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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The difference between the income taxes payable that is calculated on a separate return basis and the amount actually paid to EMC
pursuant to VMware’s tax sharing agreement (see Note H) is presented as a component of additional paid-in capital.
Earnings per Share
Basic net income per share is calculated using the weighted-average number of shares of VMware’s common stock outstanding during the
period. Diluted earnings per share is calculated using the weighted-average number of common shares including the dilutive effect of equity
awards as determined under the treasury stock method. VMware has two classes of common stock, Class A and Class B common stock. For
purposes of calculating earnings per share, VMware uses the two-class method. As both classes share the same rights in dividends, basic and
diluted earnings per share are the same for both classes.
Comprehensive Income
The components of comprehensive income include net income adjusted for unrealized gains (losses) on available-for-sale securities, net of
tax. See Note K to the consolidated financial statements for more information.
Concentrations of Risks
Financial instruments, which potentially subject VMware to concentrations of credit risk, consist principally of cash and cash equivalents
and accounts receivable. Cash on deposit with banks exceeds the amount of insurance provided on such deposits. These deposits may be
redeemed upon demand. VMware places cash and cash equivalents primarily in money market funds and limits the amount of investment with
any one issuer. As of December 31, 2009, VMware had $2,388.3 million in money market funds. The Temporary Guarantee Program for Money
Market Funds expired on September 18, 2009, and as such, VMware’s investments in certain money market funds no longer have a guarantee
backed by the U.S. Treasury. VMware holds a diversified portfolio of money market funds, which invest in municipal bonds and notes,
government agency debt, time deposits, corporate bonds, and commercial paper. VMware monitors the counterparty risk to ensure adequate
diversification amongst the financial institutions holding the Company’s funds. VMware also monitors counterparty risk to financial institutions
with which the Company enters into derivatives by ensuring that these financial institutions are of high credit quality.
VMware provides credit to distributors, resellers, and certain end user customers in the normal course of business. Credit is generally
extended to new customers based upon a credit evaluation. Credit is extended to existing customers based on ongoing credit evaluations, prior
payment history, and demonstrated financial stability.
As of December 31, 2009, one distributor accounted for 18% and two distributors accounted for 13% each, respectively, of VMware’s
accounts receivable balance. As of December 31, 2008, two distributors accounted for 22% and 20%, respectively, of VMware’s accounts
receivable balance.
One distributor accounted for 16% of revenues in both 2009 and 2008, respectively, and 12% of revenues in 2007, and another distributor
accounted for 15%, 18%, and 23% of revenues in 2009, 2008 and 2007, respectively. One channel partner accounted for less than 10% in 2009,
but accounted for 11% in both 2008 and 2007, respectively.
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