting of the board of directors following
the next annual meeting of the stockholders and until their respective
successors are chosen and qualified, and each other officer shall hold office
until the first meeting of the directors following the next annual meeting of
the stockholders unless a shorter period shall have been specified by the terms
of his election or appointment, or in each case until he sooner dies, resigns,
is removed or becomes disqualified. Each agent shall retain his authority at
the pleasure of the directors.

4.5 Resignation and Removal. Any officer may resign at any time by
-----------------------
delivering his resignation in writing to the president, the treasurer or the
clerk or to a meeting of the directors. Such resignation shall be effective
upon receipt unless specified to be effective at some other time. The directors
may remove any officer elected by them with or without cause by the vote of the
majority of the directors then in office. An

8
<PAGE>

officer may be removed for cause only after reasonable notice and an opportunity
to be heard before the directors. No officer resigning, and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the corporation) no officer removed, shall have the right
to any compensation as such officer for any period following his removal, or any
right to damages on account of such removal, whether his compensation be by the
month or by the year or otherwise, unless the directors in their discretion
provide for compensation.

4.6. Vacancies. If the office of any officer becomes vacant, the
---------
directors may elect or appoint a successor by vote of a majority of the
directors present. Each such successor shall hold office for the unexpired
term, and in the case of the president, the treasurer and the clerk, until his
successor is chosen and qualified, or in each case until he sooner dies,
resigns, is removed or becomes disqualified.

4.7. Chief Executive Officer. The chief executive officer of the
-----------------------
corporation shall be the president or such other officer as is designated by the
directors and shall, subject to the control of the directors, have general
charge and supervision of the business of the corporation and, except as the
directors shall otherwise determine, preside at all meetings of the stockholders
and of the directors. If no such designation is made, the president shall be
the chief executive officer.

4.8. President and Vice President. The president shall have the duties
----------------------------
and powers specified in these bylaws and shall have such other duties and powers
as may be determined by the directors.

Any vice presidents shall have such duties and powers as shall be
designated from time to time by the directors.

4.9. Treasurer and Assistant Treasurers. Except as the directors shall
----------------------------------
otherwise determine, the treasurer shall be the chief financial and accounting
officer of the corporation and shall be in charge of its funds and valuable
papers, books of account and accounting records, and shall have such other
duties and powers as may be designated from time to time by the directors.

Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the directors.

4.10. Clerk and Assistant Clerks. The clerk shall record all
--------------------------
proceedings of the stockholders in a book or series of books to be kept
therefor, which book or books shall be kept at the principal office of the
corporation or at the office of its transfer agent or of its clerk and shall be
open at all reasonable times to the inspection of any stockholder. In the
absence of the clerk from any meeting of stockholders, an assistant clerk, or if
there be none or he is absent, a temporary clerk chosen at the meeting, shall
record the proceedings thereof in the aforesaid book. Unless a transfer agent
has been appointed the clerk shall keep or cause to be kept the stock and
transfer records of the corporation,

9
<PAGE>

which shall contain the names and record addresses of all stockholders and the
amount of stock held by each. If no secretary is elected, the clerk shall keep a
true record of the proceedings of all meetings of the directors and in his
absence from any such meeting an assistant clerk, or if there be none or he is
absent, a temporary clerk chosen at the meeting, shall record the proceedings
thereof.

Any assistant clerks shall have such other duties and powers as shall be
designated from time to time by the directors.

4.11. Secretary and Assistant Secretaries. If a secretary is elected,
-----------------------------------
he shall keep a true record of the proceedings of all meetings of the directors
and in his absence from any such meeting an assistant secretary, or if there be
none or he is absent, a temporary secretary chosen at the meeting, shall record
the proceedings thereof.

Any assistant secretaries shall have such other duties and powers as shall
be designated from time to time by the directors.

SECTION 5. CAPITAL STOCK

5.1. Number and Par Value. The total number of shares and the par
--------------------
value, if any, of each class of stock which the corporation is authorized to
issue shall be as stated in the articles of organization.

5.2. Stock Certificates. Each stockholder shall be entitled to a
------------------
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
be prescribed from time to time by the directors. Such certificate shall be
signed by the president or a vice president and by the treasurer or an assistant
treasurer. Such signatures may be facsimiles if the certificate is signed by a
transfer agent, or by a registrar, other than a director, officer or employee of
the corporation. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the time of its issue.

5.3. Loss of Certificates. In the case of the alleged loss or
--------------------
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof, upon such conditions as the directors may
prescribe.

SECTION 6. TRANSFER OF SHARES OF STOCK

6.1. Transfer on Books. Subject to the restrictions, if any, stated
-----------------
or noted on the stock certificates, shares of stock may be transferred on the
books of the corporation

10
<PAGE>

by the surrender to the corporation or its transfer agent of the certificate
therefor properly endorsed or accompanied by a written assignment and power of
attorney properly executed, with necessary transfer stamps affixed, and with
such proof of the authenticity of signature as the directors or the transfer
agent of the corporation may reasonably require. Except as may otherwise be
required by law, by the articles of organization or by these bylaws, the
corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to receive notice and to vote with respect thereto,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been transferred on the books of the corporation in accordance with
the requirements of these bylaws. It shall be the duty of each stockholder to
notify the corporation of his post office address.

6.2. Record Date and Closing Transfer Books. The directors may fix in
--------------------------------------
advance a time, which shall not be more than sixty days before the date of any
meeting of stockholders or the date for the payment of any dividend or making of
any distribution to stockholders or the last day on which the consent or dissent
of stockholders may be effectively expressed for any purpose, as the record date
for determining the stockholders having the right to notice of and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution or the right to give such consent or dissent, and in such case
only stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the corporation after the
record date; or without fixing such record date the directors may for any of
such purposes close the transfer books for all or any part of such period. If no
record date is fixed and the transfer books are not closed:

(1) The record date for determining stockholders having the right to
notice of and to vote at a meeting of stockholders shall be at the close of
business on the date next preceding the date on which notice is given; and

(2) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors acts with respect thereto.

SECTION 7. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the extent legally permissible, indemnify
each of its directors and officers (including persons who act at its request as
directors, officers or trustees of another organization or in any capacity with
respect to any employee benefit plan) against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees, reasonably incurred by him in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having been
such a director or officer, except with respect to any matter as to which he
shall have been

11
<PAGE>

adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his action was in the best interests of the corporation (any person
serving another organization in one or more of the indicated capacities at the
request of the corporation who shall have acted in good faith in the reasonable
belief that his action was in the best interests of such other organization to
be deemed as having acted in such manner with respect to the corporation) or, to
the extent that such matter relates to service with respect to any employee
benefit plan, in the best interest of the participants or beneficiaries of such
employee benefit plan; provided, however, that as to any matter disposed of by a
compromise payment by such director or officer, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless such compromise shall be approved as in the best
interests of the corporation, after notice that it involves such
indemnification: (a) by a disinterested majority of the directors then in
office; or (b) by a majority of the disinterested directors then in office,
provided that there has been obtained an opinion in writing of independent legal
counsel to the effect that such director or officer appears to have acted in
good faith in the reasonable belief that his action was in the best interests of
the corporation; or (c) by the holders of a majority of the outstanding stock at
the time entitled to vote for directors, voting as a single class, exclusive of
any stock owned by any interested director or officer. Expenses, including
counsel fees, reasonably incurred by any director or officer in connection with
the defense or disposition of any such action, suit or other proceeding may be
paid from time to time by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by such director or officer to repay the
amounts so paid to the corporation if it is ultimately determined that
indemnification for such expenses is not authorized under this Section 7. The
right of indemnification hereby provided shall not be exclusive of or affect any
other rights to which any director or officer may be entitled. As used in this
Section, the terms, "director" and "officer" include their respective heirs,
executors and administrators, and an "interested" director or officer is one
against whom in such capacity the proceedings in question or another proceeding
on the same or similar grounds is then pending. Nothing contained in this
Section shall affect any rights to indemnification to which corporate personnel
other than directors or officers may be entitled by contract or otherwise under
law.

