þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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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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Title of each class
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Name of each exchange on which registered
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Class A Common Stock, par value $0.01
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New York Stock Exchange
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Large accelerated filer
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þ
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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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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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ITEM 1.
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BUSINESS
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•
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Compute
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•
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Storage and Availability
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•
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Network and Security
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•
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Management and Automation
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•
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vSAN—
clusters server disks to create radically simple, shared storage designed for virtual machines.
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•
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VxRail—
a fully integrated and pre-configured Dell EMC Appliance powered by vSAN and vSphere software that extends the VMware environment.
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•
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vSphere Replication—
provides a cost-efficient and simple way to manage replication.
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•
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vCenter Site Recovery Manager—
leverages vSphere and vSphere Replication to protect applications against site failures and to streamline planned migrations.
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•
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vRealize Operations—
provides performance, capacity and configuration management for virtual or physical infrastructure.
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•
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vRealize Automation—
enables customers to rapidly deploy and provision cloud services.
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•
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vRealize Business—
provides transparency and control over the costs and quality of IT services.
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•
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VMware vCloud Suite—
designed to fulfill the promise of the software-defined data center by pooling industry-standard hardware and running compute and management functions in the data center as software-defined services.
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•
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vSOM—
allows users to optimize capacity and monitor the workload performance of their vSphere environments.
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•
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VMware vRealize Suite—
cloud management platform that extends vCloud Suite capabilities beyond a vSphere private cloud environment to both heterogeneous and hybrid cloud environments.
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•
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On-Premises—
available through major compatible hardware solutions such as VxRack and HPE ProLiant. VxRack is a fully tested and pre-configured Dell EMC rack-scale system, powered by Cloud Foundation for VMware-centric data centers, or by vSphere for traditional architectures.
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•
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As-a-Service—
available through major online service providers, such as IBM Cloud (through our VMware vCloud Air Network offering) and VMware vCloud Air (“vCloud Air”). In addition, it is expected to be available in 2017 on Amazon Web Services (“AWS”) through an integrated hybrid offering, VMware Cloud on AWS.
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•
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AirWatch—
provides an enterprise mobility platform built to manage and secure endpoints from a single platform, enabling deployment of native, web or remote applications through an application catalog across every device with built-in single sign-on. It provides the core foundation to support an increasingly mobile workforce and customer base, enabling customers to take advantage of “bring your own device” initiatives.
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•
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Horizon—
provides a streamlined approach to delivering, protecting and managing virtual desktops and applications from one digital workspace, while containing costs and allowing end users to work anytime, anywhere and across any device.
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•
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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”);
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•
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announcements of investor conferences, speeches and events at which our executives discuss our products, services and competitive strategies;
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•
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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);
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•
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additional information on financial metrics, including reconciliations of non-GAAP financial measures discussed in our presentations to the nearest comparable GAAP measure;
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•
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press releases on quarterly earnings, product and service announcements, legal developments and international news;
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•
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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;
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•
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other news, blogs and announcements that we may post from time to time that investors might find useful or interesting; and
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•
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opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.
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Name
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Age
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Position(s)
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Patrick Gelsinger
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55
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Chief Executive Officer and Director
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Zane Rowe
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46
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Chief Financial Officer and Executive Vice President
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Maurizio Carli
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58
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Executive Vice President, Worldwide Sales
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Sanjay Poonen
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47
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Chief Operating Officer, Customer Operations
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Rangarajan (Raghu) Raghuram
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54
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Chief Operating Officer, Products and Cloud Services
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Rajiv Ramaswami
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51
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Chief Operating Officer, Products and Cloud Services
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S. Dawn Smith
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53
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Senior Vice President, Chief Legal Officer and Secretary
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ITEM 1A.
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RISK FACTORS
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•
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sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen;
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•
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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;
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•
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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;
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•
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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
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•
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personally identifiable or confidential data of our customers, employees and business partners could be stolen or lost.
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•
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fluctuations in demand, adoption rates, sales cycles (which have been increasing in length) and pricing levels for our products and services;
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•
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changes in customers’ budgets for information technology purchases and in the timing of their purchasing decisions;
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•
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the timing of recognizing revenue in any given quarter, which 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;
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•
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the timing of announcements or releases of new or upgraded products and services by us or by our competitors;
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•
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the timing and size of business realignment plans and restructuring charges;
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•
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our ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions;
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•
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our ability to control costs, including our operating expenses;
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•
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credit risks of our distributors, who account for a significant portion of product revenue and accounts receivable;
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•
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our ability to process sales at the end of quarter;
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•
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seasonal factors such as the end of fiscal period budget expenditures by our customers and the timing of holiday and vacation periods;
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•
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renewal rates and the amounts of the renewals for EAs as original EA terms expire;
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•
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the timing and amount of internally developed software development costs that may be capitalized;
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•
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unplanned events that could affect market perception of the quality or cost-effectiveness of our products and solutions;
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•
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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
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•
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to the extent that we buy back shares of our common stock in private transactions with Dell or other third parties through arrangements that are accounted for as derivative instruments, fluctuations in our stock price during the pricing reference periods of such arrangements may result in gains or losses in our quarterly earnings.
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•
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difficulties in enforcing contracts and collecting accounts receivable and longer payment cycles, especially in emerging markets;
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•
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difficulties in delivering support, training and documentation in certain foreign markets;
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•
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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;
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•
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changes and instability in government policies and international trade arrangements that could adversely affect the ability of U.S.-based companies to conduct business in non-U.S. markets;
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•
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economic or political instability and security concerns in countries that are important to our international sales and operations;
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•
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difficulties in transferring funds from certain countries;
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•
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increased compliance risks, particularly in emerging markets; and
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•
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difficulties in maintaining appropriate controls relating to revenue recognition practices.
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•
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pay significant damages;
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•
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stop distributing our products that contain the open source software;
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•
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revise or modify our product code to remove alleged infringing code;
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•
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release the source code of our proprietary software; or
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•
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take other steps to avoid or remedy an alleged infringement.
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•
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disrupting our ongoing operations, diverting management from day-to-day responsibilities, increasing our expenses, and adversely impacting our business, financial condition and operating results;
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•
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failure of an acquired business to further our business strategy;
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•
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uncertainties in achieving the expected benefits of an acquisition or disposition, including enhanced revenue, technology, human resources, cost savings, operating efficiencies and other synergies;
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•
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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;
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•
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incurring amortization expense related to identifiable intangible assets acquired that could impact our operating results;
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•
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difficulty integrating the operations, systems, technologies, products and personnel of acquired businesses effectively;
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•
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the need to provide transition services in connection with a disposition, which may result in the diversion of resources and focus;
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•
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difficulty achieving expected business results due to a lack of experience in new markets, products or technologies or the initial dependence on unfamiliar distribution partners or vendors;
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•
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retaining and motivating key personnel from acquired companies;
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•
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declining employee morale and retention issues affecting employees of businesses that we acquire or dispose of, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired or disposed business;
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•
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assuming the liabilities of an acquired business, including acquired litigation-related liabilities and regulatory compliance issues, and potential litigation or regulatory action arising from a proposed or completed acquisition;
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•
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lawsuits resulting from an acquisition or disposition;
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•
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maintaining good relationships with customers or business partners of an acquired business or our own customers as a result of any integration of operations or the divestiture of a business upon which our customers rely;
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•
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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;
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•
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maintaining or establishing acceptable standards, controls, procedures or policies with respect to an acquired business;
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•
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risks relating to the challenges and costs of closing a transaction; and
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•
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the need to later divest acquired assets at a loss if an acquisition does not meet our expectations.
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•
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Dell is able to control matters requiring our stockholders’ approval, including the election of a majority of our directors and the other matters over which EMC formerly had control, as described in the risk factors below.
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•
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Dell could implement changes to our business, including changing our commercial relationship with Dell or taking other corporate actions that our other stockholders may not view as beneficial.
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•
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We have arrangements with a number of companies that compete with Dell, and the completion of the Dell Acquisition could adversely affect our relationship with these companies or other customers, suppliers and partners.
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•
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Dell has a right to approve certain matters under our certificate of incorporation, including acquisitions or investments in excess of $100 million, and Dell may choose not to consent to matters that our board of directors believes are in the best interests of VMware.
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•
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We anticipate certain synergies and benefits from the Dell Acquisition that may not be realized.
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•
|
The Class V common stock issued by Dell on September 7, 2016, while not a VMware issued security, increases the supply of publicly traded securities that track VMware’s economic performance and may create the perception that the Class V common stock dilutes the holdings of our public stockholders, both of which may put downward pressure on our stock price. While the price of Class V common stock has initially been relatively stable, it may be volatile from
|
•
|
With the closing of the Dell Acquisition, Dell has become more highly leveraged and may be required to commit a substantial portion of its cash flows to servicing its indebtedness. While Dell has publicly stated that it plans to leave VMware free to use its cash to invest in the VMware business, Dell’s significant debt 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 Class V common stock issued by Dell 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.
|
•
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Some of our products compete directly with products sold or distributed by Dell, which could result in reduced sales.
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•
|
The Dell Acquisition creates potential litigation risk. Various lawsuits have been filed against EMC and others in connection with the Dell Acquisition, including one ongoing litigation in which the Company and our directors are named as defendants. It is possible that we or our directors may be named in other lawsuits.
|
•
|
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 Dell 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 Dell 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.
|
ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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Location
|
|
|
Approximate
Sq. Ft.
|
|
|
Principal Use(s)
|
|
Palo Alto, CA
|
owned:
|
|
1,492,802
|
|
(1)
|
|
Executive and administrative offices, sales and marketing, and R&D
|
North and Latin American region (excluding Palo Alto, CA)
|
leased:
|
|
1,105,910
|
|
(2)
|
|
Administrative offices, sales and marketing, R&D and data center
|
Asia Pacific region
|
leased:
|
|
1,214,958
|
|
|
|
Administrative offices, sales and marketing, R&D and data center
|
Europe, Middle East and Africa region
|
leased:
|
|
604,775
|
|
|
|
Administrative offices, sales and marketing, R&D and data center
|
(1)
|
Represents all of the right, title and interest purchased in ground leases, which expire in 2046, covering the property and improvements located at VMware’s Palo Alto, California campus. Of the total square feet owned, approximately 86,000 square feet were under construction as of December 31, 2016. In addition, we have the right to build an additional 100,000 square feet on the campus, if needed, to accommodate expansion.
|
(2)
|
Includes leased space for a Washington data center facility, for which VMware is considered to be the owner for accounting purposes.
