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Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Stock
-Based Compensation
The following table summarizes the components of total stock-based compensation included in VMware’s consolidated statements of
income for the years ended December 31, 2012 , 2011 and 2010 (table in thousands):
For the year ended December 31, 2012 , no costs were capitalized for the development of software products. For the years ended 2011 and
2010 , VMware capitalized $12.4 million and $10.9 million , respectively, of stock-based compensation associated with capitalized software
development.
From time to time, VMware issues equity awards that have a guaranteed amount of value and are classified as liability awards on VMware’
s
consolidated balance sheet. As of December 31, 2012 , liability-classified awards with an aggregate guaranteed value of $56.4 million were
outstanding. Upon vesting, these grants will be settled in shares based upon the stock price or a trailing average stock price on a date determined
by the terms of each individual award.
As of December 31, 2012 , the total unrecognized compensation cost for stock options and restricted stock was $945.4 million . This non-
cash expense will be recognized through 2016 with a weighted-average remaining period of 1.6 years. Stock-based compensation related to both
VMware and EMC equity awards held by VMware employees is recognized on VMware's consolidated statements of income over the awards'
requisite service periods. Stock-based compensation related to VMware equity awards held by EMC employees is recognized on EMC's
consolidated statements of income over the awards' requisite service periods.
Fair Value of VMware Options
The fair value of each option to acquire VMware Class A common stock granted during the years ended December 31, 2012 , 2011 and
2010 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
94
For the Year Ended December 31,
2012
2011
2010
Cost of license revenues
$
2,072
$
1,606
$
1,653
Cost of services revenues
28,220
23,389
18,478
Research and development
210,377
174,264
164,435
Sales and marketing
149,879
95,688
73,146
General and administrative
48,107
40,206
33,979
Stock-based compensation
438,655
335,153
291,691
Income tax benefit
(132,426
)
(98,180
)
(94,110
)
Total stock-based compensation, net of tax
$
306,229
$
236,973
$
197,581
For the Year Ended December 31,
VMware Stock Options 2012
2011
2010
Dividend yield
None
None
None
Expected volatility
35.8
%
37.7
%
38.0
%
Risk-free interest rate
0.3
%
1.0
%
1.5
%
Expected term (in years)
2.7
3.0
3.5
Weighted-average fair value at grant date
$
80.45
$
88.40
$
18.05