EMC 2008 Annual Report Download - page 102

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In 2008, 1.7 million shares of Class A common stock were purchased under the VMware ESPP at a weighted-average purchase price per share of $28.05.
The total cash proceeds from the purchase of these shares under the VMware ESPP were $46.9 million. As part of the 1.7 million shares purchased in 2008,
employees purchased 0.6 million shares under the VMware ESPP at a purchase price per share of $24.65. The purchase of 0.6 million shares related to the
December 31, 2007 purchase, which was completed in January 2008. The total cash proceeds from the December 31, 2007 purchase under the VMware ESPP
were $15.7 million. In 2007, no shares were purchased under the VMware ESPP.
VMware Stock Options
The following table summarizes activity since January 1, 2007 for VMware employees in VMware stock options (shares in thousands):
Number of
Shares
Weighted Average
Exercise Price
(per share)
Outstanding, January 1, 2007 — $ —
Granted 39,271 27.88
Exchanged from EMC stock options 6,732 19.94
Forfeited (539) 24.50
Expired (5) 24.64
Exercised (120) 23.00
Outstanding, December 31, 2007 45,339 26.76
Granted(1) 11,741 40.48
Forfeited(1) (8,033) 51.74
Expired (37) 24.26
Exercised (6,574) 21.64
Outstanding, December 31, 2008 42,436 26.54
Exercisable, December 31, 2008 10,889 $ 24.04
Vested and expected to vest, December 31, 2008 38,319 26.03
•
Includes options for 4,107 shares exchanged in the 2008 VMware Exchange Offer.
As of December 31, 2008, the weighted-average remaining contractual term was 4.70 years and the aggregate intrinsic value was $20.4 million for the
10,889 exercisable shares. For the 38,319 shares vested and expected to vest at December 31, 2008, the weighted-average remaining contractual term was
4.91 years and the aggregate intrinsic value was $41.5 million. The aggregate intrinsic values represent the total pre-tax intrinsic values based on VMware's
closing stock price of $23.69 as of December 31, 2008 which would have been received by the option holders had all in-the-money options been exercised as
of that date. Cash proceeds from the exercise of stock options for the years ended December 31, 2008 and 2007 were $143.2 million and $2.8 million,
respectively. The options exercised in 2008 had a pre-tax intrinsic value of $219.6 million and income tax benefits realized from the exercise of stock options
of $71.4 million. There was no pre-tax intrinsic value to the options exercised or related income tax benefits realized in 2007.
In June 2007, options were granted to non-employee directors to purchase 120,000 shares of VMware's Class A common stock with an exercise price of
$23.00 per share. The options were exercisable immediately, subjected to termination if not exercised within one year from the date of grant, and vest pro rata
over the first three years of the grant. In July 2007, the 120,000 options to purchase shares of Class A common stock were exercised prior to vesting, resulting
in the outstanding shares being subject to repurchase and hence restricted until such time as the underlying options vest. As of December 31, 2008 and 2007,
$1.8 million and $2.8 million, respectively, of the proceeds from the exercise of the options remain classified as a liability on the consolidated balance sheets.
The proceeds are reclassified to stockholders' equity as vesting occurs and the shares are no longer subject to repurchase.
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