Section 8. CORPORATE SEAL

The seal of the corporation shall, subject to alteration by the directors,
consist of a flat-faced circular die with the word "Massachusetts", together
with the name of the corporation and the year of its organization, cut or
engraved thereon.

SECTION 9. EXECUTION OF PAPERS

Except as the directors may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds,

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<PAGE>

notes, checks, drafts and other obligations made, accepted or endorsed by the
corporation shall be signed by the president or by one of the vice presidents or
by the treasurer.

SECTION 10. FISCAL YEAR

The fiscal year of the corporation shall end on December 31.

SECTION 11. AMENDMENTS

These bylaws may be altered, amended or repealed at any annual or special
meeting of the stockholders called for the purpose, of which the notice shall
specify the subject matter of the proposed alteration, amendment or repeal or
the sections to be affected thereby, by vote of the stockholders. These bylaws
may also be altered, amended or repealed by vote of a majority of the directors
then in office, except that the directors shall not take any action which
provides for indemnification of directors nor any action to amend this Section
11, and except that the directors shall not take any action unless permitted by
law.

Any bylaw so altered, amended or repealed by the directors may be further
altered or amended or reinstated by the stockholders in the above manner.

SECTION 12. MASSACHUSETTS CONTROL SHARE ACQUISITIONS ACT

The provisions of Chapter 110D shall not apply to control share
acquisitions of the corporation.

If the provisions of Chapter 110D shall become applicable to control share
acquisitions of the corporation through amendment of these bylaws or otherwise,
the following provisions shall apply:

(a) The corporation is authorized to redeem shares acquired in a control
share acquisition to the extent and in accordance with the procedures
specified in Section 6 of Chapter 110D and in this Section.

(b) The additional procedures for redemption specified in this Section
are as follows:

(i) Fair value shall be determined by the board of directors
or a committee of the board of director of the
corporation, and the amount so determined shall be
included in the notice of redemption given by the
corporation pursuant to Section 6 of Chapter 110D.

13
<PAGE>

(ii) The person whose shares are being redeemed (the "Holder")
may within ten days after the date of the notice of
redemption advise the corporation in writing that the
Holder believes that the value so determined is not fair,
and in the event the corporation shall, within the 30-day
period following its receipt of the Holder's notice,
permit the Holder to submit such written and oral evidence
of value as the Holder may wish and the board of directors
or committee considers appropriate. The board of directors
or committee shall affirm or revise its determination of
fair value within fifteen days after the completion of the
30-day period, and shall promptly advise the Holder in
writing of its decision.

(iii) The notice of redemption shall specify a redemption date,
which shall be 30 days after the date of the notice (or
the first business day after the 30-day period), and a
redemption office, which shall be the principal office of
the corporation or an office of a commercial bank
specified by the corporation in the notice. The redemption
date so fixed shall not be deferred by a request of the
Holder for a redetermination of fair value. The Holder
shall cause the certificate or certificates representing
the shares being redeemed to be delivered to the
redemption office not later than the redemption date, duly
endorsed or assigned for transfer, with signature
guaranteed, if such an endorsement or assignment is
required in the notice of redemption.

(iv) The certificate or certificates representing the shares
being redeemed having been deposited in accordance with
item (iii) above, the redemption price shall be paid by
the corporation on the redemption date specified in its
notice of redemption or such later date as the redemption
price may be determined if the Holder has duly requested a
redetermination of fair value.

(v) Notice of redemption having been given, from and after the
redemption date the shares being redeemed shall no longer
be deemed to be outstanding, and all rights of the holder
or holders thereof as a stockholder or stockholders of the
corporation shall cease, except the right to receive the
redemption price. If the corporation shall default in
payment of the redemption price, interest shall accrue
thereon from the date of default at the base or prime rate
of the corporation's principal lending bank or if none,
the base or prime rate of Fleet Bank, as in effect from
time to time during the period of default.

14
<PAGE>

(vi) Notice given by the corporation by first class mail or
delivered in person on the basis of a good faith
determination by the corporation of the identity and
address of the person who had made a control share
acquisition shall be deemed to have been duly given.

(vii) Any person who makes a control share acquisition of the
corporation shall be deemed to have consented to and shall
be bound by the provisions of this Section and shall
indemnify and hold the corporation harmless from and
against any damage, loss or expense which the corporation
may suffer as a result of any non-compliance with the
provisions of this Section.

References in this Section to Chapter 110D mean Chapter 110D of the
Massachusetts General Laws as in effect from time to time.

SECTION 13. MASSACHUSETTS BUSINESS COMBINATION ACT

The provisions of Chapter 110F of the Massachusetts General Laws shall not
apply to "business combinations" (as defined therein) involving the corporation.

<PAGE>

EXHIBIT 10.1

EMC CORPORATION

1985 STOCK OPTION PLAN, as amended July 1, 1998

1. PURPOSE.
-------

The purpose of the EMC Corporation 1985 Stock Option Plan is to enable EMC
Corporation to provide a special incentive to a limited number of key employees
of the Company and its Subsidiaries, if any, who are in a position to have a
significant effect upon the Company's business and earnings. In order to
accomplish this purpose, the Plan authorizes the grant to such key employees of
options to purchase Common Stock of the Company. Increased ownership of Common
Stock will provide such key employees with an additional incentive to take into
account the long-term interests of the Company.

2. DEFINITIONS.
-----------

As used herein, the following words or terms have the meanings set forth
below. The masculine gender is used throughout the Plan but is intended to
apply to members of both sexes.

2.1 "Board of Directors" means the Board of Directors of the Company.

2.2 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.

2.3 "Committee" means the Committee appointed by the Board of Directors to
administer the Plan or the Board of Directors as a whole if no appointment is
made.

2.4 "Common Stock" means the Common Stock of the Company.

2.5 "Company" means EMC Corporation, a corporation established under the
laws of The Commonwealth of Massachusetts.

2.6 "Fair Market Value" in the case of a share of Common Stock on a
particular day, means the fair market value as determined from time to time by
the Board of Directors or, where appropriate, by the Committee, taking into
account all information which the Board of Directors, or the Committee,
considers relevant.
<PAGE>

2.7 "Incentive Stock Option" means a stock option that satisfies the
requirements of Section 422 of the Code.

2.8 "Participant" means an individual holding a stock option or stock
options granted to him under the Plan.

2.9 "Plan" means the EMC Corporation 1985 Stock Option Plan set forth
herein.

2.10 "Subsidiary" or "Subsidiaries" means a corporation or corporations in
which the Company owns, directly or indirectly, stock possessing 50 percent or
more of the total combined voting power of all classes of stock.

2.11 "Ten Percent Stockholder" means any person who, at the time an option
is granted, owns or is deemed to own stock (as determined in accordance with
Sections 422 and 424 of the Code) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its parent
or a subsidiary.

3. ADMINISTRATION.
--------------

3.1 The Plan shall be administered by the Committee and, to the extent
provided herein, the Board of Directors. A majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members.