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
Market Prices
|
||||||
|
High
|
|
Low
|
||||
Year ended December 31, 2016
|
|
|
|
||||
First Quarter
|
$
|
57.27
|
|
|
$
|
43.25
|
|
Second Quarter
|
65.31
|
|
|
49.76
|
|
||
Third Quarter
|
76.99
|
|
|
56.09
|
|
||
Fourth Quarter
|
83.00
|
|
|
72.05
|
|
||
Year ended December 31, 2015
|
|
|
|
||||
First Quarter
|
$
|
86.91
|
|
|
$
|
73.65
|
|
Second Quarter
|
92.20
|
|
|
79.93
|
|
||
Third Quarter
|
93.43
|
|
|
76.04
|
|
||
Fourth Quarter
|
82.35
|
|
|
52.72
|
|
|
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)
|
||||||
October 1 – October 31, 2016
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2,506,192
|
|
|
$
|
73.25
|
|
|
2,506,192
|
|
|
$
|
—
|
|
November 1 – November 30, 2016
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
December 1 – December 31, 2016
|
4,775,142
|
|
|
78.53
|
|
|
4,775,142
|
|
|
125,000,000
|
|
||
|
7,281,334
|
|
|
$
|
76.71
|
|
|
7,281,334
|
|
|
125,000,000
|
|
(1)
|
On December 15, 2016, we entered into a stock purchase agreement with Dell to purchase
$500 million
of our Class A common stock. Through
December 31, 2016
, we had purchased
4.8 million
shares for
$375 million
. On February 15, 2017, the stock purchase agreement with Dell was completed. A total of
$500 million
was paid in exchange for
6.2 million
shares.
|
(2)
|
The average price paid per share excludes commissions.
|
(3)
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Represents the amounts remaining in the VMware stock repurchase authorizations.
|
|
Base Period
12/31/2011
|
|
12/31/2012
|
|
12/31/2013
|
|
12/31/2014
|
|
12/31/2015
|
|
12/31/2016
|
||||||||||||
VMware, Inc.
|
$
|
100.00
|
|
|
$
|
113.16
|
|
|
$
|
107.84
|
|
|
$
|
99.19
|
|
|
$
|
68.00
|
|
|
$
|
94.64
|
|
S&P 500 Index
|
100.00
|
|
|
116.00
|
|
|
153.57
|
|
|
174.60
|
|
|
177.01
|
|
|
198.18
|
|
||||||
S&P 500 Systems Software Index
|
100.00
|
|
|
115.22
|
|
|
153.13
|
|
|
188.36
|
|
|
208.08
|
|
|
235.62
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
For the Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
License
|
$
|
2,794
|
|
|
$
|
2,720
|
|
|
$
|
2,591
|
|
|
$
|
2,270
|
|
|
$
|
2,087
|
|
Services
|
4,299
|
|
|
3,927
|
|
|
3,444
|
|
|
2,937
|
|
|
2,518
|
|
|||||
GSA settlement
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total revenue
|
$
|
7,093
|
|
|
$
|
6,571
|
|
|
$
|
6,035
|
|
|
$
|
5,207
|
|
|
$
|
4,605
|
|
Operating income
|
1,439
|
|
|
1,197
|
|
|
1,027
|
|
|
1,093
|
|
|
872
|
|
|||||
Net income
|
1,186
|
|
|
997
|
|
|
886
|
|
|
1,014
|
|
|
746
|
|
|||||
Net income per weighted average share, basic, for Class A and Class B
|
$
|
2.82
|
|
|
$
|
2.35
|
|
|
$
|
2.06
|
|
|
$
|
2.36
|
|
|
$
|
1.75
|
|
Net income per weighted average share, diluted, for Class A and Class B
|
$
|
2.78
|
|
|
$
|
2.34
|
|
|
$
|
2.04
|
|
|
$
|
2.34
|
|
|
$
|
1.72
|
|
Weighted average shares, basic, for Class A and Class B
|
420,520
|
|
|
424,003
|
|
|
430,355
|
|
|
429,093
|
|
|
426,658
|
|
|||||
Weighted average shares, diluted, for Class A and Class B
|
423,994
|
|
|
426,547
|
|
|
434,513
|
|
|
433,415
|
|
|
433,974
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short-term investments
(1)
|
$
|
7,985
|
|
|
$
|
7,509
|
|
|
$
|
7,075
|
|
|
$
|
6,175
|
|
|
$
|
4,631
|
|
Working capital
(1)
|
5,781
|
|
|
5,231
|
|
|
4,886
|
|
|
4,198
|
|
|
2,982
|
|
|||||
Total assets
|
16,643
|
|
|
15,746
|
|
|
15,216
|
|
|
12,327
|
|
|
10,596
|
|
|||||
Total unearned revenue
|
5,624
|
|
|
5,076
|
|
|
4,833
|
|
|
4,092
|
|
|
3,461
|
|
|||||
Long-term obligations
(2)
|
1,500
|
|
|
1,500
|
|
|
1,500
|
|
|
450
|
|
|
450
|
|
|||||
Total stockholders’ equity
|
8,097
|
|
|
7,923
|
|
|
7,586
|
|
|
6,816
|
|
|
5,740
|
|
|||||
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
$
|
2,381
|
|
|
$
|
1,899
|
|
|
$
|
2,180
|
|
|
$
|
2,535
|
|
|
$
|
1,897
|
|
(1)
|
In 2012, we acquired all of the outstanding capital stock of Nicira, Inc. (“Nicira”) for $1,100 million, net of cash acquired, consisting of $1,083 million in cash and $17 million for the fair value of assumed equity attributed to pre-combination services.
|
(2)
|
On January 21, 2014, in connection with our agreement to acquire A.W.S. Holding, LLC (“AirWatch Holding”), the sole member and equity holder of AirWatch LLC (“AirWatch”), we entered into a note exchange agreement with EMC providing for the issuance of three promissory notes in the aggregate principal amount of $1,500 million. The total debt of $1,500 million includes $450 million that was exchanged for the $450 million promissory note outstanding in prior years. Refer to Note B to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
License
|
$
|
2,794
|
|
|
$
|
2,720
|
|
|
$
|
2,591
|
|
|
$
|
74
|
|
|
3
|
%
|
|
$
|
130
|
|
|
5
|
%
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Software maintenance
|
3,740
|
|
|
3,405
|
|
|
3,022
|
|
|
335
|
|
|
10
|
|
|
384
|
|
|
13
|
|
|||||
Professional services
|
559
|
|
|
522
|
|
|
422
|
|
|
37
|
|
|
7
|
|
|
98
|
|
|
23
|
|
|||||
Total services
|
4,299
|
|
|
3,927
|
|
|
3,444
|
|
|
372
|
|
|
9
|
|
|
482
|
|
|
14
|
|
|||||
GSA settlement
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
76
|
|
|
n/a
|
|
|
(76
|
)
|
|
n/a
|
|
|||||
Total revenue
|
$
|
7,093
|
|
|
$
|
6,571
|
|
|
$
|
6,035
|
|
|
$
|
522
|
|
|
8
|
|
|
$
|
536
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
United States
|
$
|
3,588
|
|
|
$
|
3,311
|
|
|
$
|
2,912
|
|
|
$
|
277
|
|
|
8
|
%
|
|
$
|
399
|
|
|
14
|
%
|
International
|
3,505
|
|
|
3,260
|
|
|
3,123
|
|
|
245
|
|
|
8
|
|
|
137
|
|
|
4
|
|
|||||
Total revenue
|
$
|
7,093
|
|
|
$
|
6,571
|
|
|
$
|
6,035
|
|
|
$
|
522
|
|
|
8
|
|
|
$
|
536
|
|
|
9
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Unearned license revenue
|
$
|
503
|
|
|
$
|
428
|
|
Unearned software maintenance revenue
|
4,628
|
|
|
4,174
|
|
||
Unearned professional services revenue
|
493
|
|
|
474
|
|
||
Total unearned revenue
|
$
|
5,624
|
|
|
$
|
5,076
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Cost of license revenue
|
$
|
157
|
|
|
$
|
184
|
|
|
$
|
190
|
|
|
$
|
(27
|
)
|
|
(15
|
)%
|
|
$
|
(6
|
)
|
|
(3
|
)%
|
Stock-based compensation
|
2
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(15
|
)
|
|||||
Total expenses
|
$
|
159
|
|
|
$
|
186
|
|
|
$
|
192
|
|
|
$
|
(27
|
)
|
|
(14
|
)
|
|
$
|
(6
|
)
|
|
(3
|
)
|
% of License revenue
|
6
|
%
|
|
7
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Cost of services revenue
|
$
|
842
|
|
|
$
|
788
|
|
|
$
|
683
|
|
|
$
|
54
|
|
|
7
|
%
|
|
$
|
106
|
|
|
15
|
%
|
Stock-based compensation
|
52
|
|
|
44
|
|
|
42
|
|
|
8
|
|
|
19
|
|
|
2
|
|
|
4
|
|
|||||
Total expenses
|
$
|
894
|
|
|
$
|
832
|
|
|
$
|
725
|
|
|
$
|
63
|
|
|
8
|
|
|
$
|
107
|
|
|
15
|
|
% of Services revenue
|
21
|
%
|
|
21
|
%
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Research and development
|
$
|
1,198
|
|
|
$
|
1,074
|
|
|
$
|
995
|
|
|
$
|
124
|
|
|
12
|
%
|
|
$
|
80
|
|
|
8
|
%
|
Stock-based compensation
|
305
|
|
|
226
|
|
|
244
|
|
|
80
|
|
|
35
|
|
|
(18
|
)
|
|
(7
|
)
|
|||||
Total expenses
|
$
|
1,503
|
|
|
$
|
1,300
|
|
|
$
|
1,239
|
|
|
$
|
203
|
|
|
16
|
|
|
$
|
61
|
|
|
5
|
|
% of Total revenue
|
21
|
%
|
|
20
|
%
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Sales and marketing
|
$
|
2,162
|
|
|
$
|
2,099
|
|
|
$
|
1,969
|
|
|
$
|
61
|
|
|
3
|
%
|
|
$
|
130
|
|
|
7
|
%
|
Stock-based compensation
|
195
|
|
|
168
|
|
|
172
|
|
|
28
|
|
|
16
|
|
|
(4
|
)
|
|
(2
|
)
|
|||||
Total expenses
|
$
|
2,357
|
|
|
$
|
2,267
|
|
|
$
|
2,141
|
|
|
$
|
88
|
|
|
4
|
|
|
$
|
126
|
|
|
6
|
|
% of Total revenue
|
33
|
%
|
|
35
|
%
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
General and administrative
|
$
|
607
|
|
|
$
|
702
|
|
|
$
|
626
|
|
|
$
|
(94
|
)
|
|
(13
|
)%
|
|
$
|
76
|
|
|
12
|
%
|
Stock-based compensation
|
82
|
|
|
64
|
|
|
69
|
|
|
17
|
|
|
27
|
|
|
(5
|
)
|
|
(7
|
)
|
|||||
Total expenses
|
$
|
689
|
|
|
$
|
766
|
|
|
$
|
695
|
|
|
$
|
(77
|
)
|
|
(10
|
)
|
|
$
|
71
|
|
|
10
|
|
% of Total revenue
|
10
|
%
|
|
12
|
%
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Realignment
|
$
|
52
|
|
|
$
|
23
|
|
|
$
|
16
|
|
|
$
|
29
|
|
|
126
|
%
|
|
$
|
7
|
|
|
46
|
%
|
% of Total revenue
|
1
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016 vs. 2015
|
|
2015 vs. 2014
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
Investment income
|
$
|
77
|
|
|
$
|
49
|
|
|
$
|
38
|
|
|
$
|
28
|
|
|
57
|
%
|
|
$
|
11
|
|
|
28
|
%
|
% of Total revenue
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
|
|
|
|
|
|
|
|
•
|
Pursuant to ongoing reseller arrangements with Dell, Dell bundles our products and services with Dell’s products and sells them to end users. Reseller revenue is presented net of related marketing development funds and rebates paid to Dell.
