VMware 2012 Annual Report Download - page 53

Table of Contents
In the years ended December 31, 2012 , 2011 and 2010 , we recognized professional services revenues of $97.7 , $66.2 and $60.6 ,
respectively, from such contractual agreements with EMC. As of December 31, 2012 and 2011 , $2.9 and $5.1 , respectively, of revenues from
professional services to EMC customers were included in unearned revenues.
In the years ended December 31, 2012 , 2011 and 2010 , we recognized revenues of $9.1 , $3.2 and $6.1 , respectively, from products and
services purchased by EMC for internal use pursuant to our contractual agreements with EMC. As of December 31, 2012 and 2011 , $28.4 and
$23.4 , respectively, of revenues from products and services purchased by EMC for internal use were included in unearned revenues.
We purchased products and services from EMC for $42.2 , $24.3 and $18.4 in the years ended December 31, 2012 , 2011 and 2010 ,
respectively.
Pursuant to the tax sharing agreement, we have made payments to EMC and EMC has made payments to us. The following table
summarizes these payments made between us and EMC during the years ended December 31, 2012 , 2011 and 2010 :
Payments between us and EMC under the tax sharing agreement primarily relate to our portion of federal income taxes on EMC's
consolidated tax return. Payments from us to EMC primarily relate to periods for which we had stand-alone federal taxable income, while
payments from EMC to us relate to periods for which we had a stand-alone federal taxable loss. The amounts that we either pay to or receive
from EMC for our portion of federal income taxes on EMC’s consolidated tax return differ from the amounts we would owe on a stand-alone
basis and the difference is presented as a component of stockholders’ equity. In 2012 , 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 $4.4 . 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 and $6.5 , respectively.
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 and primarily include salaries, benefits, travel and rent.
Additionally, EMC incurs certain administrative costs on our behalf in the U.S. that are also recorded as expenses in our consolidated statements
of income. The total cost of the services provided to us by EMC as described above was $106.3 , $82.6 and $66.4 in the years ended
December 31, 2012 , 2011 and 2010 , respectively.
In the years ended December 31, 2012 , 2011 and 2010 , $4.7 , $3.9 and $4.1 , respectively, of interest expense was recorded related to the
note payable to EMC and included in interest expense with EMC on our consolidated statements of income. Our interest expense as a separate,
stand-alone company may be higher or lower than the amounts reflected in the consolidated financial statements.
In the second quarter of 2011, we acquired certain assets relating to EMC’s Mozy cloud-based data storage and data center services,
including certain data center assets and a license to certain intellectual property. EMC retained ownership of the Mozy business and its
remaining assets. EMC continues to be responsible to Mozy customers for Mozy products and services and continues to recognize revenue from
such products and services. We entered into an operational support agreement with EMC through the end of 2012, pursuant to which we took
over responsibility to operate the Mozy service on behalf of EMC. Pursuant to the support agreement, costs incurred by us to support EMC’s
Mozy services, plus a mark-up intended to approximate third-party costs and a management fee, are reimbursed to us by EMC. On the
consolidated statements of income, in the years ended December 31, 2012 and 2011 , such amounts were $65.0 and $39.0 , respectively. These
amounts were recorded as a reduction to the costs we incurred. As of December 31, 2012 , the operational support agreement between us and
EMC was amended such that we will no longer operate the Mozy service on behalf of EMC. Under the amendment, we will transfer
substantially all employees that support Mozy services to EMC and EMC will purchase certain assets from us in relation to transferred
employees. The termination of service and related transfer of employees and sale of assets is anticipated to be substantially completed during the
first quarter of 2013.
In 2010, we acquired certain software product technology and expertise from EMC’s Ionix IT management business for cash consideration
of $175.0 . EMC retained the Ionix brand and will continue to offer customers the products acquired by us, pursuant to an ongoing reseller
agreement between EMC and us. During the years ended December 31, 2011 and 2010 , $14.4 and $10.6 , respectively, of contingent amounts
were paid to EMC. These payments were recorded as equity transactions and
50
For the Year Ended December 31,
2012
2011 2010
Payments from us to EMC
$
—
$
12.1
$
5.1
Payments from EMC to us
19.3
314.5
2.5