VMware 2011 Annual Report Download - page 52

Table of Contents
certain data center assets and a license to certain intellectual property, for approximately $8.0 . We also entered into an operational support
agreement with EMC pursuant to which we took over responsibility to operate the Mozy service on behalf of EMC. We hired more than 300
Mozy employees and, pursuant to the support agreement, costs incurred by us to support EMC’s Mozy services, plus a mark-up intended to
approximate third-party costs, are reimbursed to us by EMC. On the consolidated statements of income, such amounts were approximately
$39.0
in 2011, including a markup of $2.8 , and were recorded as a reduction to the costs we incurred. EMC retained ownership of the Mozy business
and its remaining assets. EMC continues to be responsible to Mozy customers for Mozy products and services, and continues to recognize
revenue from such products and services. As such, the assets acquired from EMC did not constitute a business and were accounted for as an
asset purchase between entities under common control pursuant to generally accepted accounting principles. Accordingly, we included the
carrying value of the transferred assets as of the date of transfer in our consolidated financial statements.
In April 2010, we acquired certain software product technology and expertise from EMC’s Ionix IT management business for cash
consideration of $175.0
. EMC retained the Ionix brand and will continue to offer customers the products acquired by us, pursuant to the ongoing
reseller agreement between EMC and us. During the years ended December 31, 2011 and 2010 , $14.4 and $10.6 , respectively, of contingent
amounts were paid to EMC. These amounts were recorded as equity transactions and were offsets to the initial capital contribution from EMC.
As of December 31, 2011, all contingent payments under the agreement had been made.
Pursuant to the ongoing reseller arrangement with EMC that commenced in 2009, EMC bundles our products and services with EMC’s
hardware and sells them to end users. In the years ended December 31, 2011 , 2010 and 2009 , we recognized revenues of $72.0 , $48.5 and
$14.1 , respectively, from products and services sold pursuant to our reseller arrangement with EMC. As of December 31, 2011 and 2010 ,
$105.6 and $29.0
, respectively, of revenues from products and services sold under the reseller arrangement were included in unearned revenues.
In the years ended December 31, 2011 , 2010 and 2009 , we recognized professional services revenues of $66.2 , $60.6 and $25.2 ,
respectively, for services provided to EMC’s customers pursuant to our contractual agreements with EMC. As of December 31, 2011 and 2010 ,
$5.1 and $5.9 , respectively, of revenues from professional services to EMC customers were included in unearned revenues.
In the years ended December 31, 2011 , 2010 and 2009 , we recognized revenues of $3.2 , $6.1 and $5.6 , 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, 2011
and 2010 , $23.4 and $19.3 , respectively, of revenues from server and desktop products and services purchased by EMC for internal use were
included in unearned revenues.
We purchased storage systems and software, as well as consulting services, from EMC for $24.3 , $18.4 and $9.7 in the years ended
December 31, 2011 , 2010 and 2009 , 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, benefits, travel and
rent. Additionally, from time to time, EMC incurs certain administrative costs on our behalf in the U.S. The total cost of the services provided to
us by EMC as described above was $82.6 , $66.4 and $95.6 in the years ended December 31, 2011 , 2010 and 2009 , respectively.
Pursuant to the tax sharing agreement, we have made payments to EMC and EMC has made payments to us. The following table
summarizes these payments made between us and EMC during the years ended December 31, 2011, 2010 and 2009:
Payments between us and EMC under the tax sharing agreement primarily relate to our portion of federal income taxes on EMC's
consolidated tax return. Payments from us to EMC primarily relate to periods for which we had stand-alone federal taxable income, while
payments from EMC to us relate to periods for which we had a stand-alone federal taxable loss. The amounts that we either pay to or receive
from EMC for its 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 2011 and 2010 , 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 $7.8 and $6.5 , 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 .
46
For the Year Ended December 31,
2011
2010 2009
Payments from VMware to EMC
$
12.1
$
5.1
$
14.2
Payments from EMC to VMware
314.5
2.5
107.6