x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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94-3292913
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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3401 Hillview Avenue
Palo Alto, CA
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94304
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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ITEM 1.
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FINANCIAL STATEMENTS
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 30,
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September 30,
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||||||||||||
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2015
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2014
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2015
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2014
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||||||||
Revenues:
|
|
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||||||||
License
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$
|
681
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$
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639
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$
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1,896
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$
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1,814
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Services
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991
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876
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2,883
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2,519
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||||
GSA settlement
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—
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—
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(76
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)
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—
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||||
Total revenues
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1,672
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|
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1,515
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|
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4,703
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|
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4,333
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||||
Operating expenses
(1)
:
|
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||||||||
Cost of license revenues
|
46
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|
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46
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|
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142
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|
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143
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||||
Cost of services revenues
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212
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|
|
196
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609
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519
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||||
Research and development
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331
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327
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958
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936
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||||
Sales and marketing
|
556
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529
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1,656
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1,550
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||||
General and administrative
|
201
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169
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568
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498
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||||
Realignment charges
|
—
|
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6
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|
|
20
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|
|
4
|
|
||||
Operating income
|
326
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|
|
242
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|
|
750
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|
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683
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||||
Investment income
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13
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|
|
11
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|
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38
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28
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||||
Interest expense with EMC
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(7
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)
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(7
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)
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(20
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)
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(18
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)
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||||
Other income (expense), net
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(7
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)
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(2
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)
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(8
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)
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(2
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)
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Income before income taxes
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325
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|
|
244
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|
|
760
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|
691
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Income tax provision
|
69
|
|
|
50
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|
|
137
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|
|
131
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Net income
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$
|
256
|
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$
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194
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$
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623
|
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$
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560
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Net income per weighted-average share, basic for Class A and Class B
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$
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0.61
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$
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0.45
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$
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1.47
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$
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1.30
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Net income per weighted-average share, diluted for Class A and Class B
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$
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0.60
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$
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0.45
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$
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1.46
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$
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1.29
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Weighted-average shares, basic for Class A and Class B
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422,329
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430,463
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424,799
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430,408
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Weighted-average shares, diluted for Class A and Class B
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423,981
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434,118
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427,466
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434,656
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__________
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||||||||
(1) Includes stock-based compensation as follows:
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||||||||
Cost of license revenues
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$
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—
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$
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1
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$
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1
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$
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2
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Cost of services revenues
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11
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|
|
11
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|
|
32
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|
|
31
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|
||||
Research and development
|
56
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|
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61
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|
|
164
|
|
|
187
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|
||||
Sales and marketing
|
43
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|
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43
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|
|
124
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|
|
128
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|
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General and administrative
|
16
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|
17
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|
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47
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|
|
51
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|
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 30,
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September 30,
|
||||||||||||
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2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income
|
$
|
256
|
|
|
$
|
194
|
|
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$
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623
|
|
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$
|
560
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Other comprehensive income (loss):