3.2 Subject to the provisions set forth herein, each of the Committee and
the Board of Directors shall have full authority to determine the provisions of
options to be granted under the Plan. Subject to the provisions set forth
herein, the Committee shall have full authority to interpret the terms of the
Plan and of options granted under the Plan, to adopt, amend and rescind rules
and guidelines for the administration of the Plan and for its own acts and
proceedings and to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan; provided, however, that
-------- -------
any change to the terms of an option granted hereunder shall be approved by the
Board of Directors to the extent such change would be deemed to be a new option
grant or such terms relate to a subsequent transaction that would not be exempt
from Section 16(b) of the Securities Exchange Act of 1934 in the absence of such
approval.

2
<PAGE>

3.3 The decision of the Committee or the Board of Directors, as
applicable, on any matter as to which the Committee or the Board of Directors,
as applicable, is given authority under subsection 3.2 shall be final and
binding on all persons concerned.

3.4 Nothing in the Plan shall be deemed to give any officer or employee,
or his legal representatives or assigns, any right to participate in the Plan,
except to such extent, if any, as the Committee or the Board, as applicable, may
have determined or approved pursuant to the provisions of the Plan.

4. SHARES SUBJECT TO THE PLAN.
--------------------------

4.1 The maximum number of shares of Common Stock that may be delivered
upon the exercise of options granted under the Plan shall be 72,000,000, subject
to adjustment in accordance with the provisions of Section 8.

4.2 If any option granted under the Plan terminates without having been
exercised in full (including an option which terminates by agreement between the
Company and the Participant), the number of shares of Common Stock as to which
such option has not been exercised prior to termination shall be available for
future grants within the limits set forth in subsection 4.1.

4.3 Shares of Common Stock delivered upon the exercise of options shall
consist of shares of authorized and unissued Common Stock, except that the Board
of Directors may from time to time in its discretion determine in any case the
shares to be so delivered shall consist of shares of authorized and issued
Common Stock reacquired by the Company and held in its Treasury. No fractional
shares of Common Stock shall be delivered upon the exercise of an option.

5. ELIGIBILITY FOR OPTIONS.
-----------------------

Employees eligible to receive options under the Plan shall be those key
employees of the Company and its Subsidiaries, if any, who, in the opinion of
the Committee, are in a position to have a significant effect upon the Company's
business and earnings. Members of the Board of Directors of the Company or a
Subsidiary who are not employed as regular salaried officers or employees of the
Company or a Subsidiary may not participate in the Plan.

3
<PAGE>

6. GRANT OF OPTIONS.
----------------

6.1 From time to time while the Plan is in effect, each of the Committee
and the Board of Directors may, in its absolute discretion, select from among
the persons eligible to receive options (including persons to whom options were
previously granted) those persons to whom options are to be granted.

6.2 Each of the Committee and the Board of Directors shall, in its
absolute discretion, determine the number of shares of Common Stock to be
subject to each option granted by it under the Plan.

6.3 No Incentive Stock Option may be granted under the Plan after May 16,
1995, but options theretofore granted may extend beyond that date.

7. PROVISIONS OF OPTIONS.
---------------------

7.1 Incentive Stock Options or Other Options. Options granted under the
----------------------------------------
Plan may be either Incentive Stock Options or options which do not qualify as
Incentive Stock Options, as the Committee or the Board of Directors shall
determine at the time of each grant of options hereunder.

7.2 Stock Option Certificates or Agreements. Options granted under the
---------------------------------------
Plan shall be evidenced by certificates or agreements in such form as the
Committee shall from time to time approve. Such certificates or agreements
shall comply with the terms and conditions of the Plan and may contain such
other provisions not inconsistent with the terms and conditions of the Plan as
the Committee shall deem advisable. In the case of options intended to qualify
as Incentive Stock Options, the certificates or agreements shall contain such
provisions relating to exercise and other matters as are required of incentive
stock options under the Code.

7.3 Terms and Conditions. All options granted under the Plan shall be
--------------------
subject to the following terms and conditions to the extent applicable and to
such other terms and conditions not inconsistent therewith as the Committee or
the Board of Directors shall determine:

7.3.1 Exercise Price. The exercise price per share of Common Stock
with respect to each option shall be as determined by the Committee but in
the case of an Incentive Stock Option not less than 100% (110% in the case
of an Incentive Stock Option granted to a Ten Percent Stockholder) of the
Fair Market Value per share at the time the option is granted. In the case
of an option

4
<PAGE>

which does not qualify as an Incentive Stock Option, the exercise price per
share of Common Stock shall be not less than par value. However, for those
employees subject to Section 16 of the Securities Exchange Act of 1934, the
per share exercise price for an option which does not qualify as an
Incentive Stock Option shall not be less than 50% of the Fair Market Value
at the time the option is granted.

7.3.2 Value of Shares of Common Stock Subject to Incentive Stock
-----------------------------------------------------------
Options. Each eligible employee may be granted Incentive Stock Options only
-------
to the extent that, in the aggregate under this Plan and all incentive
stock option plans of the Company and any related corporation, such
Incentive Stock Options do not become exercisable for the first time by
such employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the Incentive Stock Options were granted) of Common Stock in that
year. Any options granted to any employee in excess of such amount will be
granted as Non-Qualified Options.

7.3.3 Period of Options. An option shall be exercisable during such
-----------------
period of time as the Committee or the Board of Directors may specify
(subject to subsection 7.4 below), but in the case of an Incentive Stock
Option not after the expiration of ten years (five years in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder) from the date
the option is granted.

7.3.4 Exercise of Options.
-------------------

7.3.4.1 Each option shall be made exercisable at such time or
times as the Committee or the Board of Directors shall determine. In
the case of an option made exercisable in installments, the Committee
or the Board of Directors may later determine to accelerate the time
at which one or more of such installments may be exercised.

7.3.4.2 Any exercise of an option shall be in writing signed by
the proper person and delivered or mailed to the General Counsel of
the Company, accompanied by an option exercise notice and payment in
full for the number of shares in respect to which the option is
exercised.

5
<PAGE>

descent and distribution, the Company shall be under no obligation to
deliver stock thereunder until the Company is satisfied that the
person or persons exercising the option is or are the duly appointed
executor or administrator of the deceased Participant or the person or
persons to whom the option has been transferred by the Participant's
will or by the applicable laws of descent and distribution.

7.3.4.4 The Committee or the Board of Directors may at the time
of grant condition the exercise of an option upon agreement by the
Participant to subject the Common Stock to any restrictions on
transfer or repurchase rights in effect on the date of exercise, upon
representations of continued employment and upon other terms not
inconsistent with this Plan. Any such conditions shall be set forth in
the option certificate or other document evidencing the option.

7.3.4.5 In the case of an option that is not an Incentive Stock
Option, the Committee shall have the right to require that the
individual exercising the option to remit to the Company an amount
sufficient to satisfy any federal, state, or local withholding tax
requirements (or makes other arrangements satisfactory to the Company
with regard to such taxes) prior to the delivery of any Common Stock
pursuant to the exercise of the option. In the case of an Incentive
Stock Option, if at the time the Incentive Stock Option is exercised
the Committee determines that under applicable law and regulations the
Company could be liable for the withholding of any federal or state
tax with respect to a disposition of the Common Stock received upon
exercise, the Committee may require as a condition of exercise that
the individual exercising the Incentive Stock Option agree (i) to
inform the Company promptly of any disposition (within the meaning of
Section 422 (a) (1) of the Code and the regulations thereunder) of
Common Stock received upon exercise, and (ii) to give such security as
the Committee deems adequate to meet the potential liability of the
Company for the withholding of tax, and to augment such security from
time to time in any amount reasonably deemed necessary by the
Committee to preserve the adequacy of such security.

