VMware 2010 Annual Report Download - page 50

Table of Contents
revenues of $48.5 and $14.1, respectively, from products and services sold pursuant to our reseller arrangement with EMC. As of December 31,
2010 and 2009, $29.0 and $22.4, respectively, of revenues from products and services sold under the reseller arrangement were included in
unearned revenue.
In the years ended December 31, 2010, 2009 and 2008, we recognized professional services revenues of $60.6, $25.2 and $16.9,
respectively, for services provided to EMC’s customers pursuant to our contractual agreements with EMC. As of December 31, 2010 and 2009,
$5.9 and $0.7, respectively, of revenues from professional services to EMC customers were included in unearned revenue.
In the years ended December 31, 2010, 2009 and 2008, we recognized revenues of $6.1, $5.6 and $4.1, respectively, from server and
desktop products and services purchased by EMC for internal use pursuant to our contractual agreements with EMC. As of December 31, 2010
and 2009, $19.3 and $3.7, respectively, of revenues from server and desktop products and services purchased by EMC for internal use were
included in unearned revenue.
We purchased storage systems and software, as well as consulting services, from EMC for $18.4, $9.7 and $25.2 in the years ended
December 31, 2010, 2009 and 2008, respectively.
In certain geographic regions where we do not have an established legal entity, we contract with EMC subsidiaries for support services and
EMC employees who are managed by our personnel. The costs incurred by EMC on our behalf related to these employees are passed on to us
and we are charged a mark-
up intended to approximate costs that would have been charged had we contracted for such services with an unrelated
third party. These costs are included as expenses in our consolidated statements of income and primarily include salaries and benefits, travel and
rent. Additionally, EMC historically incurred certain costs on our behalf in the U.S., which primarily related to a shared system for travel. In the
fourth quarter of 2009, we implemented our own travel system in the U.S. and are now incurring these costs directly. The total cost of the
services provided to us by EMC as described above was $66.4, $95.6 and $139.8 in the years ended December 31, 2010, 2009 and 2008,
respectively.
As calculated under our tax sharing agreement with EMC, we paid EMC $5.1 in 2010 for our portion of EMC’s consolidated federal
income taxes. Under the same tax sharing agreement, EMC paid us $2.5 in 2010 for a refund of an overpayment related to the consolidated
federal and state income taxes for the fiscal year ended December 31, 2008. In 2009 and 2008, we paid $14.2 and $64.3, respectively, for our
portion of EMC’s consolidated federal and state income taxes for various periods, as well as the conclusion of the 2005 and 2006 federal income
tax audit. In 2009, EMC paid us $107.6 for our stand-alone federal taxable loss for the fiscal year ending December 31, 2008 and for a refund of
an overpayment related to our portion of EMC’s 2007 federal consolidated income taxes. No payments were made by EMC in 2008. The
amounts that we pay to EMC for our portion of federal income taxes on EMC’s consolidated tax return differ from the amounts we would owe
on a stand-alone basis and the difference is presented as a component of stockholders’ equity. In 2010 and 2008, the difference between the
amount of tax calculated on a stand-alone basis and the amount of tax calculated per the tax sharing agreement was recorded as an increase in
stockholders’ equity of $6.5 and $5.2, respectively. In 2009, the difference between the amount of tax calculated on a stand-alone basis and the
amount of tax calculated per the tax sharing agreement was recorded as a decrease in stockholders’ equity of $8.0.
Interest expense with EMC, net, primarily consists of interest expense on the note payable to EMC. In 2010, 2009 and 2008, $4.1, $6.5 and
$18.6, respectively, of interest expense was recorded related to the note payable to EMC and included in interest expense with EMC, net,
recorded on the consolidated statements of income. Our interest income and expenses as a separate, stand-
alone company may be higher or lower
than the amounts reflected in the consolidated financial statements.
In 2008, we resolved with EMC certain acquisition-
related intercompany liabilities due to EMC. As a result, intercompany liabilities due to
EMC of $9.7 were recorded as a capital contribution from EMC in additional paid-in capital without the issuance of additional equity by us or
remittance of any cash.
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