|
|
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|
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||||||||
Changes in market value of available-for-sale securities:
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||||||||
Unrealized gains (losses), net of taxes of $1, $(2), $1 and $1
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1
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(3
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)
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2
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2
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Reclassification of (gains) losses realized during the period, net of taxes of $0, $(1), $0 and $(2) for all periods
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—
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(1
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)
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—
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(2
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)
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Net change in market value of available-for-sale securities
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1
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(4
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)
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2
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—
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Changes in market value of effective foreign currency forward contracts:
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Unrealized gains (losses), net of taxes of $0 for all periods
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1
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(3
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)
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(4
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)
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(3
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)
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Reclassification of (gains) losses realized during the period, net of taxes of $0 for all periods
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(2
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)
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(1
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)
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—
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—
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Net change in market value of effective foreign currency forward contracts
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(1
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)
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(4
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)
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(4
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)
|
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(3
|
)
|
||||
Total other comprehensive income (loss)
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—
|
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(8
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)
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(2
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)
|
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(3
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)
|
||||
Total comprehensive income, net of taxes
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$
|
256
|
|
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$
|
186
|
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$
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621
|
|
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$
|
557
|
|
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September 30,
|
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December 31,
|
||||
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2015
|
|
2014
|
||||
ASSETS
|
|
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|
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Current assets:
|
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|
||||
Cash and cash equivalents
|
$
|
2,083
|
|
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$
|
2,071
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Short-term investments
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5,139
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5,004
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|
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Accounts receivable, net of allowance for doubtful accounts of $2 and $2
|
1,011
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1,520
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Due from related parties, net
|
25
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|
|
49
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Deferred tax assets
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254
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|
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248
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|
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Other current assets
|
150
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|
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238
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|
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Total current assets
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8,662
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|
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9,130
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|
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Property and equipment, net
|
1,124
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1,035
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Other assets
|
175
|
|
|
174
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|
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Deferred tax assets
|
204
|
|
|
165
|
|
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Intangible assets, net
|
645
|
|
|
748
|
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Goodwill
|
3,981
|
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|
3,964
|
|
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Total assets
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$
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14,791
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$
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15,216
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
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|
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Current liabilities:
|
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|
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Accounts payable
|
$
|
139
|
|
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$
|
203
|
|
Accrued expenses and other
|
622
|
|
|
811
|
|
||
Unearned revenues
|
2,989
|
|
|
2,982
|
|
||
Total current liabilities
|
3,750
|
|
|
3,996
|
|
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Notes payable to EMC
|
1,500
|
|
|
1,500
|
|
||
Unearned revenues
|
1,697
|
|
|
1,851
|
|
||
Other liabilities
|
310
|
|
|
283
|
|
||
Total liabilities
|
7,257
|
|
|
7,630
|
|
||
Contingencies (refer to Note I)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Class A common stock, par value $.01; authorized 2,500,000 shares; issued and outstanding 121,799 and 129,359 shares
|
1
|
|
|
1
|
|
||
Class B convertible common stock, par value $.01; authorized 1,000,000 shares; issued and outstanding 300,000 shares
|
3
|
|
|
3
|
|
||
Additional paid-in capital
|
2,707
|
|
|
3,380
|
|
||
Accumulated other comprehensive income (loss)
|
(3
|
)
|
|
(1
|
)
|
||
Retained earnings
|
4,821
|
|
|
4,198
|
|
||
Total VMware, Inc.’s stockholders’ equity
|
7,529
|
|
|
7,581
|
|
||
Non-controlling interests
|
5
|
|
|
5
|
|
||
Total stockholders’ equity
|
7,534
|
|
|
7,586
|
|
||
Total liabilities and stockholders’ equity
|
$
|
14,791
|
|
|
$
|
15,216
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2015
|
|
2014
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
623
|
|
|
$
|
560
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
246
|
|
|
255
|
|
||
Stock-based compensation
|
368
|
|
|
399
|
|
||
Excess tax benefits from stock-based compensation
|
(27
|
)
|
|
(34
|
)
|
||
Deferred income taxes, net
|
(44
|
)
|
|
(115
|
)
|
||
Impairment of strategic investment
|
5
|
|
|
—
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Accounts receivable
|
508
|
|
|
293
|
|
||
Other assets
|
14
|
|
|
(70
|
)
|
||
Due to/from related parties, net
|
31
|
|
|
25
|
|
||
Accounts payable
|
(36
|
)
|
|
41
|
|
||
Accrued expenses
|
(153
|
)
|
|
(4
|
)
|
||
Income taxes payable
|
24
|
|
|
178
|
|
||
Unearned revenues
|
(148
|
)
|
|
237
|
|
||
Net cash provided by operating activities
|
1,411
|
|
|
1,765
|
|
||
Investing activities:
|
|
|
|
||||
Additions to property and equipment
|
(274
|
)
|
|
(254
|
)
|
||
Purchases of available-for-sale securities
|
(2,675
|
)
|
|
(2,974
|
)
|
||
Sales of available-for-sale securities
|
1,700
|
|
|
1,551
|
|
||
Maturities of available-for-sale securities
|
840
|
|
|
483
|
|
||
Purchases of strategic investments
|
(11
|
)
|
|
(41
|
)
|
||
Business acquisitions, net of cash acquired
|
(21
|
)
|
|
(1,112
|
)
|
||
Decrease (increase) in restricted cash
|
77
|
|
|
(76
|
)
|
||
Other investing
|
2
|
|
|
(10
|
)
|
||
Net cash used in investing activities
|
(362
|
)
|
|
(2,433
|
)
|
||
Financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
123
|
|
|
158
|
|
||
Proceeds from issuance of notes payable to EMC
|
—
|
|
|
1,050
|
|
||
Reduction in capital from EMC
|
—
|
|
|
(24
|
)
|
||
Proceeds from non-controlling interests
|
4
|
|
|
7
|
|
||
Repurchase of common stock
|
(1,050
|
)
|
|
(450
|
)
|
||
Excess tax benefits from stock-based compensation
|
27
|
|
|
34
|
|
||
Shares repurchased for tax withholdings on vesting of restricted stock
|
(141
|
)
|
|
(119
|
)
|
||
Net cash provided by (used in) financing activities
|
(1,037
|
)
|
|
656
|
|
||
Net increase (decrease) in cash and cash equivalents
|
12
|
|
|
(12
|
)
|
||
Cash and cash equivalents at beginning of the period
|
2,071
|
|
|
2,305
|
|
||
Cash and cash equivalents at end of the period
|
$
|
2,083
|
|
|
$
|
2,293
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
21
|
|
|
$
|
20
|
|
Cash paid for taxes, net
|
155
|
|
|
65
|
|
||
Non-cash items:
|
|
|
|
||||
Changes in capital additions, accrued but not paid
|
$
|
(49
|
)
|
|
$
|
(3
|
)
|
Fair value of stock-based awards assumed in acquisitions
|
—
|
|
|
25
|
|
|
September 30, 2015
|
||||||||||||
|
Weighted-Average
Useful Lives (in years) |
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||
Purchased technology
|
6.6
|
|
$
|
651
|
|
|
$
|
(281
|
)
|
|
$
|
370
|
|
Leasehold interest
|
34.9
|
|
149
|
|
|
(19
|
)
|
|
130
|
|
|||
Customer relationships and customer lists
|
8.3
|
|
151
|
|
|
(60
|
)
|
|
91
|
|
|||
Trademarks and tradenames
|
8.6
|
|
61
|
|
|
(14
|
)
|
|
47
|
|
|||
Other
|
2.9
|
|
20
|
|
|
(13
|
)
|
|
7
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
1,032
|
|
|
$
|
(387
|
)
|
|
$
|
645
|
|
|
December 31, 2014
|
||||||||||||
|
Weighted-Average
Useful Lives (in years) |
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||