6
<PAGE>

sufficient to satisfy any federal or withholding requirement of that
foreign jurisdiction (or make other arrangements satisfactory to the
Company with regard to such taxes prior to the delivery of any Common
Stock pursuant to the exercise of the option).

7.3.5 Payment for and Delivery of Stock. The shares of stock
---------------------------------
purchased on any exercise of an option granted hereunder shall be paid for
in full in cash or, if permitted by the terms of the option, in shares of
unrestricted Common Stock at the time of such exercise or, if so permitted,
a combination of such cash and Common Stock. A Participant shall not have
the rights of a stockholder with respect to awards under the Plan except as
to stock actually issued to him.

7.3.6 Listing of Stock, Withholding and Other Legal Requirements. The
----------------------------------------------------------
Company shall not be obligated to deliver any stock until all federal and
state laws and regulations which the Company may deem applicable have been
complied with, nor, in the event the outstanding Common Stock is at the
time listed upon any stock exchange, until the stock to be delivered has
been listed or authorized to be added to the list upon official notice of
issuance to such exchange. In addition, if the shares of stock subject to
any option have not been registered in accordance with the Securities Act
of 1933, as amended, the Company may require the person or persons who
wishes or wish to exercise such option to make such representation or
agreement with respect to the sale of stock acquired on exercise of the
option as will be sufficient, in the opinion of the Company's counsel, to
avoid violation of said Act, and may also require that the certificates
evidencing said stock bear an appropriate restrictive legend.

7.3.7 Non-transferability of Options. No option may be transferred
------------------------------
by the Participant otherwise than by will, by the laws of descent and
distribution or pursuant to a qualified domestic relations order, and
during the Participant's lifetime the option may be exercised only by him
or her; provided, however, that the Board of Directors or the Committee, as
-------- -------
applicable, in its discretion, may allow for transferability of non-
qualified stock options by the Participant to "Immediate Family Members".
Immediate Family Members means children, grandchildren, spouse or common
law spouse, siblings or parents of the Participant or to bona fide trusts,
partnerships or other entities controlled by and of which the beneficiaries
are Immediate Family Members of the Participant. Any option grants that
are transferable are further conditioned on the Participant and Immediate
Family Members

7
<PAGE>

agreeing to abide by the Company's then current stock option transfer
guidelines.

7.3.8 Death. If a Participant dies at a time when he is entitled to
-----
exercise an Incentive Stock Option, then at any time or times within three
years after his death such Incentive Stock Option may be exercised, as to
all or any of the shares which the Participant was entitled to purchase
thereunder immediately prior to his death, by his executor or administrator
or the person or persons to whom the Incentive Stock Option is transferred
by will or the applicable laws of descent and distribution, and except as
so exercised such Incentive Stock Option shall expire at the end of such
three-year period. In no event, however, may any Incentive Stock Option
granted under the Plan be exercised after the expiration of ten years (five
years in the case of an Incentive Stock Option granted to a Ten Percent
Stockholder) from the date the Incentive Stock Option was granted.

7.3.9 Termination of Employment. If the employment of a Participant
-------------------------
terminates for any reason other than his death, all options held by the
Participant shall thereupon expire on the date of termination unless the
option by its terms, or the Committee or the Board of Directors by
resolution, shall allow the Participant to exercise any or all of the
options held by him after termination. In the case of an Incentive Stock
Option, the Incentive Stock Option shall in any event expire at the end of
three months after such termination of employment, or after the expiration
of ten years (five years in the case of an Incentive Stock Option granted
to a Ten Percent Stockholder) from the date the Incentive Stock Option was
granted, whichever occurs first. If the Committee or the Board of
Directors so decides, an option may provide that a leave of absence
granted by the Company or Subsidiary is not a termination of employment for
the purpose of this subsection 7.3.9, and in the absence of such a
provision the Committee may in any particular case determine that such a
leave of absence is not a termination of employment for such purpose. The
Committee shall also determine all other matters relating to continuous
employment.

8
<PAGE>

this Section 7.3.10 (such designated Participants together with Officers
referred to collectively as "Senior Participants"). The Committee or the
Board of Directors may cancel, rescind, suspend or otherwise limit or
restrict any unexpired option at any time if the Senior Participant engages
in "Detrimental Activity" (as defined below). Furthermore, in the event a
Senior Participant engages in Detrimental Activity at any time prior to or
during the six months after any exercise of an option, such exercise may be
rescinded until the later of (i) two years after such exercise or (ii) two
years after such Detrimental Activity . Upon such rescission, the Company
at its sole option may require the Senior Participant to (i) deliver and
transfer to the Company the shares of Common Stock received by the Senior
Participant upon such exercise, (ii) pay to the Company an amount equal to
any realized gain received by the Senior Participant from such exercise, or
(iii) pay to the Company an amount equal to the market price (as of the
exercise date) of the Common Stock acquired upon such exercise minus the
respective exercise price. The Company shall be entitled to set-off any
such amount owed to the Company against any amount owed to the Senior
Participant by the Company. As used in this subsection 7.3.10, "Detrimental
Activity" shall include: (i) the failure to comply with the terms of the
Plan or certificate or agreement evidencing the option, (ii) the failure to
comply with any term set forth in the Company's Key Employee Agreement
(irrespective of whether the Senior Participant is a party to the Key
Employee Agreement), (iii) any activity that results in termination of the
Senior Participant's employment for cause; (iv) a violation of any rule,
policy, procedure or guideline of the Company; (v) the Senior Participant
being convicted of, or entering a guilty plea with respect to a crime
whether or not connected with the Company; or (vi) any other conduct or act
determined to be injurious, detrimental or prejudicial to any interest of
the Company.

7.4 Authority of the Committee. The Committee shall have the
--------------------------
authority, either generally or in particular instances, to waive compliance
by a Participant with any obligation to be performed by him under an option
and to waive any condition or provision of an option, except that the
Committee may not (i) increase the total number of shares covered by any
Incentive Stock Option (except in accordance with Section 8), (ii) reduce
the option price per share of any Incentive Stock Option (except in
accordance with Section 8) or (iii) extend the term of any Incentive Stock
Option to more than ten years, subject, however, to the provisions of
Section 10.

9
<PAGE>

8. CHANGES IN STOCK.
----------------

In the event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the Common Stock that becomes effective
after the adoption of the Plan by the Board of Directors, the Committee shall
make appropriate adjustments in (i) the number and kind of shares of stock on
which options may thereafter be granted hereunder, (ii) the number and kind of
shares of stock remaining subject to each option outstanding at the time of such
change and (iii) the option price. The Committee's determination shall be
binding on all persons concerned. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation (other than a merger or consolidation in which the Company
survives but in which a majority of its outstanding shares are converted into
securities of another corporation or are exchanged for other consideration), any
option granted hereunder shall pertain and apply to the securities which a
holder of the number of shares of stock of the Company then subject to the
option would have been entitled to receive, but a dissolution or liquidation of
the Company or a merger or consolidation in which the Company is not the
surviving corporation or in which a majority of its outstanding shares are so
converted or exchanged shall cause every option hereunder to terminate; provided
that if any such dissolution, liquidation, merger or consolidation is
contemplated, the Company shall either arrange for any corporation succeeding to
the business and assets of the Company to issue to the Participants replacement
options (which, in the case of Incentive Stock Options, satisfy, in the
determination of the Committee, the requirements of Section 424 of the Code) on
such corporation's stock which will to the extent possible preserve the value of
the outstanding options or shall make the outstanding options fully exercisable
at least 20 days before the effective date of any such dissolution, liquidation,
merger or consolidation. The existence of the Plan shall not prevent any such
change or other transaction and no Participant thereunder shall have any right
except as herein expressly set forth.

