VMware 2010 Annual Report Download - page 37

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Table of Contents
While we have voluntarily caused our Compensation and Corporate Governance Committee to currently be composed entirely of
independent directors in compliance with the requirements of the New York Stock Exchange, we are not required to maintain the independent
composition of the committee. As a result of our use of the “controlled company” exemptions, holders of our Class A common stock will not
have the same protection afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance
requirements.
Our historical financial information as a business segment of EMC may not be representative of our results as an independent public
company.
The historical financial information covering the periods prior to our IPO in August 2007 included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2010 does not necessarily reflect what our financial position, results of operations or cash flows would have
been had we been an independent entity during those historical periods. The historical costs and expenses reflected in our consolidated financial
statements prior to 2008 include an allocation for certain corporate functions historically provided by EMC, including tax, accounting, treasury,
legal and human resources services. Although we have transitioned most of these corporate functions to VMware personnel, in certain
geographic regions where we do not have an established legal entity, we contract with EMC subsidiaries for support services and EMC
employees who are managed by VMware personnel. The costs incurred by EMC on VMware’s behalf related to these employees include a
mark-up intended to approximate costs that would have been charged had we contracted for such services with an unrelated third party. These
costs have been charged by EMC and are included as expenses in our consolidated statements of income. Our historical financial information is
not necessarily indicative of what our financial position, results of operations or cash flows will be in the future if and when we contract at
arm’s-length with independent third parties for the services we have received and currently receive from EMC. For additional information, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements
and notes thereto.
Risks Related to Owning Our Class A Common Stock
Our Class A common stock has only been publicly traded since August 14, 2007 and the price of our Class A common stock has fluctuated
substantially since then and may fluctuate substantially in the future.
Our Class A common stock has only been publicly traded since our IPO on August 14, 2007. The trading price of our Class A common
stock has fluctuated significantly since then. For example, between January 1, 2010 and January 31, 2011, the closing trading price of our
Class A common stock was very volatile, ranging between $41.58 and $97.00 per share. Our trading price could fluctuate substantially in the
future due to the factors discussed in this Risk Factors section and elsewhere in this Annual Report on Form 10-K.
Substantial amounts of Class A common stock are held by our employees, EMC and Cisco, and all of the shares of our Class B common
stock, which may be converted to Class A common stock upon request of the holder, are held by EMC. Shares of Class A common stock held by
EMC (including shares of Class A common stock that might be issued upon the conversion of Class B common stock) are eligible for sale
subject to the volume, manner of sale and other restrictions of Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), which
allows the holder to sell up to the greater of 1% of our outstanding Class A common stock or our four-week average weekly trading volume
during any three-month period and following the
34
•
that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written
charter addressing the committee
’
s purpose and responsibilities;
•
that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the
committee
’
s purpose and responsibilities; and
•
for an annual performance evaluation of the nominating and governance committee and compensation committee.