Purchased technology
|
6.5
|
|
$
|
699
|
|
|
$
|
(252
|
)
|
|
$
|
447
|
|
Leasehold interest
|
34.9
|
|
149
|
|
|
(15
|
)
|
|
134
|
|
|||
Customer relationships and customer lists
|
8.2
|
|
157
|
|
|
(53
|
)
|
|
104
|
|
|||
Trademarks and tradenames
|
8.6
|
|
61
|
|
|
(9
|
)
|
|
52
|
|
|||
Other
|
2.7
|
|
18
|
|
|
(7
|
)
|
|
11
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
1,084
|
|
|
$
|
(336
|
)
|
|
$
|
748
|
|
Balance, January 1, 2015
|
$
|
3,964
|
|
Increase in goodwill related to a business combination
|
17
|
|
|
Balance, September 30, 2015
|
$
|
3,981
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||
|
Balance as of
January 1, 2015
|
|
Realignment
Charges
|
|
Utilization
|
|
Balance as of
September 30, 2015
|
||||||||
Severance-related costs
|
$
|
8
|
|
|
$
|
20
|
|
|
$
|
(27
|
)
|
|
$
|
1
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income
|
$
|
256
|
|
|
$
|
194
|
|
|
$
|
623
|
|
|
$
|
560
|
|
Weighted-average shares, basic for Class A and Class B
|
422,329
|
|
|
430,463
|
|
|
424,799
|
|
|
430,408
|
|
||||
Effect of dilutive securities
|
1,652
|
|
|
3,655
|
|
|
2,667
|
|
|
4,248
|
|
||||
Weighted-average shares, diluted for Class A and Class B
|
423,981
|
|
|
434,118
|
|
|
427,466
|
|
|
434,656
|
|
||||
Net income per weighted-average share, basic for Class A and Class B
|
$
|
0.61
|
|
|
$
|
0.45
|
|
|
$
|
1.47
|
|
|
$
|
1.30
|
|
Net income per weighted-average share, diluted for Class A and Class B
|
$
|
0.60
|
|
|
$
|
0.45
|
|
|
$
|
1.46
|
|
|
$
|
1.29
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Anti-dilutive securities:
|
|
|
|
|
|
|
|
||||
Employee stock options
|
2,129
|
|
|
1,180
|
|
|
2,173
|
|
|
1,244
|
|
Restricted stock units
|
365
|
|
|
107
|
|
|
58
|
|
|
37
|
|
Total
|
2,494
|
|
|
1,287
|
|
|
2,231
|
|
|
1,281
|
|
|
September 30, 2015
|
||||||||||||||
|
Cost or Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Aggregate
Fair Value |
||||||||
Cash
|
$
|
770
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
770
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money-market funds
|
$
|
1,312
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,312
|
|
Municipal obligations
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total cash equivalents
|
$
|
1,313
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,313
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Government and agency obligations
|
$
|
642
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
645
|
|
U.S. and foreign corporate debt securities
|
3,337
|
|
|
5
|
|
|
(8
|
)
|
|
3,334
|
|
||||
Foreign governments and multi-national agency obligations
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||
Municipal obligations
|
823
|
|
|
1
|
|
|
—
|
|
|
824
|
|
||||
Asset-backed securities
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||
Mortgage-backed securities
|
271
|
|
|
—
|
|
|
—
|
|
|
271
|
|
||||
Total short-term investments
|
$
|
5,138
|
|
|
$
|
9
|
|
|
$
|
(8
|
)
|
|
$
|
5,139
|
|
Other assets:
|
|
|
|
|
|
|
|
||||||||
Marketable available-for-sale equity securities
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
December 31, 2014
|
||||||||||||||
|
Cost or Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Aggregate
Fair Value
|
||||||||
Cash
|
$
|
885
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
885
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money-market funds
|
$
|
1,130
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,130
|
|
U.S. and foreign corporate debt securities
|
54
|
|
|
—
|
|
|
—
|
|
|
54
|
|
||||
Foreign governments and multi-national agency obligations
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total cash equivalents
|
$
|
1,186
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,186
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Government and agency obligations
|
$
|
542
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
542
|
|
U.S. and foreign corporate debt securities
|
3,236
|
|
|
3
|
|
|
(5
|
)
|
|
3,234
|
|
||||
Foreign governments and multi-national agency obligations
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
||||
Municipal obligations
|
930
|
|
|
2
|
|
|
—
|
|
|
932
|
|
||||
Asset-backed securities
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
||||
Mortgage-backed securities
|
221
|
|
|
—
|
|
|
(1
|
)
|
|
220
|
|
||||
Total short-term investments
|
$
|
5,005
|
|
|
$
|
5
|
|
|
$
|
(6
|
)
|
|
$
|
5,004
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
U.S. and foreign corporate debt securities
|
$
|
1,545
|
|
|
$
|
(7
|
)
|
|
$
|
1,964
|
|
|
$
|
(5
|
)
|
Mortgage-backed securities
|
132
|
|
|
(1
|
)
|
|
107
|
|
|
(1
|
)
|
||||
Total
|
$
|
1,677
|
|
|
$
|
(8
|
)
|
|
$
|
2,071
|
|
|
$
|
(6
|
)
|
|
Amortized
Cost Basis
|
|
Aggregate
Fair Value
|
||||
Due within one year
|
$
|
1,592
|
|
|
$
|
1,593
|
|
Due after 1 year through 5 years
|
3,243
|
|
|
3,243
|
|
||
Due after 5 years through 10 years
|
95
|
|
|
95
|
|
||
Due after 10 years
|
208
|
|
|
208
|
|
||
Total short-term investments
|
$
|
5,138
|
|
|
$
|
5,139
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities
|
•
|
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are noted active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
|
September 30, 2015
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
|||||
Money-market funds
|
$
|
1,312
|
|
|
$
|
—
|
|
|
$
|
1,312
|
|
Municipal obligations
|
—
|
|
|
1
|
|
|
1
|
|
|||
Total cash equivalents
|
$
|
1,312
|
|
|
$
|
1
|
|
|
$
|
1,313
|
|
Short-term investments:
|
|
|
|
|
|
||||||
U.S. Government and agency obligations
|
$
|
472
|
|
|
$
|
173
|
|
|
$
|
645
|
|
U.S. and foreign corporate debt securities
|
—
|
|
|
3,334
|
|
|
3,334
|
|
|||
Foreign governments and multi-national agency obligations
|
—
|
|
|
35
|
|
|
35
|
|
|||
Municipal obligations
|
—
|
|
|
824
|
|
|
824
|
|
|||
Asset-backed securities
|
—
|
|
|
30
|
|
|
30
|
|
|||
Mortgage-backed securities
|
—
|
|
|
271
|
|
|
271
|
|
|||
Total short-term investments
|
$
|
472
|
|
|
$
|
4,667
|
|
|
$
|
5,139
|
|
Other assets:
|
|
|
|
|
|
||||||
Marketable available-for-sale equity securities
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
Accrued expenses and other:
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
December 31, 2014
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money-market funds
|
$
|
1,130
|
|
|
$
|
—
|
|
|
$
|
1,130
|
|
U.S. and foreign corporate debt securities
|
—
|
|
|
54
|
|
|
54
|
|
|||
Foreign governments and multi-national agency obligations
|
—
|
|
|
2
|
|
|
2
|
|
|||
Total cash equivalents
|
$
|
1,130
|
|
|
$
|
56
|
|
|
$
|
1,186
|
|
Short-term investments:
|
|
|
|
|
|
||||||
U.S. Government and agency obligations
|
$
|
353
|
|
|
$
|
189
|
|
|
$
|
542
|
|
U.S. and foreign corporate debt securities
|
—
|
|
|
3,234
|
|
|
3,234
|
|
|||
Foreign governments and multi-national agency obligations
|
—
|
|
|
23
|
|
|
23
|
|
|||
Municipal obligations
|
—
|
|
|
932
|
|
|
932
|
|
|||
Asset-backed securities
|
—
|
|
|
53
|
|
|
53
|
|
|||
Mortgage-backed securities
|
—
|
|
|
220
|
|
|
220
|
|
|||
Total short-term investments
|
$
|
353
|
|
|
$
|
4,651
|
|
|
$
|
5,004
|
|
Other current assets:
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Accrued expenses and other:
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
September 30,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Unearned license revenues
|
$
|
404
|
|
|
$
|
488
|
|
Unearned software maintenance revenues
|
3,850
|
|
|
3,905
|
|
||
Unearned professional services revenues
|
432
|
|
|
440
|
|
||
Total unearned revenues
|
$
|
4,686
|
|
|
$
|
4,833
|
|
Authorization Date
|
|
Amount Authorized
|
|
Expiration Date
|
|
Status
|
January 27, 2015
|
|
$1,000
|
|
December 31, 2017
|
|
Open
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Aggregate purchase price
|
$
|
200
|
|
|
$
|
43
|
|
|
$
|
1,050
|
|
|
$
|
450
|
|
Class A common shares repurchased
|
2,408
|
|
|
436
|
|
|
12,524
|
|
|
4,691
|
|
||||
Weighted-average price per share
|
$
|
83.06
|
|
|
$
|
98.94
|
|
|
$
|
83.84
|
|
|
$
|
95.56
|
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise Price
(per share)
|
|||
Outstanding, January 1, 2015
|
5,869
|
|
|
$
|
50.54
|
|
Granted
|
13
|
|
|
84.68
|
|
|
Forfeited
|
(213
|
)
|
|
66.83
|
|
|
Exercised
|
(2,289
|
)
|
|
29.92
|
|
|
Outstanding, September 30, 2015
|
3,380
|
|
|
63.65
|
|
|
Number of Units
|
|
Weighted-
Average Grant
Date Fair
Value
(per unit)
|
|||
Outstanding, January 1, 2015
|
12,585
|
|
|
$
|
88.88
|
|
Granted
|
5,823
|
|
|
86.98
|
|
|
Vested
|
(3,311
|
)
|
|
92.17
|
|
|
Forfeited
|
(1,382
|
)
|
|
88.16
|
|
|
Outstanding, September 30, 2015
|
13,715
|
|
|
87.38
|
|
|
Unrealized Gain on
Available-for-Sale Securities |
|
Unrealized Loss on
Cash Flow Hedges |
|
Total
|
||||||
Balance, January 1, 2015
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Unrealized gain (loss), net of taxes of $1, $0 and $1
|
2
|
|
|
(4
|
)
|
|
(2
|
)
|
|||
Balance, September 30, 2015
|
$
|
2
|
|
|
$
|
(5
|
)
|
|
$
|
(3
|
)
|
|
Unrealized Gain on
Available-for-Sale Securities |
|
Unrealized Loss on
Cash Flow Hedges |
|
Total
|
||||||
Balance, January 1, 2014
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Unrealized gain (loss), net of taxes of $1, $0 and $1
|
2
|
|
|
(3
|
)
|
|
(1
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income to the condensed consolidated statement of income, net of taxes of $(2), $0 and $(2)
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Other comprehensive income (loss), net
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Balance, September 30, 2014
|
$
|
4
|
|
|
$
|
(3
|
)
|
|
$
|
1
|
|
•
|
Pursuant to an ongoing reseller arrangement with EMC, EMC bundles VMware’s products and services with EMC’s products and sells them to end users.
|
•
|
EMC purchases products and services from VMware for internal use.
|
•
|
VMware provides professional services to end users based upon contractual agreements with EMC.
|
•
|
From time to time, VMware and EMC enter into agreements to collaborate on technology projects, and EMC pays VMware for services that VMware provides to EMC in connection with such projects.
|
•
|
Pursuant to an ongoing distribution agreement, VMware acts as the selling agent for certain products and services of Pivotal Software, Inc. (“Pivotal”), a subsidiary of EMC, in exchange for an agency fee. Under this agreement, cash is collected from the end user by VMware and remitted to Pivotal, net of the contractual agency fee.
|
•
|
VMware provides various transition services to Pivotal. Support costs incurred by VMware are reimbursed to VMware and are recorded as a reduction to the costs incurred by VMware.
|
|
Revenues and Receipts from
EMC
|
|
Unearned Revenues from
EMC
|
||||||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
December 31,
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||
Reseller revenues
|
$
|
68
|
|
|
$
|
47
|
|
|
$
|
199
|
|
|
$
|
136
|
|
|
$
|
256
|
|
|
$
|
290
|
|
Internal-use revenues
|
4
|
|
|
4
|
|
|
13
|
|
|
17
|
|
|
11
|
|
|
18
|
|
||||||
Professional services revenues
|
20
|
|
|
13
|
|
|
68
|
|
|
53
|
|
|
5
|
|
|
9
|
|
||||||
Agency fee revenues
|
1
|
|
|
1
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
||||||
Reimbursement for transition services
|
2
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
n/a
|
|
|
n/a
|
|
•
|
VMware purchases and leases products and purchases services from EMC.
|
•
|
From time to time, VMware and EMC enter into agreements to collaborate on technology projects, and VMware pays EMC for services provided to VMware by EMC related to such projects.
