VMware 2015 Annual Report Download - page 26

TableofContents
paid.Rather,aminoritystockholder’ssoleremedyinthecontextofashort-formmergeristoexerciseappraisalrightsunderDelawarelaw.Insuchaproceeding,
petitioningstockholdersmaybeawardedmoreorlessthanthemergerpriceortheamounttheywouldhavereceivedinamergernegotiatedbetweentheparentand
adisinterestedspecialcommitteeadvisedbyindependentfinancialandlegaladvisors.DenalihaspubliclystatedthatfromthecompletionoftheDellAcquisition
throughthetwo-yearanniversaryofitscompletion,itwillnotacquireanysharesofcommonstockofVMwareifsuchacquisitionwouldcausethecommonstock
ofVMwaretonolongerbepubliclytradedonaU.S.securitiesexchangeorVMwaretonolongerberequiredtofilereportsunderSections13and15(d)ofthe
ExchangeAct,ineachcase,unlesssuchacquisitionofVMwarecommonstockisrequiredinorderforVMwaretocontinuetobeamemberoftheaffiliatedgroup
ofcorporationsfilingaconsolidatedtaxreturnwithDenali.
We engage in related persons transactions with EMC that may divert our resources, create opportunity costs and prove to be unsuccessful.
WecurrentlyengageinanumberofrelatedpersonstransactionswithEMC(and,iftheDellAcquisitioniscompleted,wemayinthefutureengageinrelated
personstransactionswithDell)thatincludejointproductdevelopment,go-to-market,branding,sales,customerserviceactivities,realestateandvarioussupport
services.Additionally,wecontributedtechnologyandtransferredemployeestoPivotalSoftware,Inc.(“Pivotal”)in2013andcontinuetoholdasignificant
ownershipinterestinPivotal.Formoreinformation,refertoNoteNtotheconsolidatedfinancialstatementsinPartII,Item8and“OurRelationshipwithEMC”in
“Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations”inPartII,Item7ofthisAnnualreportonForm10-K,and
“TransactionswithRelatedPersons”intheproxystatementforour2015annualmeetingofstockholders.
Webelievethattheserelatedpersonstransactionsprovideusauniqueopportunitytoleveragetherespectivetechnicalexpertise,productstrengthsandmarket
presenceofEMCanditssubsidiariesforthebenefitofourcustomersandstockholderswhileenablingustocompetemoreeffectivelywithcompetitorswhoare
muchlargerthanus.However,thesetransactions(orothertransactionswemayenterintowithDelliftheDellAcquisitioniscompleted)mayprovenottobe
successfulandmaydivertourresourcesortheattentionofourmanagementfromotheropportunities.Negotiatingandimplementingthesearrangementscanbe
timeconsumingandcausedelaysintheintroductionofjointproductandserviceofferingsanddisruptionstoVMware'sbusiness.Wecannotpredictwhetherour
stockholdersandindustryorsecuritiesanalystswhocoveruswillreactpositivelytoannouncementsofnewrelatedpersonstransactionswithEMC,andsuch
announcementscouldhaveanegativeimpactonourstockprice.Ourparticipationinthesetransactionsmayalsocausecertainofourothervendorsandecosystem
partnerswhocompetewithEMCanditssubsidiaries(or,iftheDellAcquisitioniscompleted,Denalianditssubsidiaries)toalsoviewusastheircompetitors.
Additionally,ifPivotalrequiresadditionalfunding,wemaybeaskedtocontributecapitalresourcestoPivotaloracceptdilutioninourownershipinterest,andwe
maybeunabletorealizeanyvaluefromthetechnologyandresourcesthatwecontributedtoPivotal.
Our business and EMC’s business overlap, and EMC and Dell may compete with us, which could reduce our market share.
WeandEMCareITinfrastructurecompaniesprovidingproductsandservicesthatoverlapinvariousareas,includingsoftware-basedstorage,hyper-
convergedinfrastructureproductsandcloudcomputingservices.Dell,whichwillindirectlycontrolourcompanyiftheDellAcquisitioniscompleted,also
providesproductsandservicesthatoverlapwithoursinvariousareas,includinginmanagementandhyper-convergedinfrastructureproducts.EMCandDell
competewithusintheseareasnowandmayengageinincreasedcompetitionwithusinthefuture.Inaddition,theintellectualpropertyagreementthatwehave
enteredintowithEMCprovidesEMCtheabilitytouseoursourcecodeandintellectualproperty,which,subjecttolimitations,itmayusetoproducecertain
productsthatcompetewithours.EMC’srightsinthisregardextendtoitsmajority-ownedsubsidiaries,whichcouldincludejointventureswhereEMCholdsa
majoritypositionandoneormoreofourcompetitorsholdminoritypositions.
EMCor,iftheDellAcquisitioniscompleted,Denalicouldassertcontroloverusinamannerthatcouldimpedeourgrowthorourabilitytoenternewmarkets
orotherwiseadverselyaffectourbusiness.Further,EMCor,iftheDellAcquisitioniscompleted,Denalicouldutilizeitscontroloverustocauseustotakeor
refrainfromtakingcertainactions,includingenteringintorelationshipswithchannel,technologyandothermarketingpartners,enforcingourintellectualproperty
rightsorpursuingbusinesscombinations,othercorporateopportunities(whichEMCisexpresslypermittedtopursueunderthecircumstancessetforthinour
certificateofincorporation)orproductdevelopmentinitiativesthatcouldadverselyaffectourcompetitiveposition,includingourcompetitivepositionrelativeto
thatofEMCandDellinmarketswherewecompetewiththem.Inaddition,EMCandDellmaintainsignificantpartnershipswithcertainofourcompetitors,
includingMicrosoft.
EMC’s and Dell's competition in certain markets may affect our ability to build and maintain partnerships.
OurexistingandpotentialpartnerrelationshipsmaybenegativelyaffectedbyourrelationshipwithEMCandthependencyoftheDellAcquisition.We
partnerwithanumberofcompaniesthatcompetewithEMCorDellincertainmarketsinwhichEMCorDellparticipate.EMC’smajorityownershipinus,and
Denali'spotentialmajorityownershipinusiftheDell
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