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TableofContents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
OnMarch4,2015,ChristophHellwig,asoftwaredeveloperwhoallegesthatsoftwarecodehewroteisusedinacomponentoftheCompany'svSphere
product,filedalawsuitagainstVMwareintheHamburgRegionalCourtinGermanyallegingcopyrightinfringementforfailingtocomplywiththetermsofan
opensourceGeneralPublicLicensev.2(“GPLv.2”)andseekinganorderrequiringVMwaretocomplywiththeGPLv.2orceasedistributionofanyaffectedcode
withinGermany.VMwarebelievesthatithasmeritoriousdefensesinconnectionwiththislawsuit,andcurrentlyareasonablypossiblelossorrangeoflosscannot
beestimated.
VMwarebelievesthatithasvaliddefensesagainsteachoftheabovelegalmatters.However,giventheunpredictablenatureoflegalproceedings,an
unfavorableresolutionofoneormorelegalproceedings,claims,orinvestigationscouldhaveamaterialadverseeffectonVMware’sconsolidatedfinancial
statements.
OnNovember17,2015,FrancisM.Ford,aVMwareClassAstockholder,filedanactionintheDelawareChanceryCourtagainstcertaincurrentandformer
VMwaredirectors,amongothers,allegingthatthedirectorsbreachedtheirfiduciarydutiesinconnectionwiththeproposedacquisitionbyDellofEMC,andthe
proposedissuanceoftrackingstockthatisintendedtotracktheperformanceofVMware.TheplaintiffdoesnotassertclaimsdirectlyagainstVMware,but
purportstobringclassclaimsonbehalfofotherVMwareClassAstockholdersandderivativeclaimsonbehalfofVMware.WhileVMwaredoesnotbelievethat
thecaserepresentsamaterialadverseexposure,noassurancescanbegiventhatthelitigationwillnothaveanyadverseconsequencesforthecompanyorthe
directorsnamedinthesuit.
VMwareaccruesforaliabilitywhenadeterminationhasbeenmadethatalossisbothprobableandtheamountofthelosscanbereasonablyestimated.If
onlyarangecanbeestimatedandnoamountwithintherangeisabetterestimatethananyotheramount,anaccrualisrecordedfortheminimumamountinthe
range.Significantjudgmentisrequiredinboththedeterminationthattheoccurrenceofalossisprobableandisreasonablyestimable.Inmakingsuchjudgments,
VMwareconsiderstheimpactofnegotiations,settlements,rulings,adviceoflegalcounselandotherinformationandeventspertainingtoaparticularmatter.Legal
costsaregenerallyrecognizedasexpensewhenincurred.
VMwareisalsosubjecttootherlegal,administrativeandregulatoryproceedings,claims,demandsandinvestigationsintheordinarycourseofbusinessorin
connectionwithbusinessmergersandacquisitions,includingclaimswithrespecttocommercial,contractingandsalespractices,productliability,intellectual
property,employment,corporateandsecuritieslaw,classaction,whistleblowerandothermatters.Fromtimetotime,VMwarealsoreceivesinquiriesfromandhas
discussionswithgovernmententitiesonvariousmatters.AsofDecember31,2015and2014,amountsaccruedrelatingtotheseothermattersarisingaspartofthe
ordinarycourseofbusinesswereconsideredimmaterial.VMwaredoesnotbelievethatanyliabilityfromanyreasonablyforeseeabledispositionofsuchclaims
andlitigation,individuallyorintheaggregate,wouldhaveamaterialadverseeffectonitsconsolidatedfinancialstatements.
Operating Lease and Other Contractual Commitments
VMwareleasesofficefacilitiesandequipmentundervariousoperatingarrangements.RentexpensefortheyearsendedDecember31,2015,2014and2013
was$105million,$85millionand$67million,respectively.VMware’sminimumfutureleasecommitmentsandothercontractualcommitmentsatDecember31,
2015wereasfollows(tableinmillions):
Future Lease
Commitments
Purchase Obligations
Other Contractual
Commitments (1)
Total
2016 $ 90
$ 32
$ 7
$ 129
2017 72
19
3
94
2018 56
16
3
75
2019 45
3
3
51
2020 34
—
3
37
Thereafter 572
—
13
585
Total $ 869
$ 70
$ 32
$ 971
(1)Consistingofvariouscontractualagreements,whichincludecommitmentsontheleaseforVMware’sWashingtondatacenterfacilityandassetretirement
obligations.
Theamountofthefutureleasecommitmentsafter2020isprimarilyforthegroundleasesonVMware’sPaloAlto,Californiaheadquarterfacilities,which
expirein2046.AsseveralofVMware’soperatingleasesarepayableinforeigncurrencies,theoperatingleasepaymentsmayfluctuateinresponsetochangesin
theexchangeratebetweentheU.S.dollarandtheforeigncurrenciesinwhichthecommitmentsarepayable.
79