VMware 2009 Annual Report Download - page 83

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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the computations of basic and diluted net income per share (table in thousands, except per share data):
For the years ended December 31, 2009, 2008 and 2007, 20.6 million, 11.4 million and 2.2 million stock options, respectively, to acquire
VMware Class A common stock were excluded from the diluted earnings per share calculations because their effect would have been anti-
dilutive. For the years ended December 31, 2009 and 2008, 2.9 million and 5.4 million shares of restricted stock, respectively, were excluded
from the diluted earnings per share calculations because their effect would have been anti-dilutive.
C. Fair Value Measurements and Derivative Instruments
Fair Value Measurements
Generally accepted accounting principles provide that fair value is an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that
is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such
assumptions, generally accepted accounting principles established a three-
tier value hierarchy, which prioritizes the inputs used in measuring fair
value as follows: (Level 1) inputs are quoted prices in active markets for identical assets or liabilities; (Level 2) inputs other than the quoted
prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly; and (Level 3) unobservable inputs for
the assets or liabilities in which there is little or no market data, which requires VMware to develop its own assumptions.
VMware’s money market funds and available-for-sale securities are classified within Level 1 of the fair value hierarchy because the
securities are valued using quoted prices in active markets for identical assets. VMware’
s valuation inputs for foreign currency forward contracts
are based on quoted prices and quoted pricing intervals from public data sources. These contracts are typically classified within Level 2 of the
fair value hierarchy.
80
For the Year Ended December 31,
2009
2008
2007
Net income
$
197,098
$
290,133
$
218,137
Weighted
-
average shares, basic for Class A and Class B
394,269
385,068
350,493
Effect of dilutive securities
5,507
12,117
8,696
Weighted
-
average shares, diluted for Class A and Class B
399,776
397,185
359,189
Net income per weighted
-
average share, basic for Class A and Class B
$
0.50
$
0.75
$
0.62
Net income per weighted
-
average share, diluted for Class A and Class B
$
0.49
$
0.73
$
0.61