|
•
|
In certain geographic regions where VMware does not have an established legal entity, VMware contracts with EMC subsidiaries for support services and EMC personnel who are managed by VMware. The costs incurred by EMC on VMware’s behalf related to these employees are charged to VMware with a mark-up intended to approximate costs that would have been incurred had VMware contracted for such services with an unrelated third party. These costs are included as expenses on VMware’s condensed consolidated statements of income and primarily include salaries, benefits, travel and rent expenses. EMC also incurs certain administrative costs on VMware’s behalf in the U.S. that are recorded as expenses on VMware’s condensed consolidated statements of income.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Purchases and leases of products and purchases of services
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
45
|
|
|
$
|
48
|
|
Collaborative technology project costs
|
1
|
|
|
3
|
|
|
4
|
|
|
10
|
|
||||
EMC subsidiary support and administrative costs
|
24
|
|
|
31
|
|
|
79
|
|
|
107
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Payments from VMware to EMC
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92
|
|
|
$
|
20
|
|
|
September 30,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Due to related parties
|
$
|
(50
|
)
|
|
$
|
(76
|
)
|
Due from related parties
|
75
|
|
|
125
|
|
||
Due (to) from related parties, net
|
$
|
25
|
|
|
$
|
49
|
|
|
|
|
|
||||
Income tax due (to) from related parties
|
$
|
(36
|
)
|
|
$
|
(40
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
United States
|
$
|
861
|
|
|
$
|
780
|
|
|
$
|
2,364
|
|
|
$
|
2,112
|
|
International
|
811
|
|
|
735
|
|
|
2,339
|
|
|
2,221
|
|
||||
Total
|
$
|
1,672
|
|
|
$
|
1,515
|
|
|
$
|
4,703
|
|
|
$
|
4,333
|
|
|
September 30,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
United States
|
$
|
835
|
|
|
$
|
801
|
|
International
|
147
|
|
|
117
|
|
||
Total
|
$
|
982
|
|
|
$
|
918
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
SDDC or Software-Defined Data Center
|
•
|
Hybrid Cloud Computing
|
•
|
End-User Computing
|
|
Three Months Ended
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||||||||
|
September 30,
|
|
$ Change
|
|
% Change
|
|
September 30,
|
|
$ Change
|
|
% Change
|
||||||||||||||||||||||||
|
2015
|
|
2014
|
|
Actual
|
|
Actual
|
|
Constant
Currency
|
|
2015
|
|
2014
|
|
Actual
|
|
Actual
|
|
Constant
Currency
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
License
|
$
|
681
|
|
|
$
|
639
|
|
|
$
|
42
|
|
|
7
|
%
|
|
11
|
%
|
|
$
|
1,896
|
|
|
$
|
1,814
|
|
|
$
|
81
|
|
|
4
|
%
|
|
9
|
%
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Software maintenance
|
863
|
|
|
779
|
|
|
84
|
|
|
11
|
|
|
|
|
2,505
|
|
|
2,217
|
|
|
287
|
|
|
13
|
|
|
|
||||||||
Professional services
|
128
|
|
|
97
|
|
|
30
|
|
|
31
|
|
|
|
|
378
|
|
|
302
|
|
|
78
|
|
|
26
|
|
|
|
||||||||
Total services
|
991
|
|
|
876
|
|
|
114
|
|
|
13
|
|
|
|
|
2,883
|
|
|
2,519
|
|
|
365
|
|
|
14
|
|
|
|
||||||||
GSA settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
n/a
|
|
|
|
|
(76
|
)
|
|
—
|
|
|
(76
|
)
|
|
n/a
|
|
|
|
||||||||
Total revenues
|
$
|
1,672
|
|
|
$
|
1,515
|
|
|
$
|
156
|
|
|
10
|
|
|
14
|
|
|
$
|
4,703
|
|
|
$
|
4,333
|
|
|
$
|
371
|
|
|
9
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
United States
|
$
|
861
|
|
|
$
|
780
|
|
|
$
|
80
|
|
|
10
|
%
|
|
|
|
$
|
2,364
|
|
|
$
|
2,112
|
|
|
$
|
252
|
|
|
12
|
%
|
|
|
||
International
|
811
|
|
|
735
|
|
|
76
|
|
|
10
|
|
|
|
|
2,339
|
|
|
2,221
|
|
|
119
|
|
|
5
|
|
|
|
||||||||
Total revenues
|
$
|
1,672
|
|
|
$
|
1,515
|
|
|
$
|
156
|
|
|
10
|
|
|
14
|
|
|
$
|
4,703
|
|
|
$
|
4,333
|
|
|
$
|
371
|
|
|
9
|
|
|
12
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Unearned license revenues
|
$
|
404
|
|
|
$
|
488
|
|
Unearned software maintenance revenues
|
3,850
|
|
|
3,905
|
|
||
Unearned professional services revenues
|
432
|
|
|
440
|
|
||
Total unearned revenues
|
$
|
4,686
|
|
|
$
|
4,833
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||||
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
Cost of license revenues
|
$
|
46
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
(1
|
)%
|
|
$
|
141
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
—
|
%
|
Stock-based compensation
|
—
|
|
|
1
|
|
|
—
|
|
|
(15
|
)
|
|
1
|
|
|
2
|
|
|
—
|
|
|
(16
|
)
|
||||||
Total expenses
|
$
|
46
|
|
|
$
|
46
|
|
|
$
|
—
|
|
|
(1
|
)
|
|
$
|
142
|
|
|
$
|
143
|
|
|
$
|
—
|
|
|
—
|
|
% of License revenues
|
7
|
%
|
|
7
|
%
|
|
|
|
|
|
8
|
%
|
|
8
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||
|
2015
|
|
2014
|
|
$
Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
Cost of services revenues
|
$
|
201
|
|
|
$
|
185
|
|
|
$
|
16
|
|
|
8
|
%
|
|
$
|
577
|
|
|
$
|
488
|
|
|
$
|
88
|
|
|
18
|
%
|
Stock-based compensation
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
31
|
|
|
1
|
|
|
4
|
|
||||||
Total expenses
|
$
|
212
|
|
|
$
|
196
|
|
|
$
|
16
|
|
|
8
|
|
|
$
|
609
|
|
|
$
|
519
|
|
|
$
|
89
|
|
|
17
|
|
% of Services revenues
|
21
|
%
|
|
22
|
%
|
|
|
|
|
|
21
|
%
|
|
21
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
Research and development
|
$
|
275
|
|
|
$
|
266
|
|
|
$
|
8
|
|
|
3
|
%
|
|
$
|
794
|
|
|
$
|
749
|
|
|
$
|
45
|
|
|
6
|
%
|
Stock-based compensation
|
56
|
|
|
61
|
|
|
(4
|
)
|
|
(7
|
)
|
|
164
|
|
|
187
|
|
|
(23
|
)
|
|
(13
|
)
|
||||||
Total expenses
|
$
|
331
|
|
|
$
|
327
|
|
|
$
|
4
|
|
|
1
|
|
|
$
|
958
|
|
|
$
|
936
|
|
|
$
|
21
|
|
|
2
|
|
% of Total revenues
|
20
|
%
|
|
22
|
%
|
|
|
|
|
|
20
|
%
|
|
22
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
Sales and marketing
|
$
|
513
|
|
|
$
|
486
|
|
|
$
|
30
|
|
|
6
|
%
|
|
$
|
1,532
|
|
|
$
|
1,422
|
|
|
$
|
113
|
|
|
8
|
%
|
Stock-based compensation
|
43
|
|
|
43
|
|
|
(2
|
)
|
|
(5
|
)
|
|
124
|
|
|
128
|
|
|
(5
|
)
|
|
(4
|
)
|
||||||
Total expenses
|
$
|
556
|
|
|
$
|
529
|
|
|
$
|
28
|
|
|
5
|
|
|
$
|
1,656
|
|
|
$
|
1,550
|
|
|
$
|
109
|
|
|
7
|
|
% of Total revenues
|
33
|
%
|
|
35
|
%
|
|
|
|
|
|
35
|
%
|
|
36
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
General and administrative
|
$
|
185
|
|
|
$
|
152
|
|
|
$
|
32
|
|
|
21
|
%
|
|
$
|
521
|
|
|
$
|
447
|
|
|
$
|
73
|
|
|
16
|
%
|
Stock-based compensation
|
16
|
|
|
17
|
|
|
—
|
|
|
(2
|
)
|
|
47
|
|
|
51
|
|
|
(4
|
)
|
|
(7
|
)
|
||||||
Total expenses
|
$
|
201
|
|
|
$
|
169
|
|
|
$
|
32
|
|
|
19
|
|
|
$
|
568
|
|
|
$
|
498
|
|
|
$
|
69
|
|
|
14
|
|
% of Total revenues
|
12
|
%
|
|
11
|
%
|
|
|
|
|
|
12
|
%
|
|
11
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||||
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
|
||||||||||||||||||
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
||||||||||||||
Realignment charges
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(6
|
)
|
|
(107
|
)%
|
|
$
|
20
|
|
|
$
|
4
|
|
|
$
|
16
|
|
|
355
|
%
|
% of Total revenues
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
•
|
Pursuant to an ongoing reseller arrangement with EMC, EMC bundles our products and services with EMC’s products and sells them to end users.
|
•
|
EMC purchases products and services from us for internal use.
|
•
|
We provide professional services to end users based upon contractual agreements with EMC.
|
•
|
From time to time, we and EMC enter into agreements to collaborate on technology projects, and EMC pays us for services that we provide to EMC in connection with such projects.
|
•
|
Pursuant to an ongoing distribution agreement, we act as the selling agent for certain products and services of Pivotal Software, Inc. (“Pivotal”), a subsidiary of EMC, in exchange for an agency fee. Under this agreement, cash is collected from the end user by us and remitted to Pivotal, net of the contractual agency fee.