9. EMPLOYMENT RIGHTS.
-----------------

Neither the adoption of the Plan nor any grant of options confers upon any
employee of the Company or a Subsidiary any right to continued employment with
the Company or a Subsidiary, as the case may be, nor does it interfere in any
way with the right of the Company or a Subsidiary to terminate the employment of
any of its employees at any time.

10
<PAGE>

10. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
-------------------------------------------------------

The Committee or the Board of Directors may at any time discontinue
granting options under the Plan and, with the consent of the Participant, may at
any time cancel an existing option in whole or in part and grant another option
to the Participant for such number of shares as the Committee or the Board of
Directors specifies. The Board of Directors may at any time or times amend the
Plan for the purpose of satisfying the requirements of any changes in applicable
laws or regulations or for any other purpose which may at the time be permitted
by law or may at any time terminate the Plan as to any further grants of
options, provided that no such amendment shall without the approval of the
stockholders of the Company (a) increase the maximum number of shares available
under the Plan, (b) change the group of employees eligible to receive options
under the Plan, (c) reduce the exercise price of outstanding incentive options
or reduce the price at which incentive options may be granted, (d) extend the
time within which options may be granted, (e) alter the Plan in such a way that
incentive options granted or to be granted hereunder would not be considered
incentive stock options under Section 422 of the Code, or (f) amend the
provisions of this Section 10, and no such amendment shall adversely affect the
rights of any employee (without his consent) under any option previously
granted.

11. EFFECTIVE DATE.
--------------

The Plan shall become effective upon its adoption by the Board of
Directors, and options may be granted under the Plan from and after the date of
such adoption; provided, however, that if prior to May 16, 1986 the
stockholders of the Company have not approved the Plan, the Plan shall terminate
to the extent that it relates to the issuance of Incentive Stock Options and all
Incentive Stock Options theretofore granted shall terminate and cease to be of
any force or effect. No Incentive Stock Option granted hereunder shall be
exercisable unless and until the Plan has been so approved.

<PAGE>

EXHIBIT 10.2

EMC CORPORATION

1992 EMC CORPORATION STOCK OPTION PLAN FOR DIRECTORS,
as amended July 1, 1998

1. PURPOSE
-------

The purpose of this 1992 Stock Option Plan for Directors (the "Plan") is
to advance the interests of EMC Corporation (the "Company") by enhancing the
ability of the Company to attract and retain directors who are in a position to
make significant contributions to the success of the Company and to reward
directors for such contributions through ownership of shares of the Company's
Common Stock (the "Stock").

2. ADMINISTRATION
--------------

The Plan shall be administered by the Board of Directors (the "Board") of
the Company and the Executive Compensation and Stock Option Committee (the
"Committee") of the Board, as set forth herein. The Board and the Committee
shall each have authority, not inconsistent with the express provisions of the
Plan to grant options in accordance with the Plan to such directors as are
eligible to receive options. The Committee shall in addition have authority, not
inconsistent with the express provisions of the Plan, (a) to prescribe the form
or forms of instruments evidencing options and any other instruments required
under the Plan and to change such forms from time to time; (b) to adopt, amend
and rescind rules and regulations for the administration of the Plan; and (c) to
interpret the Plan and decide any questions and settle all controversies and
disputes that may arise in connection with the Plan. Such determinations of the
Committee or the Board, as the case may be, shall be conclusive and shall bind
all parties. Subject to Section 7, the Committee shall also have the authority,
both generally and in particular instances, to waive compliance by a director
with any obligation to be performed by him or her under an option and to waive
any condition or provision of an option. Notwithstanding the preceding two
sentences, any change to the terms of an option granted hereunder shall be
approved by the Board to the extent such change would be deemed to be a new
option grant or such terms relate to a subsequent transaction that would not be
exempt from Section 16(b) of the Securities Exchange Act of 1934 in the absence
of such approval.

3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------

The Plan shall become effective on the date on which the Plan is approved
by the stockholders of the Company. No option shall be granted under the Plan
after the completion of
<PAGE>

ten years from the date on which the Plan was adopted by the Board, but options
granted may extend beyond that date.

4. SHARES SUBJECT TO THE PLAN
--------------------------

(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
the aggregate number of shares of Stock that may be delivered upon the exercise
of options granted under the Plan shall be 3,600,000. If any option granted
under the Plan terminates without having been exercised in full, the number of
shares of Stock as to which such option was not exercised shall be available for
future grants within the limits set forth in this Section 4(a).

(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.

(c) Changes in Stock. In the event of a stock dividend, stock split or
other change in corporate structure or capitalization affecting the Stock, the
number and kind of shares of stock or securities of the Company to be subject to
options then outstanding or to be granted under the Plan, and the option price,
and other relevant provisions shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons.

5. ELIGIBILITY FOR OPTIONS
-----------------------

Directors eligible to receive options under the Plan ("Eligible Directors")
shall be those directors who (i) are not employees of the Company; and (ii) are
not holders of more than 5% of the outstanding shares of the Stock or persons in
control of such holders.

6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------

(a) Formula Options. Eligible Directors who are directors on the date of
stockholder approval of the Plan shall be awarded options to purchase up to
40,000 shares of Stock. Following stockholder approval of the plan, each newly
elected Eligible Director shall be awarded options to purchase up to 40,000
shares of Stock on the date of his or her first election.

(b) Discretionary Options. In addition to the formula options provided for
above, the Committee or the Board may award options to purchase shares of Stock
to Eligible Directors on such terms as it may determine not inconsistent with
this Plan.

(c) Exercise Price. The exercise price of each option shall be not less
than 50% of the fair market value per share of the Stock at the time of the
grant. For this purpose "fair market value" shall mean the last sales price of
the Stock as reported on the New York Stock Exchange on the date of the grant
(based on The Wall Street Journal report of composite transactions) or, if the

2
<PAGE>

Stock is no longer listed on such Exchange, it shall have the same meaning as it
does in the provisions of the Internal Revenue Code of 1986 (the "Code") and the
regulations thereunder applicable to incentive options.

(d) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the option was granted.

(e) Exercise of Options.

(1) Each formula option shall become exercisable in increments of 33 1/3%
of the shares covered thereby on each of the first through third anniversaries
of the grant. Each discretionary option shall become exercisable at such time or
times as the Committee or the Board shall determine.

(2) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) an option
exercise notice and any other documents required by the Committee; and (b)
payment in full for the number of shares for which the option is exercised.

(3) If any option is exercised by the executor or administrator of a
deceased director, or by the person or persons to whom the option has been
transferred by the director's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to deliver Stock pursuant
to such exercise until the Company is satisfied as to the authority of the
person or persons exercising the option.

(4) The Company shall have the right to settle any option, and to terminate
the rights of the holder thereof, by paying to the option holder the difference
between the fair market value of the Stock at the time of settlement and the
purchase price.

(f) Payment for and Delivery of Stock. Stock purchased under the Plan shall
be paid for as follows: (i) in cash or by certified check, bank draft or money
order payable to the order of the Company; (ii) through the delivery of shares
of Stock having a fair market value on the last business day preceding the date
of exercise equal to the purchase price; or (iii) by a combination of cash and
Stock as provided in clauses (i) and (ii) above.

