VMware 2013 Annual Report Download - page 50

Table of Contents
Information about our revenues and receipts and unearned revenues from such arrangements with EMC for the years ended December 31, 2013 , 2012
and 2011 consisted of the following:
We and EMC engaged in the following ongoing intercompany transactions, which resulted in costs to us:
Information about our costs from such arrangements with EMC for the years ended December 31, 2013 , 2012 and 2011 consisted of the following:
In the fourth quarter of 2013, we and EMC modified an existing technology licensing arrangement. Pursuant to the modified arrangement, we received
certain rights to developed technology for a lump-sum payment of $26
, which was included in amounts due to related parties, net on the consolidated balance
sheets as of December 31, 2013. The license of technology was accounted for as a transaction by entities under common control. Accordingly, an intangible
asset of $2 was recognized and was derived by allocating the value ascribed to the licensed technology based upon the relative fair market values of the
technology to each party. The difference between the asset recorded and the consideration due was primarily recognized as a reduction in capital from EMC
on the statement of stockholders' equity. In addition to the license of the technology, we will pay EMC for support and for development collaboration. These
amounts are included in collaborative technology project costs in the table above.
Certain Stock-Based Compensation
Effective September 1, 2012, Pat Gelsinger succeeded Paul Maritz as Chief Executive Officer of VMware. Prior to joining VMware, Pat Gelsinger was
the President and Chief Operating Officer of EMC Information Infrastructure Products. Paul Maritz remains a board member of VMware and currently serves
as Chief Executive Officer of Pivotal, a majority-owned
48
•
We recognize revenues for professional services based upon such contractual agreements with EMC.
• From time to time, we and EMC enter into agreements to collaborate on technology projects, and EMC pays us for services we provide to EMC in
connection with such projects.
Revenues and Receipts from EMC
Unearned Revenues from EMC
For the Year Ended December 31,
As of December 31,
2013
2012 2011 2013 2012
Reseller revenues
$
141
$
141
$
72
$
188
$
149
Professional services revenues
72
82
66
12
3
Internal-use revenues
32
9
3
20
28
Collaborative technology project
receipts
7
7
2
n/a
n/a
•
We and EMC have ongoing arrangements pursuant to which we purchase products and services for internal use from EMC.
• From time to time, we and EMC enter into agreements to collaborate on technology projects, and we pay EMC for services provided to us by EMC
related to such projects.
• In certain geographic regions where we do not have an established legal entity, we contract with EMC subsidiaries for support services and EMC
personnel who are managed by us. 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. EMC also incurs certain
administrative costs on our behalf in the U.S. that are recorded as expenses in our consolidated statements of income.
•
We incur interest expense on our note payable with EMC. See Note K and R to the consolidated financial statements in Part II, Item 8 of this Annual
Report on Form 10-K for further information.
For the Year Ended December 31,
2013
2012 2011
Purchases of products and services
$
56
$
42
$
24
Collaborative technology project costs
13
n/a
n/a
EMC subsidiary support and administrative costs
128
106
83
Interest expense on note payable
4
5
4