VMware 2009 Annual Report Download - page 60

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Table of Contents
Cash Flows from Investing Activities
Cash used in investing activities is primarily attributable to business acquisitions, capital expenditures, capitalized software development
costs, and the purchase of investments.
We invested $356.3 for an acquisition in 2009, compared with $138.6 for acquisitions in 2008 and $82.5 for acquisitions in 2007. The
increase in business acquisitions in 2009 as compared with 2008 relates to our acquisition of SpringSource in the third quarter of 2009.
Acquisitions are an important element in our industry and we expect to continue to consider investing in strategic acquisitions in the future.
Our capital expenditures totaled $103.4, $191.6, and $269.0 in 2009, 2008, and 2007, respectively. In 2009, our capital expenditures
primarily related to the completion of construction on our headquarters facility and completion of portions of our Washington data center facility
and related equipment, as well as software development and computer and network equipment to support increased personnel and related
infrastructure requirements. In 2008, our capital expenditures primarily related to the construction of our headquarters facility and our data
center, as well as investments in computer and network equipment to support increased personnel and related infrastructure requirements both
domestically and internationally. No further capital expenditures are expected related to the construction of our headquarters facility as this
project was completed in early 2009. Capital expenditures in 2007 were primarily due to our investment in our new headquarters facility. We
purchased from EMC buildings already under construction for $132.6, which was the cost expended by EMC during construction. We also
purchased furniture and fixtures for the new facilities and invested cash in the remaining buildings under development. In addition to the
investment in our headquarters facilities in 2007, we purchased computer and network equipment to support increased personnel and related
infrastructure requirements.
Our capitalized software development costs, excluding stock-based compensation expense, totaled $68.6, $90.9, and $47.7 in 2009, 2008,
and 2007, respectively. The decrease in capitalized software development costs in 2009 as compared with 2008 was primarily the result of the
reduced costs capitalized on VMware vSphere. Most of the vSphere costs were capitalized during the second half of 2008. As a result, after the
general release of VMware vSphere in the second quarter of 2009, the related cash flows shifted from investing cash flows to operating cash
flows as compared with 2008. The increase in capitalized software development costs in 2008 as compared with 2007 was the result of the
deployment of additional resources to support the development of software products, including VMware vSphere, as well as the timing of when
products reached technological feasibility.
Our purchase of investments totaled $34.7 in 2009 and $1.8 in 2008. We did not purchase investments in 2007.
Cash Flows from Financing Activities
In 2009 and 2008, we received proceeds of $227.7 and $190.1, respectively, from the issuance of our common stock from the exercise of
stock options and the purchase of shares under the VMware Employee Stock Purchase Plan (“ESPP”). Between the time of our acquisition by
EMC in January 2004 and June 2007, we did not issue equity awards in our stock to our employees. During this period, employees received
stock-based compensation in the form of EMC stock options and restricted stock awards and units as a result of grants made by EMC’s Board of
Directors. Beginning in June 2007, we granted equity incentive awards under our 2007 Equity and Incentive Plan in anticipation of our IPO. As
such, we had $2.8 of financing activities in 2007 related to the exercise of options.
Additionally, the excess tax benefit from stock-based compensation was $26.2 in 2009 and $85.8 in 2008. These amounts are shown as a
reduction to cash flows from operating activities and an increase to cash flows from financing activities. These changes year-over-year in the
excess tax benefit from stock-based compensation were primarily due to the decline in the market value of our stock and the number of awards
exercised, sold, or
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