|
•
|
We provide various transition services to Pivotal. Support costs incurred by us are reimbursed to us and are recorded as a reduction to the costs incurred by us.
|
|
Revenues and Receipts from
EMC
|
|
Unearned Revenues from
EMC
|
||||||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
December 31,
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||
Reseller revenues
|
$
|
68
|
|
|
$
|
47
|
|
|
$
|
199
|
|
|
$
|
136
|
|
|
$
|
256
|
|
|
$
|
290
|
|
Internal-use revenues
|
4
|
|
|
4
|
|
|
13
|
|
|
17
|
|
|
11
|
|
|
18
|
|
||||||
Professional services revenues
|
20
|
|
|
13
|
|
|
68
|
|
|
53
|
|
|
5
|
|
|
9
|
|
||||||
Agency fee revenues
|
1
|
|
|
1
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
||||||
Reimbursement for transition services
|
2
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
n/a
|
|
|
n/a
|
|
•
|
We purchase and lease products and purchase services from EMC.
|
•
|
From time to time, we and EMC enter into agreements to collaborate on technology projects, and we pay EMC for services provided to us by EMC related to such projects.
|
•
|
In certain geographic regions where we do not have an established legal entity, we contract with EMC subsidiaries for support services and EMC personnel who are managed by us. The costs incurred by EMC on our behalf related to these employees are charged to us with a mark-up intended to approximate costs that would have been incurred had we contracted for such services with an unrelated third party. These costs are included as expenses on our condensed consolidated statements of income and primarily include salaries, benefits, travel and rent expenses. EMC also incurs certain administrative costs on our behalf in the U.S. that are recorded as expenses on our condensed consolidated statements of income.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Purchases and leases of products and purchases of services
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
45
|
|
|
$
|
48
|
|
Collaborative technology project costs
|
1
|
|
|
3
|
|
|
4
|
|
|
10
|
|
||||
EMC subsidiary support and administrative costs
|
24
|
|
|
31
|
|
|
79
|
|
|
107
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Payments from us to EMC
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92
|
|
|
$
|
20
|
|
|
September 30,
|
|
December 31,
|
||||
|
2015
|
|
2014
|
||||
Due to related parties
|
$
|
(50
|
)
|
|
$
|
(76
|
)
|
Due from related parties
|
75
|
|
|
125
|
|
||
Due (to) from related parties, net
|
$
|
25
|
|
|
$
|
49
|
|
|
|
|
|
||||
Income tax due (to) from related parties
|
$
|
(36
|
)
|
|
$
|
(40
|
)
|
|
September 30,
|
||||||
2015
|
|
2014
|
|||||
Cash and cash equivalents
|
$
|
2,083
|
|
|
$
|
2,293
|
|
Short-term investments
|
5,139
|
|
|
4,801
|
|
||
Total cash, cash equivalents and short-term investments
|
$
|
7,222
|
|
|
$
|
7,094
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2015
|
|
2014
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,411
|
|
|
$
|
1,765
|
|
Investing activities
|
(362
|
)
|
|
(2,433
|
)
|
||
Financing activities
|
(1,037
|
)
|
|
656
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
12
|
|
|
$
|
(12
|
)
|
•
|
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”);
|
•
|
announcements of investor conferences, speeches and events at which our executives talk about our products, services and competitive strategies;
|
•
|
webcasts of our quarterly earnings calls and links to webcasts of investor conferences at which our executives appear (archives of these events are also available for a limited time);
|
•
|
additional information on financial metrics, including reconciliations of non-GAAP financial measures discussed in our presentations to the nearest comparable GAAP measure;
|
•
|
press releases on quarterly earnings, product and service announcements, legal developments and international news;
|
•
|
corporate governance information including our certificate of incorporation, bylaws, corporate governance guidelines, board committee charters, business conduct guidelines (which constitutes our code of business conduct and ethics) and other governance-related policies;
|
•
|
other news, blogs and announcements that we may post from time to time that investors might find useful or interesting; and
|
•
|
opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
If the Dell Acquisition is completed, Dell will be able to control matters requiring our stockholders’ approval, including the election of a majority of our directors and the other matters over which EMC currently has control, as described in the risk factors below.
|
•
|
Following the closing of the acquisition, Dell could implement changes to our business, including changing our commercial relationship with EMC or taking other corporate actions that our other stockholders may not view as beneficial.
|
•
|
We have arrangements with a number of companies that compete with Dell, and the pendency or completion of the Dell Acquisition could adversely affect our relationship with these companies or other customers, suppliers and partners.
|
•
|
During the pendency of the Dell Acquisition, Denali has a right of consent to matters requiring EMC’s approval under our certificate of incorporation, including acquisitions or investments in excess of $100 million (including the contemplated formation of the new cloud services business), and Denali may choose not to consent to matters that our board of directors believes are in the best interests of VMware.
|
•
|
We anticipate certain synergies and benefits from the Dell Acquisition that may not be realized.
|
•
|
The tracking stock to be issued by Denali, while not a VMware issued security, would increase the supply of publicly traded securities that track VMware's economic performance and could create the perception that the tracking stock dilutes the holdings of our public stockholders, both of which could put downward pressure on our stock price.
|
•
|
Following the closing of the Dell Acquisition, Dell will be highly leveraged and may be required to commit a substantial portion of its cash flows to servicing its indebtedness. This could create the perception that Dell may exercise its control over us to limit our growth in favor of its other businesses or cause us to transfer cash to Dell. In addition, if Dell defaults, or appears in danger of defaulting, on its indebtedness, the trading price of the tracking stock issued by Denali would be adversely affected, which could negatively impact the price of our Class A common stock, and uncertainty as to the impact of such a default on VMware could disrupt our business.
|
•
|
Some of our products, including our vRealize management products, compete directly with Dell’s products, which could result in reduced sales during the pendency or following the closing of the Dell Acquisition.
|
•
|
The pendency of the Dell Acquisition creates uncertainty for our employees, which could make it difficult to attract and retain employees.
|
•
|
The pendency of the Dell Acquisition could distract management’s focus from executing on other strategic initiatives.
|
•
|
The Dell Acquisition creates litigation risk. Various lawsuits have been filed against EMC in connection with the Dell Acquisition, and we may be named in these or other lawsuits.
|
•
|
improved products or product versions being offered by competitors in our markets;
|
•
|
competitive pricing pressures;
|
•
|
failure to timely execute and implement our product strategy, which could lead to quality issues, integration issues with ecosystem partners, and difficulties in creating and marketing suites of interoperable solutions;
|
•
|
failure to release new or enhanced versions of our server virtualization products on a timely basis, or at all;
|
•
|
technological change that we are unable to address with our server virtualization and private cloud products or that changes the way enterprises utilize our products; and
|
•
|
general economic conditions.
|
•
|
These initiatives may present new and difficult technological challenges. Significant investments will be required to acquire and develop solutions to those challenges. Customers may choose not to adopt our new product or service offerings and we may be unable to recoup or realize a reasonable return on our investments.
|
•
|
Some of our new initiatives are hosted by third parties whom we do not control but whose failure to prevent service disruptions, or other failures or breaches may require us to issue credits or refunds or indemnify or otherwise be liable to customers or third parties for damages that may occur. Any transition of our services from a third party hosting service to our own data centers would also entail a risk of service disruption during a transition. We may be subject to claims if customers of these service offerings experience service disruptions or failures, security breaches, data losses or other quality issues.
|
•
|
The success of these new offerings depends upon the cooperation of hardware, software and cloud hosting vendors to ensure interoperability with our products and offer compatible products and services to end users. If we are unable to obtain such cooperation, it may be difficult and more costly for us to achieve functionality and service levels that would make our services attractive to end users.
|
•
|
We will need to develop and implement appropriate go-to-market strategies and train our sales force in order to effectively market and sell offerings in product categories in which we may have less experience than our competitors. Accordingly, end users could choose competing products and services over ours, even if such offerings are less advanced than ours.
|
•
|
Our increasing focus on developing and marketing IT management and automation and infrastructure-as-a-service (including software-defined networking and vCloud Air) offerings that enable customers to transform their IT systems requires a greater focus on marketing and selling product suites and more holistic solutions, rather than selling on a product-by-product basis. Consequently, we have developed, and must continue to develop, new strategies for marketing and selling our offerings, and the duration of sales cycles for our offerings has increased as our customers’ purchasing decisions become more complex and require additional levels of approval.