An option holder shall not have the rights of a stockholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.

The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable Federal and state
laws and regulations have been complied with; and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance; and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been

3
<PAGE>

registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.

(g) Nontransferability of Options/Exceptions. No option may be transferred
by a director otherwise than by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order, and during the director's
lifetime the option may be exercised only by him or her; provided, however, that
-------- -------
the Board of Directors or the Committee, as applicable, in its discretion, may
allow for transferability of options by the Participant to "Immediate Family
Members." Immediate Family Members means children, grandchildren, spouse or
common law spouse, siblings or parents of the Participant or to bona fide
trusts, partnerships or other entities controlled by and of which the
beneficiaries are Immediate Family Members of the Participant. Any option grants
that are transferable are further conditioned on the Participant and Immediate
Family Members agreeing to abide by the Company's then current stock option
transfer guidelines.

(h) Death. If a director dies at the time he or she is entitled to exercise
an option, then the portion formerly exercisable by the director may be
exercised by the director's executor or administrator, or by the person to whom
the option is transferred under the applicable laws of descent and distribution,
within three years of the death of the director, subject to earlier termination
of an option pursuant to Section 6(d).

(i) Other Termination of Status of Director. All previously unexercised
options terminate and are forfeited automatically upon the termination of the
director's service with the Company, unless the Committee or the Board of
Directors specifies otherwise.

(j) Mergers, etc. In the event of a dissolution, liquidation, consolidation
or merger in which the Company is not the surviving corporation, or which
results in the acquisition of substantially all of the Company's stock by a
single person or entity or by a group of persons and entities acting in concert
all outstanding options will thereupon terminate, provided at least twenty days
prior to the effective date of any such dissolution, liquidation, consolidation
or merger, the Committee or the Board may either (i) make all outstanding
options immediately exercisable or (ii) arrange to have the surviving
corporation grant replacement options for the option holders.

(k) Claw-back for Detrimental Activity. The following provisions of this
Section 6(k) shall apply to options granted on or after July 1, 1998: The
Committee or the Board of Directors may cancel, rescind, suspend or otherwise
limit or restrict any unexpired option at any time if the director engages in
"Detrimental Activity" (as defined below). Furthermore, in the event a director
engages in Detrimental Activity at any time prior to or during the six months
after any exercise of an option, such exercise may be rescinded until the later
of (i) two years after such exercise or (ii) two years after such Detrimental
Activity. Upon such rescission, the Company at its sole option may require the
director to (i) deliver and transfer to the Company the shares of Stock received
by the director upon such exercise, (ii) pay to the Company an amount equal to

4
<PAGE>

any realized gain received by the director from such exercise, or (iii) pay to
the Company an amount equal to the market price (as of the exercise date) of the
Stock acquired upon such exercise minus the respective exercise price. The
Company shall be entitled to set-off any such amount owed to the Company against
any amount owed to the director by the Company. As used in this Section 6(k),
"Detrimental Activity" shall include: (i) the failure to comply with the terms
of the certificate or agreement evidencing the option or the Plan, (ii) the
failure to comply with any term set forth in the Key Employee Agreement
(irrespective of whether the director is a party to the Company's Key Employee
Agreement), (iii) any activity that results in removal of the director for
cause; (iv) a violation of any rule, policy, procedure or guideline of the
Company; (v) the director being convicted of, or entering a guilty plea with
respect to a crime whether or not connected with the Company; or (vi) any other
conduct or act determined to be injurious, detrimental or prejudicial to any
interest of the Company.

7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
----------------------------------------------------------------

Neither adoption of the Plan nor the grant of options to a director shall
affect the Company's right to grant to such director or any director options
that are not subject to the Plan, to issue to such directors Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to directors.

The Committee or the Board may at any time discontinue granting options
under the Plan. The Board may at any time, or times, amend the Plan for the
purpose of satisfying any changes in applicable laws or regulations or for any
other purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of options, provided that (except to
the extent expressly required or permitted herein above) no such amendment
shall, without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan; (b) increase the number of
options to be granted to Eligible Directors; (c) amend the definition of
Eligible Directors so as to enlarge the group of directors eligible to receive
options under the Plan; (d) reduce the price at which options may be granted
other than as permitted in the Plan; or (e) amend the provisions of this Section
7.

<PAGE>

EXHIBIT 10.3

EMC CORPORATION

1993 STOCK OPTION PLAN, as amended January 20, 1999

1. PURPOSE.
-------

The purpose of the EMC Corporation 1993 Stock Option Plan is to enable EMC
Corporation to provide a special incentive to a limited number of key employees
of the Company and its Subsidiaries, if any, who are in a position to have a
significant effect upon the Company's business and earnings. In order to
accomplish this purpose, the Plan authorizes the grant to such key employees of
options to purchase Common Stock of the Company. Increased ownership of Common
Stock will provide such key employees with an additional incentive to take into
account the long-term interests of the Company.

2. DEFINITIONS.
-----------

As used herein, the following words or terms have the meanings set forth
below. The masculine gender is used throughout the Plan but is intended to apply
to members of both sexes.

2.1 "Board of Directors" means the Board of Directors of the Company.

2.2 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.

2.3 "Committee" means the Committee appointed by the Board of Directors to
administer the Plan or the Board of Directors as a whole if no appointment is
made.

2.4 "Common Stock" means the Common Stock of the Company.

2.5 "Company" means EMC Corporation, a corporation established under the
laws of The Commonwealth of Massachusetts.

Page 1 of 11
<PAGE>

2.7 "Incentive Stock Option" means a stock option that satisfies the
requirements of Section 422 of the Code.

2.8 "Participant" means an individual holding a stock option or stock
options granted to him under the Plan.

2.9 "Plan" means the EMC Corporation 1993 Stock Option Plan set forth
herein.

3. ADMINISTRATION.
--------------

Page 2 of 11
<PAGE>

4. SHARES SUBJECT TO THE PLAN.
--------------------------

4.1 The maximum number of shares of Common Stock that may be delivered
upon the exercise of options granted under the Plan shall be 40,000,000*,
subject to adjustment in accordance with the provisions of Section 8.

4.2 If any option granted under the Plan terminates without having been
exercised in full (including an option which terminates by agreement between the
Company and the Participant), or if shares of Common Stock are reacquired by the
Company upon the rescission of an exercise of an option, the number of shares of
Common Stock as to which an option has not been exercised prior to termination,
or have been reacquired upon the rescission of an option, shall be available for
future grants within the limits set forth in subsection 4.1.

5. ELIGIBILITY FOR OPTIONS.
-----------------------

*Subject to stockholder approval

Page 3 of 11
<PAGE>

6. GRANT OF OPTIONS.
----------------

6.2 Each of the Committee and the Board of Directors shall, in its
absolute discretion, determine the number of shares of Common Stock to be
subject to each option granted by it under the Plan.

6.3 No Incentive Stock Option may be granted under the Plan after May 12,
2003, but options theretofore granted may extend beyond that date.

7. PROVISIONS OF OPTIONS.
---------------------

7.2 Stock Option Certificates or Agreements. Options granted under the
---------------------------------------
Plan shall be evidenced by certificates or agreements in such form as the
Committee shall from time to time approve. Such certificates or agreements shall
comply with the terms and conditions of the Plan and may contain such other
provisions not inconsistent with the terms and conditions of the Plan as the
Committee shall deem advisable. In the case of options intended to qualify as
Incentive Stock Options, the certificates or agreements shall contain such
provisions relating to exercise and other matters as are required of incentive
stock options under the Code.