|
•
|
Dell purchases products and services from us for internal use.
|
•
|
We provide professional services to end users based upon contractual agreements with Dell.
|
•
|
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 Dell, 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 services to Pivotal. Support costs incurred by us are reimbursed to us and are recorded as a reduction to the costs incurred by us.
|
|
Revenue and Receipts
|
|
Unearned Revenue
|
||||||||||||||||
|
For the Year Ended December 31,
|
|
As of December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
||||||||||
Reseller revenue
|
$
|
508
|
|
|
$
|
301
|
|
|
$
|
205
|
|
|
$
|
637
|
|
|
$
|
292
|
|
Internal-use revenue
|
35
|
|
|
17
|
|
|
21
|
|
|
15
|
|
|
11
|
|
|||||
Professional services revenue
|
115
|
|
|
100
|
|
|
85
|
|
|
—
|
|
|
3
|
|
|||||
Agency fee revenue
|
4
|
|
|
6
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|||||
Reimbursement for services to Pivotal
|
1
|
|
|
4
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
•
|
We purchase and lease products and purchase services from Dell.
|
•
|
From time to time, we and Dell enter into agreements to collaborate on technology projects, and we pay Dell for services provided to us by Dell related to such projects.
|
•
|
In certain geographic regions where we do not have an established legal entity, we contract with Dell subsidiaries for support services and Dell personnel who are managed by us. The costs incurred by Dell 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 consolidated statements of income and primarily include salaries, benefits, travel and rent expenses. Dell also incurs certain administrative costs on our behalf in the United States that are recorded as expenses on our consolidated statements of income.
|
•
|
From time to time, we invoice end users on behalf of Dell for certain services rendered by Dell. Cash related to these services is collected from the end user by us and remitted to Dell.
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Purchases and leases of products and purchases of services
|
$
|
97
|
|
|
$
|
63
|
|
|
$
|
71
|
|
Collaborative technology project costs
|
—
|
|
|
5
|
|
|
12
|
|
|||
Dell subsidiary support and administrative costs
|
105
|
|
|
100
|
|
|
137
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Due (to) related parties
|
$
|
(71
|
)
|
|
$
|
(68
|
)
|
Due from related parties
|
203
|
|
|
142
|
|
||
Due (to) from related parties, net
|
$
|
132
|
|
|
$
|
74
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Cash and cash equivalents
|
$
|
2,790
|
|
|
$
|
2,493
|
|
Short-term investments
|
5,195
|
|
|
5,016
|
|
||
Total cash, cash equivalents and short-term investments
|
$
|
7,985
|
|
|
$
|
7,509
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
2,381
|
|
|
$
|
1,899
|
|
|
$
|
2,180
|
|
Investing activities
|
(465
|
)
|
|
(336
|
)
|
|
(2,785
|
)
|
|||
Financing activities
|
(1,619
|
)
|
|
(1,141
|
)
|
|
371
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
$
|
297
|
|
|
$
|
422
|
|
|
$
|
(234
|
)
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5 years
|
||||||||||
Notes payable to Dell
(1)
|
$
|
1,576
|
|
|
$
|
26
|
|
|
$
|
713
|
|
|
$
|
563
|
|
|
$
|
274
|
|
Operating leases
(2)
|
845
|
|
|
89
|
|
|
132
|
|
|
80
|
|
|
544
|
|
|||||
Purchase obligations
|
81
|
|
|
48
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|||||
Stock purchase obligation
(3)
|
125
|
|
|
125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other contractual commitments
(4)
|
27
|
|
|
3
|
|
|
10
|
|
|
5
|
|
|
9
|
|
|||||
Sub-Total
|
2,654
|
|
|
291
|
|
|
888
|
|
|
648
|
|
|
827
|
|
|||||
Uncertain tax positions
(5)
|
260
|
|
|
|
|
|
|
|
|
|
|||||||||
Total
|
$
|
2,914
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of principal and interest payments on the notes payable to Dell. Refer to “Liquidity and Capital Resources” for a discussion of the
$1,500 million
notes payable we entered into with our Parent on January 21, 2014, in connection with our agreement to acquire AirWatch.
|
(2)
|
Our operating leases are primarily for facility space and land, and amounts in the table above exclude expected sublease income.
|
(3)
|
On December 15, 2016, we entered into a stock purchase agreement with Dell to purchase
$500 million
of our Class A common stock. Through December 31, 2016, we had purchased
4.8 million
shares for
$375 million
and had an obligation to purchase
$125 million
of additional shares.
|
(4)
|
Consisting of various contractual agreements, which include commitments on the lease for our Washington data center facility and asset retirement obligations.
|
(5)
|
As of December 31, 2016, we had
$260 million
of gross uncertain tax benefits, excluding interest and penalties. The timing of future payments relating to these obligations is highly uncertain. Based on the timing and outcome of examinations of our subsidiaries, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that within the next 12 months total unrecognized tax benefits could be potentially reduced by approximately
$8 million
.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Schedule:
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenue:
|
|
|
|
|
|
||||||
License
|
$
|
2,794
|
|
|
$
|
2,720
|
|
|
$
|
2,591
|
|
Services
|
4,299
|
|
|
3,927
|
|
|
3,444
|
|
|||
GSA settlement
|
—
|
|
|
(76
|
)
|
|
—
|
|
|||
Total revenue
|
7,093
|
|
|
6,571
|
|
|
6,035
|
|
|||
Operating expenses
(1)
:
|
|
|
|
|
|
||||||
Cost of license revenue
|
159
|
|
|
186
|
|
|
192
|
|
|||
Cost of services revenue
|
894
|
|
|
832
|
|
|
725
|
|
|||
Research and development
|
1,503
|
|
|
1,300
|
|
|
1,239
|
|
|||
Sales and marketing
|
2,357
|
|
|
2,267
|
|
|
2,141
|
|
|||
General and administrative
|
689
|
|
|
766
|
|
|
695
|
|
|||
Realignment
|
52
|
|
|
23
|
|
|
16
|
|
|||
Operating income
|
1,439
|
|
|
1,197
|
|
|
1,027
|
|
|||
Investment income
|
77
|
|
|
49
|
|
|
38
|
|
|||
Interest expense with Dell
|
(26
|
)
|
|
(26
|
)
|
|
(24
|
)
|
|||
Other income (expense), net
|
(17
|
)
|
|
(7
|
)
|
|
7
|
|
|||
Income before income taxes
|
1,473
|
|
|
1,213
|
|
|
1,048
|
|
|||
Income tax provision
|
287
|
|
|
216
|
|
|
162
|
|
|||
Net income
|
$
|
1,186
|
|
|
$
|
997
|
|
|
$
|
886
|
|
Net income per weighted-average share, basic for Class A and Class B
|
$
|
2.82
|
|
|
$
|
2.35
|
|
|
$
|
2.06
|
|
Net income per weighted-average share, diluted for Class A and Class B
|
$
|
2.78
|
|
|
$
|
2.34
|
|
|
$
|
2.04
|
|
Weighted-average shares, basic for Class A and Class B
|
420,520
|
|
|
424,003
|
|
|
430,355
|
|
|||
Weighted-average shares, diluted for Class A and Class B
|
423,994
|
|
|
426,547
|
|
|
434,513
|
|
|||
__________
|
|
|
|
|
|
||||||
(1)
Includes stock-based compensation as follows:
|
|
|
|
|
|
||||||
Cost of license revenue
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Cost of services revenue
|
52
|
|
|
44
|
|
|
42
|
|
|||
Research and development
|
305
|
|
|
226
|
|
|
244
|
|
|||
Sales and marketing
|
195
|
|
|
168
|
|
|
172
|
|
|||
General and administrative
|
82
|
|
|
64
|
|
|
69
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
$
|
1,186
|
|
|
$
|
997
|
|
|
$
|
886
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Changes in market value of available-for-sale securities:
|
|
|
|
|
|
||||||
Unrealized gains (losses), net of tax provision (benefit) of $(4), $(4) and $—
|
(6
|
)
|
|
(7
|
)
|
|
(1
|
)
|
|||
Reclassification of (gains) losses realized during the period, net of tax (provision) benefit of $3, $— and $(2)
|
5
|
|
|
—
|
|
|
(3
|
)
|
|||
Net change in market value of available-for-sale securities
|
(1
|
)
|
|
(7
|
)
|
|
(4
|
)
|
|||
Changes in market value of effective foreign currency forward contracts:
|
|
|
|
|
|
||||||
Unrealized gains (losses), net of tax provision (benefit) of $— for all periods
|
1
|
|
|
—
|
|
|
(1
|
)
|
|||
Reclassification of (gains) losses realized during the period, net of tax (provision) benefit of $— for all periods
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net change in market value of effective foreign currency forward contracts
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Total other comprehensive income (loss)
|
(1
|
)
|
|
(7
|
)
|
|
(5
|
)
|
|||
Total comprehensive income, net of taxes
|
$
|
1,185
|
|
|
$
|
990
|
|
|
$
|
881
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
1,186
|
|
|
$
|
997
|
|
|
$
|
886
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
345
|
|
|
335
|
|
|
345
|
|
|||
Stock-based compensation
|
636
|
|
|
504
|
|
|
529
|
|
|||
Excess tax benefits from stock-based compensation
|
(15
|
)
|
|
(28
|
)
|
|
(36
|
)
|
|||
Deferred income taxes, net
|
(8
|
)
|
|
(31
|
)
|
|
(128
|
)
|
|||
Gain on Dell stock purchase
|
(8
|
)
|
|
—
|
|
|
—
|
|
|||
Impairment of strategic investments
|
14
|
|
|
5
|
|
|
—
|
|
|||
Loss on disposal of assets
|
16
|
|
|
—
|
|
|
—
|
|
|||
Other
|
(2
|
)
|
|
(1
|
)
|
|
(7
|
)
|
|||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable
|
(224
|
)
|
|
(114
|
)
|
|
(267
|
)
|
|||
Other assets
|
(215
|
)
|
|
32
|
|
|
(70
|
)
|
|||
Due to/from related parties, net
|
(54
|
)
|
|
(21
|
)
|
|
(46
|
)
|
|||
Accounts payable
|
(9
|
)
|
|
(35
|
)
|
|
69
|
|
|||
Accrued expenses
|
