VMware 2014 Annual Report Download - page 53

Table of Contents
Information about our revenues and receipts and unearned revenues from such arrangements with EMC for the years ended December 31,
2014 , 2013 and 2012 consisted of the following:
We and EMC engage 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, 2014 , 2013 and 2012 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 statements 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 subsidiary of EMC in which we have an ownership
interest, and as an executive officer of EMC. Both Paul Maritz and Pat Gelsinger retain certain of their respective equity awards that they held as
of September 1, 2012 and Mr. Gelsinger continues to vest in certain of his EMC awards. Stock-based compensation related to Pat Gelsinger’s
EMC awards are being recognized in
50
Revenues and Receipts from EMC
Unearned Revenues from EMC
For the Year Ended December 31,
As of December 31,
2014
2013 2012 2014 2013
Reseller revenues
$
205
$
141
$
141
$
290
$
188
Professional services revenues
85
72
82
9
12
Internal-use revenues
21
32
9
18
20
Collaborative technology project receipts
—
7
7
n/a
n/a
Agency fee revenues
5
5
—
—
—
Reimbursement for transition services
2
12
—
n/a
n/a
•
We purchase and lease products and purchase 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 notes payable with EMC.
For the Year Ended December 31,
2014
2013 2012
Purchases and leases of products and purchases of services
$
71
$
63
$
42
Collaborative technology project costs
12
13
n/a
EMC subsidiary support and administrative costs
137
128
106
Interest expense on notes payable
24
4
5