VMware 2012 Annual Report Download - page 35

Table of Contents
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 majority-owned subsidiary of EMC may not be representative of the results of a completely
independent public company.
The financial information covering the periods included in this Annual Report on Form 10-K does not necessarily reflect what our financial
condition, results of operations or cash flows would have been had we been a completely independent entity during those periods. In certain
geographic regions where we do not have an established legal entity, we contract with EMC subsidiaries for support services and EMC
personnel who are managed by us. The costs incurred by EMC on our behalf related to these employees are passed on to us and we are charged 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 are included as expenses in our consolidated statements of income. Additionally, we and EMC engage in intercompany transactions,
including agreements regarding the use of EMC's and our intellectual property and real estate, agreements regarding the sale of goods and
services to one another, and an agreement for EMC to resell our products and services to third party customers. Accordingly, our historical
financial information is not necessarily indicative of what our financial condition, 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. In the year
ended December 31, 2012, we recognized revenues of $267.0 million and as of December 31, 2012, $180.8 million
of revenues were included in
unearned revenues from such transactions with EMC on our financial statements. For additional information, see “Management’
s Discussion and
Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto.
Risks Related to Owning Our Class A Common Stock
The price of our Class A common stock has fluctuated substantially in recent years and may fluctuate substantially in the future.
The trading price of our Class A common stock has fluctuated significantly since our IPO in August 2007. For example, between
January 1, 2012 and January 31, 2013, the closing trading price of our Class A common stock was very volatile, ranging between $76.48 and
$114.62 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 expiration of their contractual restrictions. Additionally, EMC possesses registration rights with
respect to the shares of our common stock that it holds. If EMC chooses to exercise such rights, its sale of the shares that are registered would
not be subject to the Rule 144 limitations. If a significant amount of the shares that become eligible for resale enter the public trading markets in
a short period of time, the market price of our Class A common stock may decline.
Additionally, broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual
operating performance. The stock market in general and technology companies in particular also have often experienced extreme price and
volume fluctuations. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities,
securities class action litigation has often been instituted, including against us, and, if not resolved swiftly, can result in substantial costs and a
diversion of management’s attention and resources.
If securities or industry analysts change their recommendations regarding our stock adversely, our stock price and trading volume could
decline.
The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts may
publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding
our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline.
Delaware law and our certificate of incorporation and bylaws contain anti
-takeover provisions that could delay or discourage takeover
attempts that stockholders may consider favorable.
Provisions in our certificate of incorporation and bylaws will have the effect of delaying or preventing a change of control or changes in our
management. These provisions include the following:
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