187
|
|
|
1
|
|
|
135
|
|
|||
Income taxes payable
|
(15
|
)
|
|
13
|
|
|
77
|
|
|||
Unearned revenue
|
547
|
|
|
242
|
|
|
693
|
|
|||
Net cash provided by operating activities
|
2,381
|
|
|
1,899
|
|
|
2,180
|
|
|||
Investing activities:
|
|
|
|
|
|
||||||
Additions to property and equipment
|
(153
|
)
|
|
(333
|
)
|
|
(352
|
)
|
|||
Purchases of available-for-sale securities
|
(3,725
|
)
|
|
(3,323
|
)
|
|
(3,937
|
)
|
|||
Sales of available-for-sale securities
|
2,227
|
|
|
2,193
|
|
|
2,076
|
|
|||
Maturities of available-for-sale securities
|
1,307
|
|
|
1,100
|
|
|
717
|
|
|||
Purchases of strategic investments
|
(49
|
)
|
|
(14
|
)
|
|
(52
|
)
|
|||
Proceeds from sales of strategic investments
|
1
|
|
|
4
|
|
|
11
|
|
|||
Business combinations, net of cash acquired
|
(74
|
)
|
|
(38
|
)
|
|
(1,168
|
)
|
|||
Decrease (increase) in restricted cash
|
(2
|
)
|
|
75
|
|
|
(78
|
)
|
|||
Other investing
|
3
|
|
|
—
|
|
|
(2
|
)
|
|||
Net cash used in investing activities
|
(465
|
)
|
|
(336
|
)
|
|
(2,785
|
)
|
|||
Financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
109
|
|
|
126
|
|
|
164
|
|
|||
Proceeds from issuance of notes payable to Dell
|
—
|
|
|
—
|
|
|
1,050
|
|
|||
Reduction in capital from Dell
|
—
|
|
|
—
|
|
|
(24
|
)
|
|||
Proceeds from non-controlling interests
|
—
|
|
|
4
|
|
|
7
|
|
|||
Payment to acquire non-controlling interests
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchase of common stock
|
(1,575
|
)
|
|
(1,125
|
)
|
|
(700
|
)
|
|||
Excess tax benefits from stock-based compensation
|
15
|
|
|
28
|
|
|
36
|
|
|||
Shares repurchased for tax withholdings on vesting of restricted stock
|
(164
|
)
|
|
(174
|
)
|
|
(162
|
)
|
|||
Net cash provided by (used in) financing activities
|
(1,619
|
)
|
|
(1,141
|
)
|
|
371
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
297
|
|
|
422
|
|
|
(234
|
)
|
|||
Cash and cash equivalents at beginning of the period
|
2,493
|
|
|
2,071
|
|
|
2,305
|
|
|||
Cash and cash equivalents at end of the period
|
$
|
2,790
|
|
|
$
|
2,493
|
|
|
$
|
2,071
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
29
|
|
|
$
|
28
|
|
|
$
|
27
|
|
Cash paid for taxes, net
|
467
|
|
|
231
|
|
|
215
|
|
|||
Non-cash items:
|
|
|
|
|
|
||||||
Changes in capital additions, accrued but not paid
|
$
|
(7
|
)
|
|
$
|
(49
|
)
|
|
$
|
19
|
|
Changes in tax withholdings on vesting of restricted stock, accrued but not paid
|
3
|
|
|
(2
|
)
|
|
7
|
|
|||
Fair value of stock-based awards assumed in acquisitions
|
—
|
|
|
—
|
|
|
24
|
|
|
Class A
Common Stock
|
|
Class B
Convertible
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Non-controlling Interests
|
|
Stockholders’
Equity
|
||||||||||||||||||||
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
||||||||||||||||||||||||||
Balance, January 1, 2014
|
130
|
|
|
$
|
1
|
|
|
300
|
|
|
$
|
3
|
|
|
$
|
3,496
|
|
|
$
|
3,312
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
6,816
|
|
Proceeds from issuance of common stock
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|||||||
Issuance of stock-based awards in acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|||||||
Repurchase and retirement of common stock
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(700
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(700
|
)
|
|||||||
Issuance of restricted stock, net of cancellations
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Shares withheld for tax withholdings on vesting of restricted stock
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(162
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(162
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
516
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
516
|
|
|||||||
Excess tax benefits from stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|||||||
Amount due from tax sharing arrangement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|||||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|||||||
Activities with non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||||
Reclassification of liability-classified awards to equity stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
886
|
|
|
—
|
|
|
—
|
|
|
886
|
|
|||||||
Balance, December 31, 2014
|
129
|
|
|
1
|
|
|
300
|
|
|
3
|
|
|
3,380
|
|
|
4,198
|
|
|
(1
|
)
|
|
5
|
|
|
7,586
|
|
|||||||
Proceeds from issuance of common stock
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|||||||
Repurchase and retirement of common stock
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,125
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,125
|
)
|
|||||||
Issuance of restricted stock, net of cancellations
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for tax withholdings on vesting of restricted stock
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(173
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(173
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
504
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
504
|
|
|||||||
Excess tax benefits from stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||||
Credit from tax sharing arrangement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||||||
Activities with non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
997
|
|
|
—
|
|
|
—
|
|
|
997
|
|
|||||||
Balance, December 31, 2015
|
122
|
|
|
1
|
|
|
300
|
|
|
3
|
|
|
2,728
|
|
|
5,195
|
|
|
(8
|
)
|
|
4
|
|
|
7,923
|
|
|||||||
Proceeds from issuance of common stock
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|||||||
Repurchase and retirement of common stock
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,575
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,575
|
)
|
|||||||
Issuance of restricted stock, net of cancellations
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for tax withholdings on vesting of restricted stock
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(167
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(167
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
636
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
636
|
|
|||||||
Tax shortfall from stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|||||||
Credit from tax sharing arrangement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||||
Activities with non-controlling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(5
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,186
|
|
|
—
|
|
|
—
|
|
|
1,186
|
|
|||||||
Balance, December 31, 2016
|
108
|
|
|
$
|
1
|
|
|
300
|
|
|
$
|
3
|
|
|
$
|
1,721
|
|
|
$
|
6,381
|
|
|
$
|
(9
|
)
|
|
$
|
—
|
|
|
$
|
8,097
|
|
Buildings
|
|
Term of underlying land lease
|
Land improvements
|
|
15 years
|
Furniture and fixtures
|
|
7 years
|
Equipment
|
|
3 to 6 years
|
Software
|
|
3 to 8 years
|
Leasehold improvements
|
|
20 years, not to exceed the shorter of the estimated useful life or remaining lease term
|
•
|
Pursuant to ongoing reseller arrangements with Dell, Dell bundles VMware’s products and services with Dell’s products and sells them to end users. Reseller revenue is presented net of related marketing development funds and rebates paid to Dell.
|
•
|
Dell purchases products and services from VMware for internal use.
|
•
|
VMware provides professional services to end users based upon contractual agreements with Dell.
|
•
|
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 Dell, 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 services to Pivotal. Support costs incurred by VMware are reimbursed to VMware and are recorded as a reduction to the costs incurred by VMware.
|
|
Revenue and Receipts
|
|
Unearned Revenue
|
||||||||||||||||
|
For the Year Ended December 31,
|
|
As of December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
||||||||||
Reseller revenue
|
$
|
508
|
|
|
$
|
301
|
|
|
$
|
205
|
|
|
$
|
637
|
|
|
$
|
292
|
|
Internal-use revenue
|
35
|
|
|
17
|
|
|
21
|
|
|
15
|
|
|
11
|
|
|||||
Professional services revenue
|
115
|
|
|
100
|
|
|
85
|
|
|
—
|
|
|
3
|
|
|||||
Agency fee revenue
|
4
|
|
|
6
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|||||
Reimbursement for services to Pivotal
|
1
|
|
|
4
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
•
|
VMware purchases and leases products and purchases services from Dell.
|
•
|
From time to time, VMware and Dell enter into agreements to collaborate on technology projects, and VMware pays Dell for services provided to VMware by Dell related to such projects.
|
•
|
In certain geographic regions where VMware does not have an established legal entity, VMware contracts with Dell subsidiaries for support services and Dell personnel who are managed by VMware. The costs incurred by Dell 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 consolidated statements of income and primarily include salaries, benefits, travel and rent expenses. Dell also incurs certain administrative costs on VMware’s behalf in the United States that are recorded as expenses on VMware’s consolidated statements of income.
|
•
|
From time to time, VMware invoices end users on behalf of Dell for certain services rendered by Dell. Cash related to these services is collected from the end user by VMware and remitted to Dell.
