VMware 2009 Annual Report Download - page 34

Table of Contents
Although we have entered into a tax sharing agreement with EMC under which our tax liabilities effectively will be determined as if we were
not part of any consolidated, combined or unitary tax group of EMC Corporation and/or its subsidiaries, we nonetheless could be held liable
for the tax liabilities of other members of these groups.
We have historically been included in EMC’s consolidated group for U.S. federal income tax purposes, as well as in certain consolidated,
combined or unitary groups that include EMC Corporation and/or certain of its subsidiaries for state and local income tax purposes. Pursuant to
our tax sharing agreement with EMC, we and EMC generally will make payments to each other such that, with respect to tax returns for any
taxable period in which we or any of our subsidiaries are included in EMC’s consolidated group for U.S. federal income tax purposes or any
other consolidated, combined or unitary group of EMC Corporation and/or its subsidiaries, the amount of taxes to be paid by us will be
determined, subject to certain adjustments, as if we and each of our subsidiaries included in such consolidated, combined or unitary group filed
our own consolidated, combined or unitary tax return.
Prior to our IPO in August 2007, we were included in the EMC consolidated group for U.S. federal income tax purposes, and expect to
continue to be included in such consolidated group for periods in which EMC owns at least 80% of the total voting power and value of our
outstanding stock. Each member of a consolidated group during any part of a consolidated return year is jointly and severally liable for tax on the
consolidated return of such year and for any subsequently determined deficiency thereon. Similarly, in some jurisdictions, each member of a
consolidated, combined or unitary group for state, local or foreign income tax purposes is jointly and severally liable for the state, local or
foreign income tax liability of each other member of the consolidated, combined or unitary group. Accordingly, for any period in which we are
included in the EMC consolidated group for U.S. federal income tax purposes or any other consolidated, combined or unitary group of EMC
Corporation and/or its subsidiaries, we could be liable in the event that any income tax liability was incurred, but not discharged, by any other
member of any such group.
Any inability to resolve favorably any disputes that arise between us and EMC with respect to our past and ongoing relationships may result
in a significant reduction of our revenues and earnings.
Disputes may arise between EMC and us in a number of areas relating to our ongoing relationships, including:
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with
an unaffiliated party.
The agreements we enter into with EMC may be amended upon agreement between the parties. While we are controlled by EMC, we may
not have the leverage to negotiate amendments to these agreements if required on terms as favorable to us as those we would negotiate with an
unaffiliated third party.
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labor, tax, employee benefit, indemnification and other matters arising from our separation from EMC;
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employee retention and recruiting;
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business combinations involving us;
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our ability to engage in activities with certain channel, technology or other marketing partners;
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sales or dispositions by EMC of all or any portion of its ownership interest in us;
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the nature, quality and pricing of services EMC has agreed to provide us;
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arrangements with third parties that are exclusionary to EMC;
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business opportunities that may be attractive to both EMC and us; and
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product or technology development or marketing activities or customer agreements which may require the consent of EMC.