VMware 2010 Annual Report Download - page 51

Table of Contents
As of December 31, 2010, we had $76.5 due from EMC, which was partially offset by $21.0 due to EMC. As of December 31, 2009, we
had $47.1 due from EMC, which was partially offset by $20.7 due to EMC. The net amounts due from EMC as of December 31, 2010 and
December 31, 2009 were $55.5 and $26.4, respectively, and resulted from the related party transactions described above. In addition to the $55.5
due from EMC as of December 31, 2010, we had $144.3 of income taxes receivable due from EMC, which is included in other current assets on
our consolidated balance sheets. As of December 31, 2009, we had $3.0 of income taxes receivable due from EMC and $10.5 of income taxes
payable due to EMC. A large portion of the income tax receivable is related to 2010 federal income taxes and is expected to be received from
EMC after the 2010 consolidated federal tax return extension is filed. Balances due to or from EMC which are unrelated to tax obligations are
generally settled in cash within 60 days of each quarter-
end. The timing of the tax payments due to and from EMC is governed by the tax sharing
agreement with EMC.
By nature of EMC’s majority ownership of us, the amounts we recorded for our intercompany transactions with EMC would not be
considered arm’s-length with an unrelated third party. Therefore the financial statements included herein may not necessarily reflect our
financial condition, results of operations and cash flows had we engaged in such transactions with an unrelated third party during all periods
presented. Accordingly, our historical results should not be relied upon as an indicator of our future performance as a stand-alone company.
Income Statement Presentation
As we operate our business in one operating segment, our revenues and operating expenses are presented and discussed at the consolidated
level.
Sources of Revenues
License revenues
Our license revenues consist of revenues earned from the licensing of our software products. These products are generally priced and
licensed on a perpetual basis based upon the number of physical desktop computers or server processors on which our software runs. Certain
products are licensed on a subscription basis. Effective September 1, 2010, our management solutions are priced on a per-virtual-machine basis.
The new model for management products better aligns with our customer’s need to manage the number of virtual machines, rather than to the
management of physical hardware.
Software maintenance revenues
Software maintenance revenues are recognized ratably over the contract period. Our contract periods typically range from one to five
years. Customers receive various types of technical support based on the level of support purchased. Customers who are party to software
maintenance agreements with us are entitled to receive product updates and upgrades on a when-and-if-available basis.
Professional services revenues
Professional services include design, implementation and training. Professional services are not considered essential to the functionality of
our products, as these services do not alter the product capabilities and may be performed by our customers or by other vendors. Professional
services engagements performed for a fixed fee, for which we are able to make reasonably dependable estimates of progress toward completion,
are recognized on a proportional performance basis based on hours incurred and estimated hours of completion. Professional services
engagements that are on a time and materials basis are recognized based on hours incurred. Revenues on all other professional services
engagements are recognized upon completion.
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