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Purchases and leases of products and purchases of services
|
$
|
97
|
|
|
$
|
63
|
|
|
$
|
71
|
|
Collaborative technology project costs
|
—
|
|
|
5
|
|
|
12
|
|
|||
Dell subsidiary support and administrative costs
|
105
|
|
|
100
|
|
|
137
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Due (to) related parties
|
$
|
(71
|
)
|
|
$
|
(68
|
)
|
Due from related parties
|
203
|
|
|
142
|
|
||
Due (to) from related parties, net
|
$
|
132
|
|
|
$
|
74
|
|
Intangible assets
|
$
|
25
|
|
Goodwill
|
39
|
|
|
Other acquired assets
|
12
|
|
|
Total assets acquired
|
76
|
|
|
Deferred tax liabilities
|
(9
|
)
|
|
Fair value of assets acquired and liabilities assumed
|
$
|
67
|
|
|
For the Year Ended
December 31, 2014
|
||
Pro forma adjusted net income
|
$
|
849
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Balance, beginning of the year
|
$
|
616
|
|
|
$
|
748
|
|
Additions to intangible assets related to business combinations
|
40
|
|
|
13
|
|
||
Amortization expense
|
(129
|
)
|
|
(145
|
)
|
||
Reduction related to sale of assets
|
(10
|
)
|
|
—
|
|
||
Balance, end of the year
|
$
|
517
|
|
|
$
|
616
|
|
|
December 31, 2016
|
||||||||||||
|
Weighted-Average Useful Lives
(in years) |
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
Purchased technology
|
6.6
|
|
$
|
641
|
|
|
$
|
(358
|
)
|
|
$
|
283
|
|
Leasehold interest
|
34.9
|
|
149
|
|
|
(24
|
)
|
|
125
|
|
|||
Customer relationships and customer lists
|
8.3
|
|
132
|
|
|
(62
|
)
|
|
70
|
|
|||
Trademarks and tradenames
|
8.7
|
|
61
|
|
|
(23
|
)
|
|
38
|
|
|||
Other
|
5.7
|
|
4
|
|
|
(3
|
)
|
|
1
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
987
|
|
|
$
|
(470
|
)
|
|
$
|
517
|
|
|
December 31, 2015
|
||||||||||||
|
Weighted-Average Useful Lives
(in years) |
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
Purchased technology
|
6.6
|
|
$
|
648
|
|
|
$
|
(298
|
)
|
|
$
|
350
|
|
Leasehold interest
|
34.9
|
|
149
|
|
|
(20
|
)
|
|
129
|
|
|||
Customer relationships and customer lists
|
8.4
|
|
148
|
|
|
(62
|
)
|
|
86
|
|
|||
Trademarks and tradenames
|
8.6
|
|
61
|
|
|
(16
|
)
|
|
45
|
|
|||
Other
|
2.9
|
|
20
|
|
|
(14
|
)
|
|
6
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
1,026
|
|
|
$
|
(410
|
)
|
|
$
|
616
|
|
2017
|
$
|
126
|
|
2018
|
116
|
|
|
2019
|
95
|
|
|
2020
|
45
|
|
|
2021
|
27
|
|
|
Thereafter
|
108
|
|
|
Total
|
$
|
517
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Balance, beginning of the year
|
$
|
3,993
|
|
|
$
|
3,964
|
|
Increase in goodwill related to business combinations
|
39
|
|
|
29
|
|
||
Balance, end of the year
|
$
|
4,032
|
|
|
$
|
3,993
|
|
|
For the Year Ended December 31, 2016
|
||||||||||||||
|
Balance as of
January 1, 2016
|
|
Realignment
|
|
Utilization
|
|
Balance as of
December 31, 2016
|
||||||||
Severance-related costs
|
$
|
3
|
|
|
$
|
50
|
|
|
$
|
(52
|
)
|
|
$
|
1
|
|
Costs to exit facilities
|
—
|
|
|
2
|
|
|
(1
|
)
|
|
1
|
|
||||
Total
|
$
|
3
|
|
|
$
|
52
|
|
|
$
|
(53
|
)
|
|
$
|
2
|
|
|
For the Year Ended December 31, 2015
|
||||||||||||
|
Balance as of
January 1, 2015
|
|
Realignment
|
|
Utilization
|
|
Balance as of
December 31, 2015
|
||||||
Severance-related costs
|
$
|
8
|
|
|
23
|
|
|
(28
|
)
|
|
$
|
3
|
|
|
For the Year Ended December 31, 2014
|
||||||||||||||
|
Balance as of
January 1, 2014
|
|
Realignment
|
|
Utilization
|
|
Balance as of
December 31, 2014
|
||||||||
Workforce reductions
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
(10
|
)
|
|
$
|
8
|
|
Asset impairments, exit of facilities and other exit costs
|
3
|
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
||||
Total
|
$
|
3
|
|
|
$
|
16
|
|
|
$
|
(11
|
)
|
|
$
|
8
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
$
|
1,186
|
|
|
$
|
997
|
|
|
$
|
886
|
|
Gain on stock purchase with Dell, net of tax
|
(8
|
)
|
|
—
|
|
|
—
|
|
|||
Net income, as adjusted
|
$
|
1,178
|
|
|
$
|
997
|
|
|
$
|
886
|
|
Weighted-average shares, basic for Class A and Class B
|
420,520
|
|
|
424,003
|
|
|
430,355
|
|
|||
Effect of stock purchase with Dell
|
7
|
|
|
—
|
|
|
—
|
|
|||
Effect of other dilutive securities
|
3,467
|
|
|
2,544
|
|
|
4,158
|
|
|||
Weighted-average shares, diluted for Class A and Class B
|
423,994
|
|
|
426,547
|
|
|
434,513
|
|
|||
Net income per weighted-average share, basic for Class A and Class B
|
$
|
2.82
|
|
|
$
|
2.35
|
|
|
$
|
2.06
|
|
Net income per weighted-average share, diluted for Class A and Class B
|
$
|
2.78
|
|
|
$
|
2.34
|
|
|
$
|
2.04
|
|
|
For the Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Anti-dilutive securities:
|
|
|
|
|
|
|||
Employee stock options
|
1,817
|
|
|
2,219
|
|
|
1,440
|
|
Restricted stock units
|
652
|
|
|
249
|
|
|
16
|
|
Total
|
2,469
|
|
|
2,468
|
|
|
1,456
|
|
|
December 31, 2016
|
||||||||||||||
|
Cost or Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Aggregate Fair Value
|
||||||||
Cash
|
$
|
512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
512
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money-market funds
|
$
|
2,235
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,235
|
|
Time deposits
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||
Municipal obligations
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||
Total cash equivalents
|
$
|
2,278
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,278
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Government and agency obligations
|
$
|
734
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
731
|
|
U.S. and foreign corporate debt securities
|
3,885
|
|
|
2
|
|
|
(18
|
)
|
|
3,869
|
|
||||
Foreign governments and multi-national agency obligations
|
32
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||
Municipal obligations
|
365
|
|
|
—
|
|
|
—
|
|
|
365
|
|
||||
Asset-backed securities
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Mortgage-backed securities
|
196
|
|
|
—
|
|
|
(2
|
)
|
|
194
|
|
||||
Total short-term investments
|
$
|
5,216
|
|
|
$
|
2
|
|
|
$
|
(23
|
)
|
|
$
|
5,195
|
|
Other assets:
|
|
|
|
|
|
|
|
||||||||
Marketable available-for-sale equity securities
|
$
|
15
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
December 31, 2015
|
||||||||||||||
|
Cost or Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Aggregate Fair Value
|
||||||||
Cash
|
$
|
725
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
725
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money-market funds
|
$
|
1,763
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,763
|
|
Time deposits
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
Total cash equivalents
|
$
|
1,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,768
|
|
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Time deposits
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12
|
|
U.S. Government and agency obligations
|
753
|
|
|
—
|
|
|
(3
|
)
|
|
750
|
|
||||
U.S. and foreign corporate debt securities
|
3,263
|
|
|
1
|
|
|
(12
|
)
|
|
3,252
|
|
||||
Foreign governments and multi-national agency obligations
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||
Municipal obligations
|
705
|
|
|
1
|
|
|
—
|
|
|
706
|
|
||||
Asset-backed securities
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
Mortgage-backed securities
|
243
|
|
|
—
|
|
|
(2
|
)
|
|
241
|
|
||||
Total short-term investments
|
$
|
5,031
|
|
|
$
|
2
|
|
|
$
|
(17
|
)
|
|
$
|
5,016
|
|
Other assets:
|
|
|
|
|
|
|
|
||||||||
Marketable available-for-sale equity securities
|
$
|
15
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||
U.S. Government and agency obligations
|
$
|
608
|
|
|
$
|
(3
|
)
|
|
$
|
657
|
|
|
$
|
(3
|
)
|
U.S. and foreign corporate debt securities
|
2,595
|
|
|
(18
|
)
|
|
2,564
|
|
|
(11
|
)
|
||||
Mortgage-backed securities
|
164
|
|
|
(2
|
)
|
|
171
|
|
|
(1
|
)
|
||||
Total
|
$
|
3,367
|
|
|
$
|
(23
|
)
|
|
$
|
3,392
|
|
|
$
|
(15
|
)
|
|
Amortized
Cost Basis
|
|
Aggregate
Fair Value
|
||||
Due within one year
|
$
|
1,570
|
|
|
$
|
1,570
|
|
Due after 1 year through 5 years
|
3,171
|
|
|
3,153
|
|
||
Due after 5 years through 10 years
|
113
|
|
|
112
|
|
||
Due after 10 years
|
362
|
|
|
360
|
|
||
Total short-term investments
|
$
|
5,216
|
|
|
$
|
5,195
|
|
•
|
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
|
|
December 31, 2016
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
|||||
Money-market funds
|
$
|
2,235
|
|
|
$
|
—
|
|
|
$
|
2,235
|
|
Time deposits
|
—
|
|
|
26
|
|
|
26
|
|
|||
Municipal obligations
|
—
|
|
|
17
|
|
|
17
|
|
|||
Total cash equivalents
|
$
|
2,235
|
|
|
$
|
43
|
|
|
$
|
2,278
|
|
Short-term investments:
|
|
|
|
|
|
||||||
U.S. Government and agency obligations
|
$
|
441
|
|
|
$
|
290
|
|
|
$
|
731
|
|
U.S. and foreign corporate debt securities
|
—
|
|
|
3,869
|
|
|
3,869
|
|
|||
Foreign governments and multi-national agency obligations
|
—
|
|
|
32
|
|
|
32
|
|
|||
Municipal obligations
|
—
|
|
|
365
|
|
|
365
|
|
|||
Asset-backed securities
|
—
|
|
|
4
|
|
|
4
|
|
|||
Mortgage-backed securities
|
—
|
|
|
194
|
|
|
194
|
|
|||
Total short-term investments
|
$
|
441
|
|
|
$
|
4,754
|
|
|
$
|
5,195
|
|
Other current assets:
|
|
|
|
|
|
||||||
Derivative on stock purchase with Dell (refer to Note B)
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
8
|
|
Other assets:
|
|
|
|
|
|
||||||
Marketable available-for-sale equity securities
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
December 31, 2015
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money-market funds
|
$
|
1,763
|
|
|
$
|
—
|
|
|
$
|
1,763
|
|
Time deposits
|
—
|
|
|
5
|
|
|
5
|
|
|||
Total cash equivalents
|
$
|
1,763
|
|
|
$
|
5
|
|
|
$
|
1,768
|
|
Short-term investments:
|
|
|
|
|
|
||||||
Time deposits
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
12
|
|
U.S. Government and agency obligations
|
543
|
|
|
207
|
|
|
750
|
|
|||
U.S. and foreign corporate debt securities
|
—
|
|
|
3,252
|
|
|
3,252
|
|
|||
Foreign governments and multi-national agency obligations
|
—
|
|
|
35
|
|
|
35
|
|
|||
Municipal obligations
|
—
|
|
|
706
|
|
|
706
|
|
|||
Asset-backed securities
|
—
|
|
|
20
|
|
|
20
|
|
|||
Mortgage-backed securities
|
—
|
|
|
241
|
|
|
241
|
|
|||
Total short-term investments
|
$
|
543
|
|
|
$
|
4,473
|
|
|
$
|
5,016
|
|
Other assets:
|
|
|
|
|
|
||||||
Marketable available-for-sale equity securities
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Equipment and software
|
$
|
1,269
|
|
|
$
|
1,180
|
|
Buildings and improvements
|
814
|
|
|
792
|
|
||
Furniture and fixtures
|
102
|
|
|
100
|
|
||
Construction in progress
|
30
|
|
|
30
|
|
||
Total property and equipment
|
2,215
|
|
|
2,102
|
|
||
Accumulated depreciation
|
(1,166
|
)
|
|
(974
|
)
|
||
Total property and equipment, net
|
$
|
1,049
|
|
|
$
|
1,128
|
|
|
Future Lease Commitments
(1)
|
|
Purchase Obligations
|
|
Other Contractual Commitments
(2)
|
|
Total
|
||||||||
2017
|
$
|
89
|
|
|
$
|
39
|
|
|
$
|
3
|
|
|
$
|
131
|
|
2018
|
73
|
|
|
29
|
|
|
5
|
|
|
107
|
|
||||
2019
|
59
|
|
|
4
|
|
|
5
|
|
|
68
|
|
||||
2020
|
44
|
|
|
—
|
|
|
3
|
|
|
47
|
|
||||
2021
|
36
|
|
|
—
|
|
|
2
|
|
|
38
|
|
||||
Thereafter
|
544
|
|
|
—
|
|
|
9
|
|
|
553
|
|
||||
Total
|
$
|
845
|
|
|
$
|
72
|
|
|
$
|
27
|
|
|
$
|
944
|
|
(1)
|
Amounts in the table above exclude expected sublease income.
|
(2)
|
Consisting of various contractual agreements, which include commitments on the lease for VMware’s Washington data center facility and asset retirement obligations.