|
•
|
We will need to develop appropriate pricing strategies for our new product initiatives. For example, it has frequently been challenging for software companies to derive significant revenue streams from open source projects, such as certain of our offerings. Additionally, in some cases our new product initiatives are predicated on converting free and trial users to paying customers of the premium tiers of these services, and therefore we must maintain a sufficient conversion ratio for such services to be profitable. Also, certain of our new product initiatives, such as our vCloud Air hybrid cloud services and our SaaS offerings, have a subscription model. We may not be able to accurately predict subscription renewal rates or their impact on results, and because revenue is recognized for our services over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our results. Moreover, as customers transition to our hybrid cloud and SaaS products and services, our revenue growth rate may be adversely
|
•
|
The success of our hybrid cloud offerings, including vCloud Air, and our SaaS offerings, will depend on the successful global implementation of the offering and building effective go-to-market strategies. We will need to build sales expertise and infrastructure to support the new offering that is capable of meeting customer requirements for security, reliability and regulatory compliance. Our vCloud Air hybrid cloud offering involves significant capital investment as well as technology risk, and may not be accepted by customers. Further, our newer hybrid cloud and SaaS offerings may lead our team to reduce the time spent on selling our existing product portfolio, which could have a material negative impact on revenues.
|
•
|
As we expand our vCloud Air hybrid cloud offerings globally, we may rely more upon joint ventures with established providers of IT products and services in particular regions, such as our joint venture with the Softbank Group to expand our vCloud Air hybrid cloud service to Japan. Joint ventures require close ongoing cooperation and commitments from the joint venture partners, and the willingness to devote adequate resources as required. If we are unable to continue our strategic alignment with joint venture partners or obtain the cooperation and commitments we are relying upon, our ability to successfully expand our hybrid cloud offerings globally will diminish.
|
•
|
Our new products and services may compete with offerings from companies who are members of our developer and technology partner ecosystem. Consequently, we may find it more difficult to continue to work together productively on other projects, and the advantages we derive from our ecosystem could diminish.
|
•
|
The virtualized end-user computing industry has continued to expand. Other companies are entering, and are developing competing standards for, the end-user computing space, such as Microsoft, Amazon and Citrix, and such companies are likely to introduce their own initiatives that may compete with or not be compatible with our end-user computing initiatives, which could limit the degree to which other vendors develop products and services around our offerings and end users adopt our platforms.
|
•
|
The cloud computing industry is in early stages of expansion. Other companies are entering, and are developing competing standards for the cloud computing space, such as Microsoft, IBM, Cisco, Google and Amazon, as well as numerous vendor offerings based on the OpenStack project. These companies are likely to introduce their own initiatives that may compete with or not be compatible with our cloud initiatives, which could potentially limit the degree to which other vendors develop products and services around our offerings and end users adopt our platforms.
|
•
|
Emerging IT sectors, such as cloud computing and SaaS, are frequently subject to a “first mover” effect pursuant to which certain product and service offerings can rapidly capture a significant portion of market share and developer attention. Therefore, because competitive product and service offerings in these sectors have gained broad adoption before ours, it may be difficult for us to displace such offerings regardless of the comparative technical merit, efficacy or cost of our products and services.
|
•
|
Developing and launching new technologies in new areas, as we are continuing to do with our VMware NSX virtual networking, Virtual SAN virtual storage and vCloud Air initiatives, requires significant investments of resources and often entails greater risk than incremental investments in existing industries. If these investments are not successful, our rate of growth may decline or reverse and our operating results will be negatively affected.
|
•
|
In connection with some of our product initiatives, including our hybrid cloud and mobile services, we expect that our customers may increasingly use our services to store and process personal information and other regulated data, increasing our potential exposure to cybersecurity breaches and data loss.
|
•
|
As we continue to develop and expand our hybrid cloud and SaaS offerings, we will need to continue to evolve our processes to meet a number of regulatory, intellectual property and contractual and service compliance challenges as we seek to transform significant portions of our business from a products- to a services-based organization and as our customers increasingly utilize our services to house their data and rely upon our services for their own continuous operations. These challenges include compliance with licenses for open source and third party software embedded in our hybrid cloud and SaaS offerings, maintaining compliance with export control and privacy regulations, protecting our services from external threats, maintaining the continuous service levels and data security expected by our customers, preventing the inappropriate use of our services, compliance with an increasing number of data sovereignty laws and regulations and adapting our go-to-market efforts to clarify the increasing complexity in our product and service offerings for our customers.
|
•
|
Marketing and selling new technologies to enterprises requires significant investment of time and resources in order to educate customers on the benefits of our new product offerings. These investments can be costly and the additional effort required to educate both customers and our own sales force can distract from their efforts to sell existing products and services.
|
•
|
general economic conditions in our domestic and international markets and the effect that these conditions have on our customers’ capital budgets and the availability of funding for software purchases;
|
•
|
fluctuations in demand, adoption rates, sales cycles (which have been increasing in length) and pricing levels for our products and services;
|
•
|
fluctuations in foreign currency exchange rates;
|
•
|
changes in customers’ budgets for information technology purchases and in the timing of their purchasing decisions;
|
•
|
the timing of recognizing revenues in any given quarter, which, as a result of software revenue recognition policies, can be affected by a number of factors, including product announcements, beta programs and product promotions that can cause revenue recognition of certain orders to be deferred until future products to which customers are entitled become available;
|
•
|
the sale of our products and services in the time frames we anticipate, including the number and size of orders in each quarter;
|
•
|
our ability to develop, introduce and ship in a timely manner new products and services and enhancements that meet customer demand, certification requirements and technical requirements;
|
•
|
the introduction of new pricing and packaging models for our product offerings;
|
•
|
the timing of the announcement or release of upgrades or new products and services by us or by our competitors;
|
•
|
our ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions;
|
•
|
our ability to control costs, including our operating expenses;
|
•
|
changes to our effective tax rate;
|
•
|
the increasing scale of our business and its effect on our ability to maintain historical rates of growth;
|
•
|
our ability to attract and retain highly skilled employees, particularly those with relevant experience in software development and sales;
|
•
|
our ability to conform to emerging industry standards and to technological developments by our competitors and customers;
|
•
|
seasonal factors such as the end of fiscal period budget expenditures by our customers and the timing of holiday and vacation periods;
|
•
|
renewal rates and the amounts of the renewals for EAs as original EA terms expire;
|
•
|
the timing and amount of software development costs that may be capitalized beginning when technological feasibility has been established and ending when the product is available for general release;
|
•
|
unplanned events that could affect market perception of the quality or cost-effectiveness of our products and solutions;
|
•
|
our ability to accurately predict the degree to which customers will elect to purchase our subscription-based offerings in place of licenses to our on-premises offerings; and
|
•
|
the recoverability of benefits from goodwill and acquired intangible assets, and the potential impairment of these assets.
|
•
|
sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen;
|
•
|
our electronic communications systems, including email and other methods, could be disrupted, and our ability to conduct our business operations could be seriously damaged until such systems can be restored and secured;
|
•
|
our ability to process customer orders and electronically deliver products and services could be degraded, and our distribution channels could be disrupted, resulting in delays in revenue recognition;
|
•
|
defects and security vulnerabilities could be exploited or introduced into our software products or our hybrid cloud and SaaS offerings, thereby damaging the reputation and perceived reliability and security of our products and services and potentially making the data systems of our customers vulnerable to further data loss and cyber incidents; and
|
•
|
personally identifiable or confidential data of our customers, employees and business partners could be stolen or lost.
|
•
|
the difficulty of managing and staffing international offices and the increased travel, infrastructure and legal compliance costs associated with multiple international locations;
|
•
|
increased exposure to foreign currency exchange rate risk;
|
•
|
difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;
|
•
|
difficulties in delivering support, training and documentation in certain foreign markets;
|
•
|
tariffs and trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products and services in certain foreign markets;
|
•
|
economic or political instability and security concerns in countries that are important to our international sales and operations;
|
•
|
macroeconomic disruptions, such as monetary and credit crises, that can threaten the stability of local and regional financial institutions and decrease the value of our international investments;
|
•
|
the overlap of different tax structures or changes in international tax laws;
|
•
|
reduced protection for intellectual property rights, including reduced protection from software piracy, in some countries;
|
•
|
difficulties in transferring funds from certain countries; and
|
•
|
difficulties in maintaining appropriate controls relating to revenue recognition practices.
