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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In addition to the aforementioned analysis, with respect to grants of options to purchase Class A common stock with a per share exercise price of $23.00,
VMware believes that the fair value of its equity at that time was further substantiated by the arm's-length transaction with Intel Capital, whereby Intel agreed
to purchase 9.5 million shares of VMware's Class A common stock at $23.00 per share, subject to adjustment if the price in the offering were below $23.00
per share. VMware believes that the fair value of its equity at the time of the grant of options at $25.00 per share was substantiated by the contemporaneous
arm's-length transaction whereby Cisco agreed to purchase 6.0 million shares of VMware's Class A common stock from EMC at $25.00 per share. VMware
believes that the fair value of their equity at the time of the grant of options at $29.00 per share was substantiated by the proximity to the IPO.
The fair value of each VMware option granted at $23.00 was estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
Dividend yield None
Expected volatility 39.2%
Risk-free interest rate 5.0%
Expected term (in years) 3.4
The fair value of each VMware option granted at $25.00 was estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
Dividend yield None
Expected volatility 38.2%
Risk-free interest rate 4.8%
Expected term (in years) 3.4
The fair value of each VMware option granted at $29.00 was estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
Dividend yield None
Expected volatility 39.6%
Risk-free interest rate 4.5%
Expected term (in years) 3.4
P. Restructuring Charges and Impairment
In 2008, 2007 and 2006, we incurred restructuring charges of $250.3 million, $31.3 million and $162.6 million, respectively.
To further improve the competitiveness and efficiency of our global business in response to a challenging global economy, in the fourth quarter of 2008,
we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. The plan includes the following
components:
A reduction in force resulting in the elimination of approximately 2,400 positions which will be substantially completed by the end of 2009 and
fully completed by the third quarter of 2010.
The consolidation of facilities and the termination of contracts. These actions are expected to be completed by 2015.
The write-off of certain assets for which EMC has determined it will no longer derive any benefit. These actions were completed in the fourth
quarter of 2008.
In addition to this plan, we also recognized an asset impairment charge for certain assets for which the forecasted cash flows from the assets are less than
the assets' net book value.
The total charge resulting from these actions is expected to be between $362.0 million and $387.0 million, with $247.9 million recognized in 2008,
$100.0 million to $125.0 million to be recognized in 2009 and 2010 and the remainder to
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