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Salaries, commissions, bonuses, and benefits
|
$
|
503
|
|
|
$
|
388
|
|
Accrued partner liabilities
|
219
|
|
|
146
|
|
||
Other
|
176
|
|
|
212
|
|
||
Total
|
$
|
898
|
|
|
$
|
746
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Unearned license revenue
|
$
|
503
|
|
|
$
|
428
|
|
Unearned software maintenance revenue
|
4,628
|
|
|
4,174
|
|
||
Unearned professional services revenue
|
493
|
|
|
474
|
|
||
Total unearned revenue
|
$
|
5,624
|
|
|
$
|
5,076
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Federal:
|
|
|
|
|
|
||||||
Current
|
$
|
153
|
|
|
$
|
142
|
|
|
$
|
188
|
|
Deferred
|
5
|
|
|
(33
|
)
|
|
(116
|
)
|
|||
|
158
|
|
|
109
|
|
|
72
|
|
|||
State:
|
|
|
|
|
|
||||||
Current
|
14
|
|
|
9
|
|
|
15
|
|
|||
Deferred
|
(5
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|||
|
9
|
|
|
8
|
|
|
3
|
|
|||
Foreign:
|
|
|
|
|
|
||||||
Current
|
128
|
|
|
96
|
|
|
87
|
|
|||
Deferred
|
(8
|
)
|
|
3
|
|
|
—
|
|
|||
|
120
|
|
|
99
|
|
|
87
|
|
|||
Total provision for income taxes
|
$
|
287
|
|
|
$
|
216
|
|
|
$
|
162
|
|
|
For the Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Statutory federal tax rate
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
State taxes, net of federal benefit
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
Tax rate differential for non-U.S. jurisdictions
|
(16
|
)%
|
|
(20
|
)%
|
|
(21
|
)%
|
U.S. tax credits
|
(3
|
)%
|
|
(2
|
)%
|
|
(3
|
)%
|
Permanent items and other
|
2
|
%
|
|
4
|
%
|
|
4
|
%
|
Effective tax rate
|
19
|
%
|
|
18
|
%
|
|
16
|
%
|
|
December 31,
|
||||||
2016
|
|
2015
|
|||||
Deferred tax assets:
|
|
|
|
||||
Unearned revenue
|
$
|
324
|
|
|
$
|
320
|
|
Accruals and other
|
66
|
|
|
60
|
|
||
Stock-based compensation
|
75
|
|
|
73
|
|
||
Tax credit and net operating loss carryforwards
|
175
|
|
|
162
|
|
||
Other assets, net
|
33
|
|
|
19
|
|
||
Intangible and other non-current assets
|
57
|
|
|
65
|
|
||
Basis difference on investment in business
|
20
|
|
|
20
|
|
||
Gross deferred tax assets
|
750
|
|
|
719
|
|
||
Valuation allowance
|
(166
|
)
|
|
(144
|
)
|
||
Total deferred tax assets
|
584
|
|
|
575
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property, plant and equipment, net
|
(122
|
)
|
|
(119
|
)
|
||
Net deferred tax assets
|
$
|
462
|
|
|
$
|
456
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Payments from VMware to Dell
|
$
|
373
|
|
|
$
|
144
|
|
|
$
|
150
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Income tax-related asset, net
|
$
|
181
|
|
|
$
|
—
|
|
Income tax due to Dell
|
—
|
|
|
(18
|
)
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Balance, beginning of the year
|
$
|
245
|
|
|
$
|
190
|
|
|
$
|
167
|
|
Tax positions related to current year:
|
|
|
|
|
|
||||||
Additions
|
45
|
|
|
41
|
|
|
32
|
|
|||
Tax positions related to prior years:
|
|
|
|
|
|
||||||
Additions
|
9
|
|
|
54
|
|
|
1
|
|
|||
Reductions
|
(8
|
)
|
|
(14
|
)
|
|
(3
|
)
|
|||
Settlements
|
(16
|
)
|
|
(12
|
)
|
|
(1
|
)
|
|||
Reductions resulting from a lapse of the statute of limitations
|
(14
|
)
|
|
(11
|
)
|
|
(2
|
)
|
|||
Foreign currency effects
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|||
Balance, end of the year
|
$
|
260
|
|
|
$
|
245
|
|
|
$
|
190
|
|
Authorization Date
|
|
Amount Authorized
|
|
Expiration Date
|
|
Status
|
April 18, 2016
|
|
$1,200
|
|
December 31, 2016
|
|
Completed in 2016
|
January 27, 2015
|
|
1,000
|
|
December 31, 2017
|
|
Completed in 2016
|
August 6, 2014
|
|
1,000
|
|
December 31, 2016
|
|
Completed in 2015
|
August 7, 2013
|
|
700
|
|
December 31, 2015
|
|
Completed in 2014
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Aggregate purchase price
|
$
|
1,575
|
|
|
$
|
1,125
|
|
|
$
|
700
|
|
Class A common shares repurchased
|
21,281
|
|
|
13,495
|
|
|
7,642
|
|
|||
Weighted-average price per share
|
$
|
73.99
|
|
|
$
|
83.36
|
|
|
$
|
91.61
|
|
|
Number of Units
|
|
Weighted-Average Grant Date Fair Value
(per unit)
|
|||
Outstanding, January 1, 2014
|
12,856
|
|
|
$
|
85.85
|
|
Granted
|
6,189
|
|
|
92.82
|
|
|
Vested
|
(5,166
|
)
|
|
86.27
|
|
|
Forfeited
|
(1,294
|
)
|
|
88.03
|
|
|
Outstanding, December 31, 2014
|
12,585
|
|
|
88.88
|
|
|
Granted
|
12,787
|
|
|
72.42
|
|
|
Vested
|
(4,855
|
)
|
|
90.72
|
|
|
Forfeited
|
(1,824
|
)
|
|
87.39
|
|
|
Outstanding, December 31, 2015
|
18,693
|
|
|
77.29
|
|
|
Granted
|
12,742
|
|
|
60.90
|
|
|
Vested
|
(7,188
|
)
|
|
77.18
|
|
|
Forfeited
|
(3,381
|
)
|
|
75.93
|
|
|
Outstanding, December 31, 2016
|
20,866
|
|
|
67.54
|
|
|
Number of Units
(in thousands)
|
|
Weighted Average Remaining Term
(in years)
|
|
Aggregate Intrinsic Value
(1)
(in millions)
|
|||
Expected to vest, December 31, 2016
|
17,835
|
|
|
2.65
|
|
$
|
1,404
|
|
(1)
|
The aggregate intrinsic values represent the total pre-tax intrinsic values based on VMware's closing stock price of
$78.73
as of
December 31, 2016
, which would have been received by the RSU holders had the RSUs been issued as of
December 31, 2016
.
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash proceeds
|
$
|
103
|
|
|
$
|
98
|
|
|
$
|
80
|
|
Class A common shares purchased
|
2,657
|
|
|
1,495
|
|
|
1,099
|
|
|||
Weighted-average price per share
|
$
|
38.78
|
|
|
$
|
65.54
|
|
|
$
|
73.21
|
|
|
VMware Stock Options
|
|
EMC Stock Options
|
||||||||||
|
Number of Shares
|
|
Weighted-Average Exercise Price
(per share)
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
(per share)
|
||||||
Outstanding, January 1, 2014
|
5,755
|
|
|
$
|
44.12
|
|
|
1,696
|
|
|
$
|
15.53
|
|
Options relating to employees transferred (to) from EMC
|
—
|
|
|
—
|
|
|
149
|
|
|
15.87
|
|
||
Granted
|
2,695
|
|
|
50.91
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(220
|
)
|
|
47.89
|
|
|
(2
|
)
|
|
19.10
|
|
||
Expired
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
14.14
|
|
||
Exercised
|
(2,361
|
)
|
|
35.58
|
|
|
(563
|
)
|
|
14.37
|
|
||
Outstanding, December 31, 2014
|
5,869
|
|
|
50.54
|
|
|
1,271
|
|
|
16.08
|
|
||
Options relating to employees transferred (to) from EMC
|
—
|
|
|
—
|
|
|
8
|
|
|
20.23
|
|
||
Granted
|
21
|
|
|
54.23
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(322
|
)
|
|
70.42
|
|
|
(1
|
)
|
|
19.37
|
|
||
Expired
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
14.21
|
|
||
Exercised
|
(2,404
|
)
|
|
29.44
|
|
|
(201
|
)
|
|
13.96
|
|
||
Outstanding, December 31, 2015
|
3,164
|
|
|
64.56
|
|
|
1,063
|
|
|
16.54
|
|
||
Options relating to employees transferred (to) from EMC
|
—
|
|
|
—
|
|
|
19
|
|
|
15.90
|
|
||
Granted
|
66
|
|
|
6.53
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(259
|
)
|
|
77.42
|
|
|
—
|
|
|
—
|
|
||
Expired
|
(476
|
)
|
|
80.52
|
|
|
(17
|
)
|
|
14.44
|
|
||
Exercised
|
(418
|
)
|
|
13.41
|
|
|
(1,065
|
)
|
|
16.56
|
|
||
Outstanding, December 31, 2016
|
2,077
|
|
|
67.75
|
|
|
—
|
|
|
—
|
|
|
VMware Stock Options
|
|||||||||||
|
Outstanding Options
(in thousands)
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Term
(in years)
|
|
Aggregate Intrinsic Value
(1)
(in millions)
|
|||||
Exercisable, December 31, 2016
|
1,436
|
|
|
$
|
66.56
|
|
|
4.41
|
|
$
|
28
|
|
Vested and expected to vest, December 31, 2016
|
2,050
|
|
|
67.47
|
|
|
4.48
|
|
39
|
|
(1)
|
The aggregate intrinsic values represent the total pre-tax intrinsic values based on VMware's closing stock price of
$78.73
as of
December 31, 2016
, which would have been received by the option holders had all in-the-money options been exercised as of that date.
