EMC 2009 Annual Report Download - page 87

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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
For the Year Ended
December 31,
VMware Employee Stock Purchase Plan 2009 2008 2007
Dividend yield None None None
Expected volatility 50.9% 39.3% 34.8%
Risk-free interest rate 0.3% 2.7% 4.8%
Expected term (in years) 0.5 0.5 0.4
Weighted-average fair value at grant date $ 7.79 $ 18.06 $ 6.99
For all equity awards granted in 2009, volatility was based on an analysis of historical stock prices and implied volatilities of publicly-traded companies
with similar characteristics, including industry, stage of life cycle, size, financial leverage, as well as the implied volatilities of VMware's Class A common
stock. The expected term was calculated based only upon the expected term of similar grants of comparable companies.
For all equity awards granted in 2008 and 2007, volatility was based on an analysis of historical stock prices and implied volatility of publicly-traded
companies with similar characteristics, including industry, stage of life cycle, size and financial leverage. The expected term was calculated based on the
historical experience that VMware employees have had with EMC stock option grants as well as the expected term of similar grants of comparable
companies.
VMware's expected dividend yield input was zero as it has not historically paid, nor does it expect in the future to pay, cash dividends on its common
stock. The risk-free interest rate was based on U.S. Treasury instrument whose term is consistent with the expected term of the stock options.
For the equity awards granted prior to VMware's IPO, VMware performed a contemporaneous valuation of their Class A common stock each time an
equity grant of common stock was made. In determining the fair value of the equity, VMware analyzed general market data, including economic,
governmental, and environmental factors; considered its historic, current, and future state of its operations; analyzed its operating and financial results;
analyzed its forecasts; gathered and analyzed available financial data for publicly traded companies engaged in the same or similar lines of business to
develop appropriate valuation multiples and operating comparisons and analyzed other facts and data considered pertinent to the valuation to arrive at an
estimated fair value.
VMware utilized both the income approach and the market approach in estimating the value of the equity. The market approach estimates the fair value
of a company by applying to the company's historical and/or projected financial metrics to market multiples of the corresponding financial metrics of publicly
traded firms in similar lines of business. Due to the prospect of an imminent public offering, VMware did not apply a marketability discount in carrying out
either approach. Further, VMware did not apply a minority interest discount in concluding on fair value.
In reaching its estimated valuation range, VMware considered the indicated values derived from each valuation approach in relation to the relative
merits of each approach, the suitability of the information used, and the uncertainties involved. The results of the approaches overlapped, with the income
approach results falling within a narrower range, which VMware ultimately relied on in its concluding estimate of value.
Q. Restructuring and Acquisition-Related Charges
In 2009, 2008 and 2007, we incurred restructuring and acquisition-related charges of $107.5 million, $250.3 million and $31.3 million, respectively. In
2009, we incurred $88.4 million of restructuring charges, primarily related to our 2008 restructuring program and $19.1 million of costs in connection with
acquisitions for financial advisory, legal and accounting services. In 2008 and 2007, all charges are only related to restructuring activities as acquisition costs
were generally capitalized under prior business combination accounting rules.
In the fourth quarter of 2008, to further improve the competitiveness and efficiency of our global business in response to a challenging global economy,
we implemented a restructuring program to further streamline the costs related to our Information Infrastructure business. The plan included the following
components:
• A reduction in force resulting in the elimination of approximately 2,400 positions which was substantially completed by the end of 2009 and will be
fully completed in 2010.
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