7.3.1 Exercise Price. The exercise price per share of Common Stock
--------------
with respect to each option shall be as determined by the Committee but in
the case of an Incentive Stock Option not less than 100% (110% in the case
of an Incentive Stock Option granted to a Ten Percent Stockholder) of the
Fair Market Value per share at the time the option is granted. In the case
of an option

Page 4 of 11
<PAGE>

which does not qualify as an Incentive Stock Option, the exercise price per
share of Common Stock shall be not less than par value.

7.3.2 Value of Shares of Common Stock Subject to Incentive Stock
----------------------------------------------------------
Options. Each eligible employee may be granted Incentive Stock Options only
-------
to the extent that, in the aggregate under this Plan and all incentive
stock option plans of the Company and any related corporation, such
Incentive Stock Options do not become exercisable for the first time by
such employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the Incentive Stock Options were granted) of Common Stock in that
year. Any options granted to an employee in excess of such amount will be
granted as Non-Qualified Options.

7.3.3 Period of Options. An option shall be exercisable during such
-----------------
period of time as the Committee or Board of Directors may specify (subject
to subsection 7.4 below), but in the case of an Incentive Stock Option not
after the expiration of ten years (five years in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder) from the date the option
is granted.

7.3.4 Exercise of Options.
-------------------

7.3.4.3 In the event an option is exercised by the executor or
administrator of a deceased Participant, or by the person or persons
to whom the option has been transferred by the Participant's will or
the applicable laws of descent and distribution, the Company shall be
under no obligation to deliver stock thereunder until the Company is
satisfied that the person or persons exercising the option is or are
the duly appointed executor or administrator of the deceased
Participant or the person or persons to whom the

Page 5 of 11
<PAGE>

option has been transferred by the Participant's will or by the
applicable laws of descent and distribution.

7.3.4.6 In the case of an option that is exercised by an
individual that is subject to taxation in a foreign jurisdiction, the
Committee shall have the right to require the individual exercising
the option to remit to the Company an amount sufficient to satisfy any
federal or withholding requirement of that foreign jurisdiction (or
make other arrangements satisfactory to the Company with regard to
such taxes prior to the delivery of any Common Stock pursuant to the
exercise of the option).

Page 6 of 11
<PAGE>

7.3.6 Listing of Stock, Withholding and Other Legal Requirements.
----------------------------------------------------------
The Company shall not be obligated to deliver any stock until all federal
and state laws and regulations which the Company may deem applicable have
been complied with, nor, in the event the outstanding Common Stock is at
the time listed upon any stock exchange, until the stock to be delivered
has been listed or authorized to be added to the list upon official notice
of issuance to such exchange. In addition, if the shares of stock subject
to any option have not been registered in accordance with the Securities
Act of 1933, as amended, the Company may require the person or persons who
wishes or wish to exercise such option to make such representation or
agreement with respect to the sale of stock acquired on exercise of the
option as will be sufficient, in the opinion of the Company's counsel, to
avoid violation of said Act, and may also require that the certificates
evidencing said stock bear an appropriate restrictive legend.

7.3.7 Non-transferability of Options. No option may be transferred by
------------------------------
the Participant otherwise than by will, by the laws of descent and
distribution or pursuant to a qualified domestic relations order, and
during the Participant's lifetime the option may be exercised only by him
or her; provided, however, that the Board of Directors or the Committee, as
-------- -------
applicable, in its discretion, may allow for transferability of non-
qualified stock options by the Participant to "Immediate Family Members."
Immediate Family Members means children, grandchildren, spouse or common
law spouse, siblings or parents of the Participant or to bona fide trusts,
partnerships or other entities controlled by and of which the beneficiaries
are Immediate Family Members of the Participant. Any option grants that are
transferable are further conditioned on the Participant and Immediate
Family Members agreeing to abide by the Company's then current stock option
transfer guidelines.

7.3.8 Death. If a Participant dies at a time when he is entitled to
-----
exercise an Incentive Stock Option, then at any time or

Page 7 of 11
<PAGE>

times within three years after his death such Incentive Stock Option may be
exercised, as to all or any of the shares which the Participant was
entitled to purchase thereunder immediately prior to his death, by his
executor or administrator or the person or persons to whom the Incentive
Stock Option is transferred by will or the applicable laws of descent and
distribution, and except as so exercised such Incentive Stock Option shall
expire at the end of such three-year period. In no event, however, may any
Incentive Stock Option granted under the Plan be exercised after the
expiration of ten years (five years in the case of an Incentive Stock
Option granted to a Ten Percent Stockholder) from the date the Incentive
Stock Option was granted.

7.3.9 Termination of Employment. If the employment of a Participant
-------------------------
terminates for any reason other than his death, all options held by the
Participant shall thereupon expire on the date of termination unless the
option by its terms, or the Committee or the Board of Directors by
resolution, shall allow the Participant to exercise any or all of the
options held by him after termination. In the case of an Incentive Stock
Option, the Incentive Stock Option shall in any event expire at the end of
three months after such termination of employment, or after the expiration
of ten years (five years in the case of an Incentive Stock Option granted
to a Ten Percent Stockholder) from the date the Incentive Stock Option was
granted, whichever occurs first. If the Committee or the Board of Directors
so decides, an option may provide that a leave of absence granted by the
Company or Subsidiary is not a termination of employment for the purpose of
this subsection 7.3.9, and in the absence of such a provision the Committee
may in any particular case determine that such a leave of absence is not a
termination of employment for such purpose. The Committee shall also
determine all other matters relating to continuous employment.

7.3.10 Claw-back for Detrimental Activity. The following provisions
----------------------------------
of this Section 7.3.10 shall apply to options granted on or after July 1,
1998 to (i) Participants who are classified by the Company or a Subsidiary
as an executive officer, senior officer, or officer (collectively, an
"Officer") of the Company or a Subsidiary; and (ii) certain other
Participants designated by the Committee or the Board of Directors to be
subject to the terms of this Section 7.3.10 (such designated Participants
together with Officers referred to collectively as "Senior Participants").
The Committee or the Board of Directors may cancel, rescind, suspend or
otherwise limit or restrict any unexpired option at any time if the Senior
Participant engages in "Detrimental Activity" (as defined below).

Page 8 of 11
<PAGE>

Furthermore, in the event a Senior Participant engages in Detrimental
Activity at any time prior to or during the six months after any exercise
of an option, such exercise may be rescinded until the later of (i) two
years after such exercise or (ii) two years after such Detrimental
Activity. Upon such rescission, the Company at its sole option may require
the Senior Participant to (i) deliver and transfer to the Company the
shares of Common Stock received by the Senior Participant upon such
exercise, (ii) pay to the Company an amount equal to any realized gain
received by the Senior Participant from such exercise, or (iii) pay to the
Company an amount equal to the market price (as of the exercise date) of
the Common Stock acquired upon such exercise minus the respective exercise
price. The Company shall be entitled to set-off any such amount owed to the
Company against any amount owed to the Senior Participant by the Company.
As used in this subsection 7.3.10, "Detrimental Activity" shall include:
(i) the failure to comply with the terms of the Plan or certificate or
agreement evidencing the option, (ii) the failure to comply with any term
set forth in the Company's Key Employee Agreement (irrespective of whether
the Senior Participant is a party to the Key Employee Agreement), (iii) any
activity that results in termination of the Senior Participant's employment
for cause; (iv) a violation of any rule, policy, procedure or guideline of
the Company; (v) the Senior Participant being convicted of, or entering a
guilty plea with respect to a crime whether or not connected with the
Company; or (vi) any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company.

