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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
deliverables, eliminate the use of the residual value method of allocating arrangement consideration and require expanded disclosure. These new
standards became effective for us for multiple-element arrangements entered into or materially modified on or after January 1, 2011. VMware
has determined that these new standards did not have an impact on VMware’s consolidated financial statements as the Company’s business is
currently conducted.
Software
In September 2009, the FASB issued amended standards for the accounting for certain revenue arrangements that include software
elements. These new standards amend pre-existing software revenue guidance by removing from its scope tangible products that contain both
software and non-software components that function together to deliver the product’s functionality. These amended standards became effective
for VMware for revenue arrangements entered into or materially modified on or after January 1, 2011. VMware has determined that these new
standards are not applicable to the Company’s business and will not have an impact on its consolidated financial statements.
Consolidations
In December 2009, the FASB issued standards for consolidation of variable interest entities (“VIEs”)
primarily related to the determination
of the primary beneficiary of the VIE. These amended standards became effective for VMware on January 1, 2010. The adoption of these
standards did not have a material impact on VMware’s consolidated financial position and results of operations. These amended standards may,
however, have an impact on accounting for any changes to existing relationships or future investments.
B. Earnings per Share
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the
period. Diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding and
potentially dilutive securities, as calculated using the treasury stock method, outstanding during the period. Potentially dilutive securities include
stock options, unvested restricted stock units, unvested restricted stock awards, other unvested restricted stock, and purchase options under
VMware’s employee stock purchase plan. Securities are excluded from the computations of diluted net income per share if their effect would be
anti-dilutive. As of December 31, 2010, VMware had 116.4 million shares of Class A common stock and 300.0 million shares of Class B
common stock outstanding that were included in the calculation of basic earnings per share. VMware uses the two-class method to calculate
earnings per share as both classes share the same rights in dividends, therefore basic and diluted earnings per share are the same for both classes.
The following table sets forth the computations of basic and diluted net income per share (table in thousands, except per share data):
83
For the Year Ended December 31,
2010
2009
2008
Net income
$
357,439
$
197,098
$
290,133
Weighted
-
average shares, basic for Class A and Class B
409,805
394,269
385,068
Effect of dilutive securities
13,641
5,507
12,117
Weighted
-
average shares, diluted for Class A and Class B
423,446
399,776
397,185
Net income per weighted
-
average share, basic for Class A and Class B
$
0.87
$
0.50
$
0.75
Net income per weighted
-
average share, diluted for Class A and Class B
$
0.84
$
0.49
$
0.73