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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fair Value of VMware Options
The fair value of each option to acquire VMware Class A common stock granted during the years ended December 31, 2010, 2009 and
2008 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
For all equity awards granted in 2010 and 2009, volatility was based on an analysis of historical stock prices and implied volatilities of
publicly-traded companies with similar characteristics, including industry, stage of life cycle, size, financial leverage, as well as the implied
volatilities of VMware’
s Class A common stock. The expected term was calculated based upon an analysis of the expected term of similar grants
of comparable publicly-traded companies.
For all equity awards granted in 2008, volatility was based on an analysis of historical stock prices and implied volatility of publicly-
traded
companies with similar characteristics, including industry, stage of life cycle, size and financial leverage. The expected term was calculated
based on the historical experience that VMware employees have had with EMC stock option grants as well as the expected term of similar grants
of comparable companies.
For all periods presented, VMware’s expected dividend yield input was zero as it has not historically paid, nor expects in the future to pay,
cash dividends on its common stock. The risk-free interest rate was based on U.S. Treasury instrument whose term is consistent with the
expected term of the stock options.
103
For the Year Ended
December 31,
VMware Stock Options
2010
2009
2008
Dividend yield
None
None
None
Expected volatility
38.0
%
36.1
%
39.4
%
Risk
-
free interest rate
1.5
%
1.9
%
2.5
%
Expected term (in years)
3.5
3.7
3.4
Weighted
-
average fair value at grant date
$
18.05
$
12.18
$
17.88
For the Year Ended
December 31,
VMware Employee Stock Purchase Plan
2010
2009
2008
Dividend yield
None
None
None
Expected volatility
33.1
%
50.9
%
39.3
%
Risk
-
free interest rate
0.2
%
0.3
%
2.7
%
Expected term (in years)
0.5
0.5
0.5
Weighted
-
average fair value at grant date
$
15.18
$
7.79
$
18.06