VMware 2011 Annual Report Download - page 100

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In the years ended December 31, 2011 , 2010 and 2009 , VMware recognized professional services revenues of $66.2 million ,
$60.6 million
and $25.2 million , respectively, for services provided to EMC’s customers pursuant to VMware’s contractual agreements with EMC. As of
December 31, 2011 and 2010 , $5.1 million and $5.9 million , respectively, of revenues from professional services to EMC customers were
included in unearned revenues.
In the years ended December 31, 2011 , 2010 and 2009 , VMware recognized revenues of $3.2 million , $6.1 million and $5.6 million ,
respectively, from server and desktop products and services purchased by EMC for internal use pursuant to VMware’s contractual agreements
with EMC. As of December 31, 2011 and 2010 , $23.4 million and $19.3 million , respectively, of revenues from server and desktop products
and services purchased by EMC for internal use were included in unearned revenues.
VMware purchased storage systems and software, as well as consulting services, from EMC for $24.3 million , $18.4 million and $9.7
million in the years ended December 31, 2011 , 2010 and 2009 , respectively.
In certain geographic regions where VMware does not have an established legal entity, VMware contracts with EMC subsidiaries for
support services and EMC employees who are managed by VMware’s personnel. The costs incurred by EMC on VMware’s behalf related to
these employees are passed on to VMware and VMware is charged a mark-up intended to approximate costs that would have been charged had
VMware contracted for such services with an unrelated third party. These costs are included as expenses in VMware’s consolidated statements
of income and primarily include salaries, benefits, travel and rent. Additionally, from time to time, EMC incurs certain administrative costs on
VMware’s behalf in the U.S. The total cost of the services provided to VMware by EMC as described above was $82.6 million , $66.4 million
and $95.6 million in the years ended December 31, 2011 , 2010 and 2009 , respectively.
Pursuant to the tax sharing agreement, VMware has made payments to EMC and EMC has made payments to VMware. The following table
summarizes these payments made between VMware and EMC during the years ended December 31, 2011, 2010 and 2009 (table in thousands):
Payments between VMware and EMC under the tax sharing agreement primarily relate to VMware's portion of federal income taxes on
EMC's consolidated tax return. Payments from VMware to EMC primarily relate to periods for which VMware had stand-alone federal taxable
income, while payments from EMC to VMware relate to periods for which VMware had a stand-alone federal taxable loss. The amounts that
VMware either pays to or receives from EMC for its portion of federal income taxes on EMC’s consolidated tax return differ from the amounts
VMware would owe on a stand-alone basis and the difference is presented as a component of stockholders’ equity. In 2011 and 2010 , the
difference between the amount of tax calculated on a stand-alone basis and the amount of tax calculated per the tax sharing agreement was
recorded as an increase in stockholders’ equity of $7.8 million and $6.5 million , respectively. In 2009
, the difference between the amount of tax
calculated on a stand-alone basis and the amount of tax calculated per the tax sharing agreement was recorded as a decrease in stockholders’
equity of $8.0 million .
In the years ended December 31, 2011 , 2010 and 2009 , $3.9 million , $4.1 million and $6.5 million , respectively, of interest expense was
recorded related to the note payable to EMC and included in interest expense with EMC, on VMware's consolidated statements of income.
VMware’s interest income and expenses as a separate, stand-alone company may be higher or lower than the amounts reflected in the
consolidated financial statements. In June 2011, VMware and EMC amended the note to extend its maturity date from April 16, 2012 to
April 16, 2015 .
As of December 31, 2011 , VMware had $101.4 million due from EMC, which was partially offset by $27.6 million due to EMC. As of
December 31, 2010 , VMware had $76.5 million due from EMC, which was partially offset by $21.0 million due to EMC. The net amounts due
from EMC as of December 31, 2011 and December 31, 2010 were $73.8 million and $55.5 million , respectively, and resulted from the related
party transactions described above. Additionally, as of December 31, 2011 , VMware had $3.3 million of net income taxes payable due to EMC,
which was included in accrued expenses and other on the consolidated balance sheet. As of December 31, 2010, VMware had $144.3 million of
income taxes receivable due from EMC, which was included in other current assets on VMware’
s consolidated balance sheet. Balances due to or
from EMC which are unrelated to tax obligations are generally settled in cash within 60 days of each quarter-end. The timing of the tax
payments due to and from EMC is governed by the tax sharing agreement with EMC.
Transactions with Other Related Parties
90
For the Year Ended December 31,
2011
2010 2009
Payments from VMware to EMC
$
12,148
$
5,100
$
14,205
Payments from EMC to VMware
314,450
2,471
107,579