|
|
For the Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cost of license revenue
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Cost of services revenue
|
52
|
|
|
44
|
|
|
42
|
|
|||
Research and development
|
305
|
|
|
226
|
|
|
244
|
|
|||
Sales and marketing
|
195
|
|
|
168
|
|
|
172
|
|
|||
General and administrative
|
82
|
|
|
64
|
|
|
69
|
|
|||
Stock-based compensation
|
636
|
|
|
504
|
|
|
529
|
|
|||
Income tax benefit
|
(183
|
)
|
|
(144
|
)
|
|
(157
|
)
|
|||
Total stock-based compensation, net of tax
|
$
|
453
|
|
|
$
|
360
|
|
|
$
|
372
|
|
|
For the Year Ended December 31,
|
||||||||||
VMware Stock Options
|
2016
|
|
2015
|
|
2014
|
||||||
Dividend yield
|
None
|
|
|
None
|
|
|
None
|
|
|||
Expected volatility
|
31.9
|
%
|
|
32.0
|
%
|
|
36.2
|
%
|
|||
Risk-free interest rate
|
0.9
|
%
|
|
1.1
|
%
|
|
0.9
|
%
|
|||
Expected term (in years)
|
3.1
|
|
|
3.3
|
|
|
3.2
|
|
|||
Weighted-average fair value at grant date
|
$
|
49.64
|
|
|
$
|
27.16
|
|
|
$
|
48.47
|
|
|
For the Year Ended December 31,
|
||||||||||
VMware Employee Stock Purchase Plan
|
2016
|
|
2015
|
|
2014
|
||||||
Dividend yield
|
None
|
|
|
None
|
|
|
None
|
|
|||
Expected volatility
|
38.3
|
%
|
|
30.1
|
%
|
|
32.3
|
%
|
|||
Risk-free interest rate
|
0.5
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|||
Expected term (in years)
|
0.7
|
|
|
0.5
|
|
|
0.5
|
|
|||
Weighted-average fair value at grant date
|
$
|
13.57
|
|
|
$
|
20.59
|
|
|
$
|
20.71
|
|
|
Unrealized Gain (Loss) on
Available-for-Sale Securities |
|
Unrealized Gain (Loss) on
Forward Contracts |
|
Total
|
||||||
Balance, January 1, 2015
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Unrealized gains (losses), net of tax provision (benefit) of $(4), $— and $(4)
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Other comprehensive income (loss), net
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Balance, December 31, 2015
|
(7
|
)
|
|
(1
|
)
|
|
(8
|
)
|
|||
Unrealized gains (losses), net of tax provision (benefit) of $(4), $— and $(3)
|
(6
|
)
|
|
1
|
|
|
(5
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statement of income, net of tax (provision) benefit of $3, $— and $3
|
5
|
|
|
(1
|
)
|
|
4
|
|
|||
Other comprehensive income (loss), net
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Balance, December 31, 2016
|
$
|
(8
|
)
|
|
$
|
(1
|
)
|
|
$
|
(9
|
)
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
United States
|
$
|
784
|
|
|
$
|
831
|
|
International
|
132
|
|
|
148
|
|
||
Total
|
$
|
916
|
|
|
$
|
979
|
|
•
|
SDDC or Software-Defined Data Center
|
•
|
Hybrid Cloud Computing
|
•
|
End-User Computing
|
2016
|
Q1 2016
|
|
Q2 2016
|
|
Q3 2016
|
|
Q4 2016
|
||||||||
Revenue
|
$
|
1,589
|
|
|
$
|
1,693
|
|
|
$
|
1,778
|
|
|
$
|
2,032
|
|
Net income
|
161
|
|
|
265
|
|
|
319
|
|
|
441
|
|
||||
Net income per share, basic
|
$
|
0.38
|
|
|
$
|
0.62
|
|
|
$
|
0.76
|
|
|
$
|
1.07
|
|
Net income per share, diluted
|
$
|
0.38
|
|
|
$
|
0.62
|
|
|
$
|
0.75
|
|
|
$
|
1.04
|
|
2015
|
Q1 2015
|
|
Q2 2015
|
|
Q3 2015
|
|
Q4 2015
|
||||||||
Revenue
|
$
|
1,511
|
|
|
$
|
1,521
|
|
|
$
|
1,672
|
|
|
$
|
1,868
|
|
Net income
|
196
|
|
|
172
|
|
|
256
|
|
|
373
|
|
||||
Net income per share, basic
|
$
|
0.46
|
|
|
$
|
0.41
|
|
|
$
|
0.61
|
|
|
$
|
0.89
|
|
Net income per share, diluted
|
$
|
0.45
|
|
|
$
|
0.40
|
|
|
$
|
0.60
|
|
|
$
|
0.88
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation
|
|
S-1/A-2
|
|
333-142368
|
|
3.1
|
|
7/9/07
|
3.2
|
|
|
Amended and Restated Bylaws
|
|
8-K
|
|
001-33622
|
|
3.1
|
|
3/8/11
|
4.1
|
|
|
Form of Specimen Common Stock Certificate
|
|
S-1/A-4
|
|
333-142368
|
|
4.1
|
|
7/27/07
|
10.1
|
|
|
Form of Master Transaction Agreement between VMware, Inc. and EMC Corporation
|
|
S-1/A-2
|
|
333-142368
|
|
10.1
|
|
7/9/07
|
10.2
|
|
|
Form of Administrative Services Agreement between VMware, Inc. and EMC Corporation
|
|
S-1/A-2
|
|
333-142368
|
|
10.2
|
|
7/9/07
|
10.3
|
|
|
Amended and Restated Tax Sharing Agreement between VMware, Inc. and Dell Technologies Inc. effective as of September 6, 2016
|
|
10-Q
|
|
001-33622
|
|
10.32
|
|
11/7/16
|
10.4
|
|
|
Form of Intellectual Property Agreement between VMware, Inc. and EMC Corporation
|
|
S-1/A-1
|
|
333-142368
|
|
10.4
|
|
6/11/07
|
10.5
|
|
|
Amended and Restated Real Estate License Agreement between VMware, Inc. and EMC Corporation dated September 21, 2015
|
|
10-Q
|
|
001-33622
|
|
10.5
|
|
11/9/15
|
10.6+
|
|
|
2007 Equity and Incentive Plan, as amended and restated May 27, 2015
|
|
10-Q
|
|
001-33622
|
|
10.6
|
|
8/5/15
|
10.7+
|
|
|
Form of Indemnification Agreement for VMware, Inc. Directors and Executive Officers, as approved March 4, 2014
|
|
10-Q
|
|
001-33622
|
|
10.29
|
|
5/1/14
|
10.8
|
|
|
Form of Insurance Matters Agreement between VMware, Inc. and EMC Corporation
|
|
S-1/A-2
|
|
333-142368
|
|
10.11
|
|
7/9/07
|
10.9+
|
|
|
Form of Stock Option Agreement, as amended May 13, 2015
|
|
10-Q
|
|
001-33622
|
|
10.9
|
|
8/5/15
|
10.10+
|
|
|
Form of Restricted Stock Unit Agreement, as amended August 12, 2016
|
|
10-Q
|
|
001-33622
|
|
10.10
|
|
11/7/16
|
10.11
|
|
|
2007 Employee Stock Purchase Plan, as amended and restated November 14, 2013
|
|
10-K
|
|
001-33622
|
|
10.13
|
|
2/25/14
|
10.12+
|
|
|
Executive Bonus Program, as amended and restated February 12, 2014
|
|
10-Q
|
|
001-33622
|
|
10.20
|
|
5/1/14
|
10.13
|
|
|
Agreement of Purchase and Sale Agreement between Roche Palo Alto LLC and VMware, Inc. dated March 16, 2011
|
|
10-Q
|
|
001-33622
|
|
10.24
|
|
8/3/11
|
10.14
|
|
|
Amended and Restated Ground Lease between VMware, Inc. and the Board of Trustees of the Leland Stanford Junior University dated June 13, 2011 (3431 Hillview Campus)
|
|
10-Q
|
|
001-33622
|
|
10.25
|
|
8/3/11
|
10.15
|
|
|
Ground Lease between 3401 Hillview LLC. and the Board of Trustees of the Leland Stanford Junior University dated as of February 2, 2006
|
|
10-Q
|
|
001-33622
|
|
10.26
|
|
8/3/11
|
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16+
|
|
|
Form of Performance Stock Unit Agreement, as amended March 16, 2015
|
|
10-Q
|
|
001-33622
|
|
10.19
|
|
5/4/15
|
10.17+
|
|
|
Non-Qualified Deferred Compensation Plan, effective as of January 1, 2014
|
|
10-K
|
|
001-33622
|
|
10.26
|
|
2/25/14
|
10.18+
|
|
|
Non-Qualified Deferred Compensation Plan Adoption Agreement, effective as of January 1, 2014
|
|
10-K
|
|
001-33622
|
|
10.27
|
|
2/25/14
|
10.19+*
|
|
|
Letter Agreement between VMware, Inc. and Sanjay Poonen effective as of October 26, 2016
|
|
|
|
|
|
|
|
|
10.20
|
|
|
Third Amendment to Ground Lease by and between the Board of Trustees of the Leland Stanford Junior University and 3401 Hillview LLC dated as of January 1, 2014
|
|
10-Q
|
|
001-33622
|
|
10.30
|
|
5/1/14
|
10.21
|
|
|
Note Exchange Agreement by and between VMware, Inc. and EMC Corporation, dated as of January 21, 2014
|
|
10-Q
|
|
001-33622
|
|
10.31
|
|
5/1/14
|
10.22
|
|
|
Promissory Note for $680 million due and payable on May 1, 2018, issued to EMC Corporation dated January 31, 2014
|
|
10-Q
|
|
001-33622
|
|
10.32
|
|
5/1/14
|
10.23
|
|
|
Promissory Note for $550 million due and payable on May 1, 2020, issued to EMC Corporation dated January 31, 2014
|
|
10-Q
|
|
001-33622
|
|
10.33
|
|
5/1/14
|
10.24
|
|
|
Promissory Note for $270 million due and payable on December 1, 2022, issued to EMC Corporation dated January 31, 2014
|
|
10-Q
|
|
001-33622
|
|
10.34
|
|
5/1/14
|
10.25+
|
|
|
Change in Control Retention Plan, adopted February 25, 2015
|
|
10-K
|
|
001-33622
|
|
10.28
|
|
2/26/15
|
10.26+
|
|
|
Letter Agreement between VMware, Inc. and Zane Rowe dated January 26, 2016
|
|
10-Q
|
|
001-33622
|
|
10.27
|
|
5/5/16
|
10.27+
|
|
|
Consulting Agreement between VMware, Inc. and Carl Eschenbach effective as of April 11, 2016
|
|
10-Q
|
|
001-33622
|
|
10.28
|
|
8/8/16
|
10.28+
|
|
|
Executive Retention Plan, adopted June 15, 2016
|
|
8-K
|
|
001-33622
|
|
99.1
|
|
6/17/16
|
10.29+
|
|
|
Letter Agreement between VMware, Inc. and Maurizio Carli effective as of April 1, 2016
|
|
10-Q
|
|
001-33622
|
|
10.30
|
|
8/8/16
|
10.30+
|
|
|
Form of Restricted Stock Unit Agreement for U.K. Participants, as amended September 1, 2016
|
|
10-Q
|
|
001-33622
|
|
10.31
|
|
11/7/16
|
10.31
|
|
|
Stock Purchase Agreement, dated as of December 15, 2016, by and among Dell Technologies Inc., EMC Equity Assets LLC and VMware, Inc.