7.4 Authority of the Committee. The Committee shall have the authority,
--------------------------
either generally or in particular instances, to waive compliance by a
Participant with any obligation to be performed by him under an option and to
waive any condition or provision of an option, except that the Committee may not
(i) increase the total number of shares covered by any Incentive Stock Option
(except in accordance with Section 8), (ii) reduce the option price per share of
any Incentive Stock Option (except in accordance with Section 8) or (iii) extend
the term of any Incentive Stock Option to more than ten years, subject, however,
to the provisions of Section 10.

8. CHANGES IN STOCK.
----------------

Page 9 of 11
<PAGE>

hereunder, (ii) the number and kind of shares of stock remaining subject to each
option outstanding at the time of such change and (iii) the option price. The
Committee's determination shall be binding on all persons concerned. Subject to
any required action by the stockholders, if the Company shall be the surviving
corporation in any merger or consolidation (other than a merger or consolidation
in which the Company survives but in which a majority of its outstanding shares
are converted into securities of another corporation or are exchanged for other
consideration), any option granted hereunder shall pertain and apply to the
securities which a holder of the number of shares of stock of the Company then
subject to the option would have been entitled to receive, but a dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation or in which a majority of its outstanding shares
are so converted or exchanged shall cause every option hereunder to terminate;
provided that if any such dissolution, liquidation, merger or consolidation is
contemplated, the Company shall either arrange for any corporation succeeding to
the business and assets of the Company to issue to the Participants replacement
options (which, in the case of Incentive Stock Options, satisfy, in the
determination of the Committee, the requirements of Section 424 of the Code) on
such corporation's stock which will to the extent possible preserve the value of
the outstanding options or shall make the outstanding options fully exercisable
at least 20 days before the effective date of any such dissolution, liquidation,
merger or consolidation. The existence of the Plan shall not prevent any such
change or other transaction and no Participant thereunder shall have any right
except as herein expressly set forth.

9. EMPLOYMENT RIGHTS.
-----------------

10. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
-------------------------------------------------------

Page 10 of 11
<PAGE>

satisfying the requirements of any changes in applicable laws or regulations or
for any other purpose which may at the time be permitted by law or may at any
time terminate the Plan as to any further grants of options, provided that no
such amendment shall without the approval of the stockholders of the Company (a)
increase the maximum number of shares available under the Plan, (b) change the
group of employees eligible to receive options under the Plan, (c) reduce the
exercise price of outstanding incentive options or reduce the price at which
incentive options may be granted, (d) extend the time within which options may
be granted, (e) alter the Plan in such a way that incentive options granted or
to be granted hereunder would not be considered incentive stock options under
Section 422 of the Code, or (f) amend the provisions of this Section 10, and no
such amendment shall adversely affect the rights of any employee (without his
consent) under any option previously granted.

11. EFFECTIVE DATE.
--------------

The Plan became effective immediately upon its approval by the stockholders
of the Company at the Annual Meeting on May 12, 1993.

Page 11 of 11

<PAGE>

EXHIBIT 21.1--SUBSIDIARIES OF REGISTRANT

The following is a list of the Corporation's consolidated subsidiaries as
of January 31, 1999. The Corporation owns, directly or indirectly, 100% of the
voting securities of each subsidiary, unless noted otherwise and except for
director's qualifying shares.

<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
NAME ORGANIZATION
- ---- ------------
<S> <C>
Conley Corporation........................................................................... Delaware
EMC (Benelux) B.V............................................................................ The Netherlands
EMC Computer Storage Systems (Israel) Ltd.................................................... Israel
EMC Computer Storage Systems (Sales and Services) Ltd........................................ Israel
EMC Computer Systems AG...................................................................... Switzerland
EMC Computer Systems Argentina S.A........................................................... Argentina
EMC Computer-Systems A/S..................................................................... Denmark
EMC Computer-Systems AS...................................................................... Norway
EMC Computer Systems Austria GmbH............................................................ Austria
EMC Computer Systems (Benelux) B.V........................................................... The Netherlands
EMC Computer-Systems Brazil Ltda............................................................. Brazil
EMC Computer Systems California, Inc......................................................... Delaware
EMC Computer-Systems Deutschland GmbH........................................................ Germany
EMC Computer Systems (F.E.) Ltd.............................................................. Hong Kong
EMC Computer Systems France S.A.............................................................. France
EMC Computer-Systems Ireland Limited......................................................... Ireland
EMC Computer Systems Italia S.p.A............................................................ Italy
EMC Computer-Systems OY...................................................................... Finland
EMC Computer Systems Poland.................................................................. Poland
EMC Computer Systems (S.A.) (Pty.) Ltd....................................................... South Africa
EMC Computer Systems (South Asia) Pte. Ltd................................................... Singapore
EMC Computer Systems Spain S.L............................................................... Spain
EMC Computer-Systems Svenska AB.............................................................. Sweden
EMC Computer Systems (U.K.) Limited.......................................................... United Kingdom
EMC Computer Systems Venezuela, S.A.......................................................... Venezuela
EMC Corporation of Canada.................................................................... Canada
EMC Foreign Sales Corporation (F.S.C.)....................................................... Barbados
EMC International Holdings, Inc.............................................................. Delaware
EMC Japan K.K.*.............................................................................. Japan
EMC Securities Corporation................................................................... Massachusetts
Epoch, Inc................................................................................... Delaware
Hankook EMC Computer Systems Chusik Hoesa.................................................... South Korea
M.C.I. Management and Computer Consulting Canada, Inc........................................ Canada
M.C.I. Management and Computer Consulting, Inc............................................... Canada
M.C.I. Management and Computer Consulting International, Inc................................. Canada
MCI S.A...................................................................................... France
Management Consulting & Informatic Ltd....................................................... Israel
McDATA Asia Pacific Pte. Ltd................................................................. Singapore
McDATA Corporation**......................................................................... Delaware
McDATA Holdings Corporation.................................................................. Delaware
McDATA International......................................................................... U.S. Virgin Islands
Millennia III, Inc........................................................................... Delaware
P2i.......................................................................................... France
</TABLE>

_____________________________
*95% owned by EMC Corporation
**89% owned by McData Holdings Corporation.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements of EMC Corporation on Form S-3 (File Nos. 333-24901, 333-41079 and
333-60177) and on Form S-8 (File Nos. 33-51800, 33-54860, 33-63665, 333-31471,
333-55801, 333-1375, 333-05133, 333-61113, 333-63045 and 333-57263) of our
report dated January 22, 1999 on our audits of the consolidated financial
statements and consolidated financial statement schedule of EMC Corporation as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998, which report is included in this Annual Report on
Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts
March 11, 1999

<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 705,177
<SECURITIES> 825,298
<RECEIVABLES> 984,412
<ALLOWANCES> 6,562
<INVENTORY> 485,844
<CURRENT-ASSETS> 3,104,813
<PP&E> 637,534
<DEPRECIATION> 360,663
<TOTAL-ASSETS> 4,568,571
<CURRENT-LIABILITIES> 653,193
<BONDS> 517,500
0
0
<COMMON> 5,036
<OTHER-SE> 3,319,100
<TOTAL-LIABILITY-AND-EQUITY> 4,568,571
<SALES> 3,791,291
<TOTAL-REVENUES> 3,973,735
<CGS> 1,929,208
<TOTAL-COSTS> 2,991,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,191
<INCOME-PRETAX> 1,057,818
<INCOME-TAX> 264,455
<INCOME-CONTINUING> 793,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 793,363
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.49

</TABLE>