EMC 2007 Annual Report Download - page 64

EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In December 2007, the FASB issued FAS No. 141 (revised 2007), "Business Combinations" ("FAS No. 141R"). This statement establishes principles
and requirements for how the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. FAS No. 141R is effective for fiscal years beginning on December 15, 2008. We are currently evaluating the potential
impact of FAS No. 141R on our financial position and results of operations.
In December 2007, the FASB issued FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51"
("FAS No. 160"). The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and
therefore deconsolidation of a subsidiary. FAS No. 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the
potential impact of FAS No. 160 on our financial position and results of operations.
B. VMware, Inc. Transactions
In the third quarter of 2007, VMware completed an initial public offering ("IPO") of its Class A common stock. Prior to the IPO, EMC amended
VMware's certificate of incorporation to authorize shares of Class A and Class B common stock. After a conversion of existing common stock into Class A
and Class B common stock, EMC held 32.5 million shares of Class A common stock and 300.0 million shares of Class B common stock. The ownership
rights of Class A and Class B common stock are the same, except with respect to voting, conversion, certain actions that require the consent of holders of
Class B common stock and other protective provisions. Each share of Class B common stock has ten votes, while each share of Class A common stock has
one vote for all matters to be voted on by stockholders. In the IPO, VMware sold 37.95 million shares of its Class A common stock at $29.00 per share,
resulting in net proceeds of approximately $1,035.2 million. The SAB 51 gain of $551.1 million, net of taxes, of $330.7 million from this transaction was
recorded as an increase to additional paid-in capital which reflects the amount of EMC's share of VMware's net assets (after minority interests) in excess of
EMC's carrying value prior to the IPO.
In connection with the IPO, EMC and VMware conducted a voluntary exchange offer enabling VMware employees in the United States to exchange
their existing EMC options and restricted stock awards for options to purchase VMware Class A common stock and restricted stock awards of VMware
Class A common stock, respectively, at an exchange ratio based upon EMC's two-day weighted average trading price prior to the consummation of the
offering and the IPO offering price of Class A common stock. See Note P.
In August 2007, Intel Corporation, through its affiliate, Intel Capital Corporation, purchased from VMware 9.5 million newly issued shares of VMware's
Class A common stock at $23.00 per share, resulting in net proceeds to VMware of approximately $218.3 million. The SAB 51 gain of $135.1 million, net of
taxes, of $81.0 million from this transaction, was recorded as an increase to additional paid-in capital.
In August 2007, Cisco Systems, Inc. purchased 6.0 million shares of VMware's Class A common stock held by EMC at $25.00 per share, resulting in net
proceeds to EMC of approximately $150.0 million. This transaction resulted in a pre-tax gain of $148.6 million.
As of December 31, 2007, the minority stockholders' proportionate share of equity in VMware of $189.0 million is reflected as Minority interest in
VMware in the accompanying balance sheets. At December 31, 2007, EMC held approximately 98% of the combined voting power of VMware's outstanding
common stock and approximately 85% of the economic interest in VMware.
C. Business Acquisitions, Goodwill and Intangible Assets
2007 Acquisitions
In February 2007, we acquired all of the outstanding capital stock of Valyd Software Private Limited, a provider of solutions for entity-wide data
protection for a variety of database management systems. This acquisition further expands and strengthens our Security offerings.
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