|
•
|
the tendency of customers to wait until late in a quarter to commit to a purchase in the hope of obtaining more favorable pricing;
|
•
|
the fourth quarter influence of customers spending their remaining capital budget authorization prior to new budget constraints in the following year; and
|
•
|
seasonal influences, such as holiday or vacation periods.
|
•
|
managing the length of the development cycle for new products and services and product and service enhancements, which has frequently been longer than we originally expected;
|
•
|
increasing complexity of our product offerings as we introduce product suites such as our vCloud Suite and increasingly offer SaaS versions of our products, such as our vRealize, Horizon and AirWatch SaaS offerings, which can significantly increase the development time and effort necessary to achieve the interoperability of product suite components while maintaining product quality;
|
•
|
growth rates of our emerging products and services may be negatively impacted despite their technical merit by the need to package such products and services in more complex product suite offerings that require more time for customer evaluation and purchase decisions;
|
•
|
managing customers’ transitions to new products and services, which can result in delays in their purchasing decisions;
|
•
|
adapting to emerging and evolving industry standards and to technological developments by our competitors and customers;
|
•
|
entering into new or unproven markets with which we have limited experience;
|
•
|
reacting to trends and predicting which technologies will be successful and develop into industry standards;
|
•
|
tailoring our business and pricing models appropriately as we enter new markets and respond to competitive pressures and technological changes;
|
•
|
incorporating and integrating acquired products and technologies; and
|
•
|
developing or expanding efficient sales channels.
|
•
|
pay significant damages;
|
•
|
stop distributing our products that contain the open source software;
|
•
|
revise or modify our product code to remove alleged infringing code;
|
•
|
release the source code of our proprietary software; or
|
•
|
take other steps to avoid or remedy an alleged infringement.
|
•
|
If open source software programmers, most of whom we do not employ, do not continue to develop and enhance open source technologies, our development expenses could be increased and our product release and upgrade schedules could be delayed.
|
•
|
One of the characteristics of open source software is that anyone can modify the existing software or develop new software that competes with existing open source software. As a result, competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is also possible for new competitors with greater resources than ours to develop their own open source solutions, potentially reducing the demand for, and putting price pressure on, our solutions.
|
•
|
It is possible that a court could hold that the licenses under which our open source products and services are developed and licensed are not enforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under them. Any ruling by a court that these licenses are not enforceable, or that open source components of our product or services offerings may not be liberally copied, modified or distributed, may have the effect of preventing us from distributing or developing all or a portion of our products or services. In addition, licensors of open source software employed in our offerings may, from time to time, modify the terms of their license agreements in such a manner that those license terms may no longer be compatible with other open source licenses in our offerings or our end-user license agreement or terms of service, and thus could, among other consequences, prevent us from continuing to distribute the software code subject to the modified license or terms of service.
|
•
|
Actions to protect and maintain ownership and control over our intellectual property could adversely affect our standing in the open source community, which in turn could limit our ability to continue to rely on this community, upon which we are dependent, as a resource to help develop and improve our open source products and services.
|
•
|
disrupting our ongoing operations, diverting management from day-to-day responsibilities, increasing our expenses, and adversely impacting our business, financial condition and results of operations;
|
•
|
failure of the acquired business to further our business strategy;
|
•
|
uncertainties in achieving the expected benefits of an acquisition, including enhanced revenues, technology, human resources, cost savings, operating efficiencies and other synergies;
|
•
|
reducing cash available for operations, stock repurchase programs and other uses and resulting in potentially dilutive issuances of equity securities or the incurrence of debt;
|
•
|
incurring amortization expense related to identifiable intangible assets acquired that could impact our operating results;
|
•
|
difficulty integrating the operations, systems, technologies, products and personnel of the acquired businesses effectively;
|
•
|
retaining and motivating key personnel from acquired companies;
|
•
|
assuming the liabilities of the acquired business, including acquired litigation-related liabilities and regulatory compliance issues, and potential litigation or regulatory action arising from a proposed or completed acquisition;
|
•
|
maintaining good relationships with customers or business partners of the acquired business or our own customers as a result of any integration of operations;
|
•
|
product liability, customer liability or intellectual property liability associated with the sale of the acquired business’s products;
|
•
|
unidentified issues not discovered during the diligence process, including issues with the acquired business’s intellectual property, product quality, security, privacy practices, accounting practices, regulatory compliance or legal contingencies;
|
•
|
maintaining or establishing acceptable standards, controls, procedures or policies with respect to the acquired business; and
|
•
|
risks relating to the challenges and costs of closing a transaction.
|
•
|
the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies;
|
•
|
any determinations with respect to significant mergers, acquisitions and other business combinations;
|
•
|
our acquisition or disposition of a significant amount of assets;
|
•
|
our financing activities;
|
•
|
certain changes to our certificate of incorporation;
|
•
|
changes to the agreements we entered into in connection with our transition to becoming a public company;
|
•
|
corporate opportunities that may be suitable for us and EMC;
|
•
|
determinations with respect to enforcement of rights we may have against third parties, including with respect to intellectual property rights;
|
•
|
the payment of dividends on our common stock; and
|
•
|
the number of shares available for issuance under our stock plans for our prospective and existing employees.
|
•
|
consolidate or merge with any other entity;
|
•
|
acquire the stock or assets of another entity in excess of $100 million;
|
•
|
issue any stock or securities except to our subsidiaries or pursuant to our employee benefit plans;
|
•
|
establish the aggregate annual amount of shares we may issue under employee equity awards;
|
•
|
dissolve, liquidate or wind us up;
|
•
|
declare dividends on our stock;
|
•
|
enter into any exclusive or exclusionary arrangement with a third party involving, in whole or in part, products or services that are similar to EMC’s; and
|
•
|
amend, terminate or adopt any provision inconsistent with certain provisions of our certificate of incorporation or bylaws.
|
•
|
labor, tax, employee benefit, indemnification and other matters arising from our separation from EMC;
|
•
|
our reseller arrangements with EMC;
|
•
|
tax matters that involve us as a member of EMC's consolidated group;
|
•
|
employee retention and recruiting;
|
•
|
business combinations involving us;
|
•
|
our ability to engage in activities with certain channel, technology or other marketing partners;
|
•
|
sales or dispositions by EMC of all or any portion of its ownership interest in us;
|
•
|
the nature, quality and pricing of services EMC has agreed to provide us or we have agreed to provide to EMC;
|
•
|
arrangements with third parties that are exclusionary to EMC;
|
•
|
arrangements with EMC for collaborative product or technology development, marketing and sales activities involving our technology, employees and other resources;
|
•
|
business opportunities that may be attractive to both EMC and us; and
|
•
|
product or technology development or marketing activities or customer agreements which may require the consent of EMC.
|
•
|
that a majority of our board of directors consists of independent directors;
|
•
|
that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
|
•
|
that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
•
|
for an annual performance evaluation of the nominating and governance committee and compensation committee.
|
•
|
the division of our board of directors into three classes, with each class serving for a staggered three-year term, which prevents stockholders from electing an entirely new board of directors at any annual meeting;
|
•
|
the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;
|
•
|
following a 355 distribution of Class B common stock by EMC to its stockholders, the restriction that a beneficial owner of 10% or more of our Class B common stock may not vote in any election of directors unless such person or group also owns at least an equivalent percentage of Class A common stock or obtains approval of our board of directors prior to acquiring beneficial ownership of at least 5% of Class B common stock;
|
•
|
the prohibition of cumulative voting in the election of directors or any other matters, which would otherwise allow less than a majority of stockholders to elect director candidates;
|
•
|
the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon at a stockholders’ meeting;
|
•
|
the ability of the board of directors to issue, without stockholder approval, up to 100,000,000 shares of preferred stock with terms set by the board of directors, which rights could be senior to those of common stock; and
|
•
|
in the event that EMC or its successor-in-interest no longer owns shares of our common stock representing at least a majority of the votes entitled to be cast in the election of directors, stockholders may not act by written consent and may not call special meetings of the stockholders.
