EMC 2010 Annual Report Download - page 32

Table of Contents
Non-controlling Interest in VMware, Inc.
The net income attributable to the non-controlling interest in VMware was $69.7, $33.7 and $44.7 in 2010, 2009 and 2008, respectively. VMware's
reported net income was $357.4, $197.1 and $290.1 in 2010, 2009 and 2008, respectively. The weighted-average non-controlling interest in VMware was
approximately 19.5%, 17.0% and 15.0% in 2010, 2009 and 2008, respectively. In the first quarter of 2010, we announced a stock purchase program of
VMware's Class A common stock to maintain an approximately 80% majority ownership in VMware over the long term. We have purchased approximately
6.0 million shares as of December 31, 2010 for $399.2.
Financial Condition
Cash provided by operating activities was $4,548.8, $3,334.4 and $3,565.1 for 2010, 2009 and 2008, respectively. Cash received from customers was
$17,585.4, $14,647.7 and $15,378.1 in 2010, 2009 and 2008, respectively. In 2010, the increase was attributable to an increase in sales volume and higher
cash proceeds from the sale of maintenance contracts, which are typically billed and paid in advance of services being rendered. In 2009, the decrease was
attributable to a reduction in sales volume. Cash paid to suppliers and employees was $12,830.7, $11,032.9 and $11,747.0 in 2010, 2009 and 2008,
respectively. In 2010, the increase was primarily attributable to an increase in headcount and related employee expenses, material costs correlated to higher
sales volume and other operating expenses. In 2009, the decrease was attributable to a reduction in purchases associated with a reduction in sales volume and
a decrease in compensation costs. Cash received from dividends and interest was $102.9, $109.5 and $240.0 in 2010, 2009 and 2008, respectively. In 2010,
2009 and 2008, we paid $232.1, $316.5 and $232.3, respectively, in income taxes. These payments are comprised of estimated taxes for the current year,
extension payments for the prior year and refunds or payments associated with income tax filings and tax audits.
Cash used in investing activities was $6,476.0, $3,095.5 and $1,614.9 in 2010, 2009 and 2008, respectively. Cash paid for acquisitions, strategic
investments and other related investments was $3,108.7, $2,847.1 and $731.0 in 2010, 2009 and 2008, respectively. In 2010, we acquired Isilon for $2,301.1,
net of cash acquired, and in 2009, we acquired Data Domain for $1,933.9, net of cash acquired. Capital additions were $745.4, $411.6 and $695.9 in 2010,
2009 and 2008, respectively. The higher level of capital additions in 2010 was primarily due to an increase in spending on facility expansion and information
technology infrastructure for 2010. In 2009, the lower level of capital additions was due to lower spending on infrastructure as part of our 2009 cost savings
initiatives. Capitalized software development costs were $363.0, $304.5 and $295.0 in 2010, 2009 and 2008, respectively. The increase in 2010 was primarily
attributable to EMC Information Infrastructure's efforts on its software development activities. Net purchases of investments were $2,259.0 in 2010 compared
to net sales and maturities of $466.6 and $75.1 in 2009 and 2008, respectively. This activity varies from period to period based upon our cash collections, cash
requirements and maturity dates of our investments.
Cash (used in) provided by financing activities was $(243.8), $211.9 and $(534.0) in 2010, 2009 and 2008, respectively. In 2010 and 2008, we spent
$999.9 and $1,489.5 to repurchase 52.7 million and 112.2 million shares of EMC common stock, respectively. We additionally spent $399.2 to purchase
6.0 million shares of VMware common stock and VMware spent $338.5 to repurchase 4.9 million shares of its common stock in 2010. We made no share
repurchases in 2009. We generated $1,212.0, $594.0 and $431.2 in 2010, 2009 and 2008, respectively, from the exercise of stock options and the purchase of
shares within the employee stock plans.
Based upon the closing price of our common stock for the prescribed measurement period during the three months ended December 31, 2010, the
convertible senior debt of $1,725, 1.75% convertible senior notes due 2011 (the "2011 Notes") and our $1,725, 1.75% convertible senior notes due 2013 (the
"2013 Notes" and, together with the 2011 Notes, the "Notes") are convertible at the option of the holder through March 31, 2011. Upon conversion, we are
obligated to pay cash up to the principal amount of the debt converted. We have the option to settle any conversion value in excess of the principal amount
with cash, shares of our common stock, or a combination thereof.
Additionally, $1,725 of the Notes are due in November 2011. The remaining $1,725 of the Notes is due in November 2013. At maturity, we are
obligated to pay cash up to the principal amount of the debt. We have the option to settle any conversion value in excess of the principal amount with cash,
shares of our common stock, or a combination thereof.
In connection with the issuance of the Notes, we entered into separate convertible note hedge transactions with respect to our common stock. These will
generally have the effect of offsetting the cash outlay which may be paid by EMC for the conversion value in excess of the principal amount.
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