|
|
8-K
|
|
001-33622
|
|
10.1
|
|
12/15/16
|
10.32+*
|
|
|
Letter Agreement between VMware, Inc. and Raghu Raghuram effective as of October 26, 2016
|
|
|
|
|
|
|
|
|
10.33+*
|
|
|
Letter Agreement between VMware, Inc. and Rajiv Ramaswami effective as of October 26, 2016
|
|
|
|
|
|
|
|
|
21*
|
|
|
List of subsidiaries
|
|
|
|
|
|
|
|
|
23*
|
|
|
Consent of PricewaterhouseCoopers LLP
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
32.1ǂ
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2ǂ
|
|
|
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
|
|
|
|
|
|
|
|
|
101.INS*
|
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
101.SCH*
|
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
101.CAL*
|
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
101.DEF*
|
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
101.LAB*
|
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
101.PRE*
|
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
|
VMWARE, INC.
|
|
|
|
|
|
Dated:
|
February 24, 2017
|
By:
|
/s/ Patrick Gelsinger
|
|
|
|
Patrick Gelsinger
Chief Executive Officer
|
|
|
|
|
Dated:
|
February 24, 2017
|
By:
|
/s/ Kevan Krysler
|
|
|
|
Kevan Krysler
Senior Vice President, Chief Accounting Officer
(Principal Accounting Officer)
|
Date
|
|
Signature
|
|
Title
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Patrick Gelsinger
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
Patrick Gelsinger
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Zane Rowe
|
|
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
|
|
|
Zane Rowe
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Michael Dell
|
|
Chairman
|
|
|
Michael Dell
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Anthony Bates
|
|
Director
|
|
|
Anthony Bates
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Michael Brown
|
|
Director
|
|
|
Michael Brown
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Donald Carty
|
|
Director
|
|
|
Donald Carty
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Egon Durban
|
|
Director
|
|
|
Egon Durban
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Karen Dykstra
|
|
Director
|
|
|
Karen Dykstra
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Paul Maritz
|
|
Director
|
|
|
Paul Maritz
|
|
|
|
|
|
|
|
February 24, 2017
|
|
/s/ Paul Sagan
|
|
Director
|
|
|
Paul Sagan
|
|
Tax Valuation Allowance
|
Balance at Beginning of Period
|
|
Tax Valuation Allowance Charged to Income Tax Provision
|
|
Tax Valuation Allowance Credited to Income Tax Provision
|
|
Balance at End of Period
|
||||||||
Year ended December 31, 2016 income tax valuation allowance
|
$
|
144
|
|
|
$
|
31
|
|
|
$
|
(9
|
)
|
|
$
|
166
|
|
Year ended December 31, 2015 income tax valuation allowance
|
106
|
|
|
47
|
|
|
(9
|
)
|
|
144
|
|
||||
Year ended December 31, 2014 income tax valuation allowance
|
94
|
|
|
21
|
|
|
(9
|
)
|
|
106
|
|
|
October 25, 2016
Sanjay Poonen
Dear Sanjay,
I am pleased to present you with this letter to document your new role at VMware, Inc. (“VMware”).
Title
Effective October 26, 2016 (the “Effective Date”), your new title is Chief Operating Officer, Customer Operations. In your role, you will report directly to me.
Salary and Bonus
As of the Effective Date, your annual base salary rate will continue to be $610,000, and you will remain a participant in VMware's Executive Bonus Program as it may be amended from time to time. You will continue to be eligible for an annual target bonus opportunity of 100% of your eligible compensation.
Equity
Your existing equity awards will remain in effect in accordance with their terms. You will be eligible for future equity award grants by the Compensation and Corporate Governance Committee of the VMware Board of Directors (the “Committee”) in accordance with VMware’s ongoing compensation programs for its executive officers.
Severance Protection
You will remain a participant in the VMware Executive Retention Plan adopted on June 15, 2016, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Change in Control Protection
You will remain a participant in the VMware Change in Control Retention Plan adopted on February 25, 2015, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Entire Agreement
This letter agreement represents the entire agreement between you and VMware with respect to the matters set forth herein and supersedes and replaces any prior agreements, written or oral, with respect to your role and compensation.
I would like to thank you for your contributions to VMware’s successes and for your continued
commitment toward accomplishment of our goals.
Best regards and continued success,
Pat Gelsinger, Chief Executive Officer
|
|
Signed:
/s/ Sanjay Poonen
Date:
October 31, 2016
Sanjay Poonen
|
|
October 25, 2016
Raghu Raghuram
Dear Raghu,
I am pleased to present you with this letter to document your new role at VMware, Inc. (“VMware”).
Title
Effective October 26, 2016 (the “Effective Date”), your new title is Chief Operating Officer, Products and Cloud Services. In your role, you will report directly to me.
Salary and Bonus
As of the Effective Date, your annual base salary rate will continue to be $610,000, and you will remain a participant in VMware's Executive Bonus Program as it may be amended from time to time. You will continue to be eligible for an annual target bonus opportunity of 100% of your eligible compensation.
Equity
Your existing equity awards will remain in effect in accordance with their terms. You will be eligible for future equity award grants by the Compensation and Corporate Governance Committee of the VMware Board of Directors (the “Committee”) in accordance with VMware’s ongoing compensation programs for its executive officers.
Severance Protection
You will remain a participant in the VMware Executive Retention Plan adopted on June 15, 2016, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Change in Control Protection
You will remain a participant in the VMware Change in Control Retention Plan adopted on February 25, 2015, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Entire Agreement
This letter agreement represents the entire agreement between you and VMware with respect to the matters set forth herein and supersedes and replaces any prior agreements, written or oral, with respect to your role and compensation.
I would like to thank you for your contributions to VMware’s successes and for your continued
commitment toward accomplishment of our goals.
Best regards and continued success,
Pat Gelsinger, Chief Executive Officer
|
|
Signed:
/s/ Raghu Raghuram
Date:
October 31, 2016
Raghu Raghuram
|
|
October 25, 2016
Rajiv Ramaswami
Dear Rajiv,
I am pleased to present you with this letter to document your new role and compensation at VMware, Inc. (“VMware”).
Title
Effective October 26, 2016 (the “Effective Date”), your new title is Chief Operating Officer, Products and Cloud Services. In your role, you will report directly to me.
Salary
As of the Effective Date, your annual base salary rate will continue to be $700,000.
Bonus
As of the Effective Date, you will become a participant in VMware's Executive Bonus Program as it may be amended from time to time. You will continue to be eligible for an annual target bonus opportunity of 100% of your eligible compensation. Pursuant to the terms and conditions set forth in VMware's Executive Bonus Program, any bonus for which you become eligible will be measured and funded on a semi-annual basis, with the actual payout based on achievement of VMware financial goals and your individual performance, as approved by the Committee. Any bonus payment for your initial period of employment will be prorated based on your actual start date. VMware reserves the right to modify or discontinue the Executive Bonus Program and/or your bonus opportunity at any time.
Equity
Your existing equity awards will remain in effect in accordance with their terms. You will be eligible for future equity award grants by the Compensation and Corporate Governance Committee of the VMware Board of Directors in accordance with VMware’s ongoing compensation programs for its executive officers.
Severance Protection
You will remain a participant in the VMware Executive Retention Plan adopted on June 15, 2016, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Change in Control Protection
You will remain a participant in the VMware Change in Control Retention Plan adopted on February 25, 2015, as it may be amended from time to time in accordance with and subject to its terms and conditions.
Entire Agreement
This letter agreement represents the entire agreement between you and VMware with respect to the matters set forth herein and supersedes and replaces any prior agreements, written or oral, with respect to your role and compensation.
The company values the contributions you make and the results you have achieved to support our company in accomplishment of our goals. Best regards and continued success.
Pat Gelsinger, Chief Executive Officer
|
|
Signed:
/s/ Rajiv Ramaswami
Date:
October 26, 2016
Rajiv Ramaswami
|
SUBSIDIARIES
|
|
STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION
|
|||
3401 Hillview LLC
|
|
Delaware
|
|||
Arkinnet Software Private Limited
|
|
India
|
|||
A.W.S. Holding, LLC
|
|
Delaware
|
|||
AirWatch LLC
|
|
Delaware
|
|||
AirWatch Technologies India Private Limited
|
|
India
|
|||
Nicira, Inc.
|
|
Delaware
|
|||
Taiwan VMware Information Technology LLC
|
|
Taiwan
|
|||
VMware Australia Pty Ltd
|
|
Australia
|
|||
VMware Bermuda Limited
|
|
Ireland
|
|||
VMware Bulgaria EOOD
|
|
Bulgaria
|
|||
VMware Canada Inc.
|
|
Canada
|
|||
VMware Costa Rica Ltda.
|
|
Costa Rica
|
|||
VMware Denmark ApS
|
|
Denmark
|
|||
VMware Eastern Europe
|
|
Armenia
|
|||
VMware France SAS
|
|
France
|
|||
VMware Global, Inc.
|
|
Delaware
|
|||
VMware Hong Kong Limited
|
|
Hong Kong
|
|||
VMware Information Technology (China) Co. Ltd
|
|
China
|
|||
VMware International Limited
|
|
Ireland
|
|||
VMware International Marketing Limited
|
|
Ireland
|
|||
VMware Israel Ltd.
|
|
Israel
|
|||
VMware Italy S.r.l.
|
|
Italy
|
|||
VMware KSA
|
|
Saudi Arabia
|
|||
VMware Korea Co., Ltd.
|
|
South Korea
|
|||
VMware Malaysia SDN. BHD.
|
|
Malaysia
|
|||
VMware Marketing Austria GmbH
|
|
Austria
|
|||
VMware Middle East FZ-LLC
|
|
Dubai
|
|||
VMware Netherlands B.V.
|
|
Netherlands
|
|||
VMware NZ Company
|
|
New Zealand
|
|||
VMware Singapore Pte Ltd.
|
|
Singapore
|
|||
VMware Software e Serviços Brasil Ltda.
|
|
Brazil
|
|||
VMware Software India Private Limited
|
|
India
|
|||
VMware Spain, S.L.
|
|
Spain
|
|||
VMware Sweden AB
|
|
Sweden
|
|||
VMware Switzerland GmBH
|
|
Switzerland
|
|||
VMware (Thailand) Co., Ltd.
|
|
Thailand
|
|||
VMware Turkey Software Solutions and Services Company Limited
|
|
Turkey
|
|||
VMware UK Limited
|
|
United Kingdom
|
|||
VMware, K.K.
|
|
Japan
|
|||
Wanova Technologies Ltd.
|
|
Israel
|
1.
|
I have reviewed this annual report on Form 10-K 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:
|
February 24, 2017
|
By:
|
|
/s/ Patrick Gelsinger
|
|
|
|
|
Patrick Gelsinger
Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this annual report on Form 10-K 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:
|
February 24, 2017
|
By:
|
|
/s/ Zane Rowe
|
|
|
|
|
Zane Rowe
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
|
Date:
|
February 24, 2017
|
By:
|
|
/s/ Patrick Gelsinger
|
|
|
|
|
Patrick Gelsinger
Chief Executive Officer
(Principal Executive Officer)
|
Date:
|
February 24, 2017
|
By:
|
|
/s/ Zane Rowe
|
|
|
|
|
Zane Rowe
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
|