|
•
|
amend certain provisions of our bylaws or certificate of incorporation;
|
•
|
make certain acquisitions or dispositions;
|
•
|
declare dividends, or undertake a recapitalization or liquidation;
|
•
|
adopt any stockholder rights plan, “poison pill” or other similar arrangement;
|
•
|
approve any transactions that would involve a merger, consolidation, restructuring, sale of substantially all of our assets or any of our subsidiaries or otherwise result in any person or entity obtaining control of us or any of our subsidiaries; or
|
•
|
undertake certain other actions.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
•
|
(a) Sales of Unregistered Securities
|
•
|
(b) Use of Proceeds from Public Offering of Common Stock
|
•
|
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid Per Share
(1)(2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs
(1)(3)
|
||||||
July 1 – July 31, 2015
|
947,178
|
|
|
$
|
83.39
|
|
|
947,178
|
|
|
$
|
1,031,378,401
|
|
August 1 – August 31, 2015
|
822,883
|
|
|
85.66
|
|
|
822,883
|
|
|
960,889,434
|
|
||
September 1 – September 30, 2015
|
637,879
|
|
|
79.14
|
|
|
637,879
|
|
|
910,407,828
|
|
||
|
2,407,940
|
|
|
$
|
83.04
|
|
|
2,407,940
|
|
|
910,407,828
|
|
(1)
|
In January 2015, VMware’s Board of Directors authorized the repurchase of up to an additional one billion dollars of VMware’s Class A common stock through the end of 2017. The January 2015 authorization was in addition to the authorization approved in August 2014 for the repurchase of up to one billion dollars of VMware’s Class A common stock through the end of 2016. VMware’s Class A common stock has been, and may in the future be, purchased pursuant to our stock repurchase authorizations, from time to time, in the open market or through private transactions, subject to market conditions. We are not obligated to purchase any shares under our stock repurchase program. Subject to applicable laws, repurchases under our stock repurchase program may be made at such times and in such amounts as we deem appropriate. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including VMware’s stock price, cash requirements for operations and business combinations, corporate and regulatory requirements and other market and economic conditions. Purchases under our stock repurchase program can be discontinued at any time that we feel additional purchases are not warranted.
|
(2)
|
The average price paid per share excludes commissions.
|
(3)
|
Represents the amounts remaining in the VMware stock repurchase authorizations.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Filed
Herewith
|
|
Form/
File No.
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation
|
|
|
|
S-1/A-2
|
|
7/9/2007
|
3.2
|
|
|
Amended and Restated Bylaws
|
|
|
|
8-K
|
|
3/8/2011
|
10.5
|
|
|
Amended and Restated Real Estate License Agreement between VMware, Inc. and EMC Corporation dated September 21, 2015
|
|
X
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
31.2
|
|
|
Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
32.1
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
32.2
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document
|
|
X
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema
|
|
X
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
X
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
X
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
X
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
X
|
|
|
|
|
|
|
VMWARE, INC.
|
|
|
|
|
|
Dated:
|
November 9, 2015
|
By:
|
/s/ Kevan Krysler
|
|
|
|
Kevan Krysler
Senior Vice President, Chief Accounting Officer
(Principal Accounting Officer)
|
|
|
|
|
|
Incorporated by Reference
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Filed
Herewith
|
|
Form/
File No.
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation
|
|
|
|
S-1/A-2
|
|
7/9/2007
|
3.2
|
|
|
Amended and Restated Bylaws
|
|
|
|
8-K
|
|
3/8/2011
|
10.5
|
|
|
Amended and Restated Real Estate License Agreement between VMware, Inc. and EMC Corporation dated September 21, 2015
|
|
X
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
31.2
|
|
|
Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
32.1
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
32.2
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document
|
|
X
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema
|
|
X
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
X
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
X
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
X
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
X
|
|
|
|
|
1.
|
Defined Terms
.
|
2.
|
License
.
|
3.
|
License
Period
.
|
(i)
|
with respect to Commingled Space:
|
1)
|
With 10 or less seats, by delivery to Licensor of written notice delivered not less than three (3) months prior to the desired early termination date as to such Commingled Space;
|
2)
|
With 11-20 seats, by delivery to Licensor of written notice delivered not less than six (6) months prior to the desired early termination date as to such Commingled Space;
|
3)
|
With more than 20 seats, by delivery to Licensor of written notice delivered not less than nine (9) months prior to the desired early termination date as to such Commingled Space; and
|
(ii)
|
with respect to Special Commingled Space, Licensee may terminate by delivery of written notice delivered prior to the desired early termination date as to such License Area;
provided that
, Licensor shall continue to cross-charge Licensee on a monthly basis for such License Area until the earlier of (1) the date Licensor begins using or occupying any of the License Area;
provided that
, if Licensor uses or occupies less than the total License Area, the cross-charge to Licensee for any unused or unoccupied portion will continue monthly, (2) the Termination Date listed in the Leasing Memorandum and (3) the date Licensor is able to dispose of the License Area (e.g., by subleasing the License Area or terminating the underlying Lease). In addition, the Parties may agree to a lump sum lease termination amount that would include a buyout of the term and any restoration costs.
|
(iii)
|
With respect to Demised Space and Specialty Space, Licensee may terminate by delivery of written notice delivered prior to the desired early termination date as to such License Area;
provided that
, Licensor shall continue to cross-charge Licensee on a monthly basis for such License Area until the earlier of (1) the date Licensor begins using or occupying any of the License Area; (2) the Termination Date listed in the Leasing Memorandum and (3) the date Licensor is able to dispose of the License Area (e.g., by subleasing the License Area or terminating the underlying Lease). In addition, the Parties may agree to a lump sum lease termination amount that would include a buyout of the term and any restoration costs.
|
(iv)
|
With respect to Pass-Through Space, Licensee is obligated through the Termination Date set forth in the Leasing Memorandum, unless the Parties subsequently agree in writing to terms regarding an early termination.
|
4.
|
License Fee
.
|
(i)
|
The License Fee for Commingled Space, Special Commingled Space and Demised Space shall be based on actual costs and calculated for each License Area using the same methodology as Licensor uses for its internal cost allocations for such License Area, and such methodology shall be reflected in the respective Leasing Memorandum, in the form attached hereto as
Appendix C
(the “
Leasing Memorandum
”);
provided, however
, in the event of any “Material Change” to a Commingled Space, Special Commingled Space or Demised Space, an Authorized Signatory of each Party will execute and deliver a revised Leasing Memorandum to reflect any such Material Change, which shall be effective upon the execution and delivery of the Leasing Memorandum. The term “
Material Change
” means any change of 25% or more in the relevant metric used to calculate the Unit Cost of a License Area (such as headcount, number of seats or number of square feet). Concurrent with the execution of a new Leasing Memorandum, Licensor will notify Licensee in writing of the estimated Unit Cost and License Fee (as applicable) to be used for such location and provide reasonable back-up for such calculations. “
Unit Cost
” shall mean the actual cost per headcount, per seat or per square feet of the License Area for Commingled Space, Special Commingled Space and Demised Space. Subject to a Material Change, the Unit Cost shall be fixed through the end of each calendar year. The License Fee for Commingled Space, Special Commingled Space and Demised Space shall be calculated by multiplying the Unit Cost for the applicable License Area by the headcount, square feet, or number of seats, as applicable.
|
(ii)
|
The License Fee for Specialty Space shall be determined on a case-by-case basis as negotiated between the parties and shall be documented in the Leasing Memorandum or in the case of office space that has in excess of 100 seats, in the separate lease or sublease agreement.
|
(iii)
|
The License Fee for Pass-Through Space shall be the actual costs paid to the third party as recognized by the Licensor for the related Lease.
|
9.
|
Damage and Destruction
.
|
10.
|
Insurance/Indemnity
.
|
(a)
|
Commingled Space, Special Commingled Space or Specialty Space
.
|
(b)
|
Demised Space
.
|
(c)
|
Pass-Through Space
.
|
15.
|
Notices
.
|
27.
|
Miscellaneous
.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of VMware, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 9, 2015
|
By:
|
|
/s/ Patrick P. Gelsinger
|
|
|
|
|
Patrick P. Gelsinger
Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of VMware, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 9, 2015
|
By:
|
|
/s/ Jonathan C. Chadwick
|
|
|
|
|
Jonathan C. Chadwick
Chief Financial Officer, Chief Operating Officer and Executive Vice President
(Principal Financial Officer)
|
Date:
|
November 9, 2015
|
By:
|
|
/s/ Patrick P. Gelsinger
|
|
|
|
|
Patrick P. Gelsinger
Chief Executive Officer
(Principal Executive Officer)
|
Date:
|
November 9, 2015
|
By:
|
|
/s/ Jonathan C. Chadwick
|
|
|
|
|
Jonathan C. Chadwick
Chief Financial Officer, Chief Operating Officer and Executive Vice President
(Principal Financial Officer)
|