VMware 2012 Annual Report Download - page 54

Table of Contents
were offsets to the initial capital contribution from EMC. As of December 31, 2011 , all contingent payments under the agreement had been
made.
From time to time, we and EMC enter into agreements to collaborate on technology projects. In the years ended December 31, 2012 , 2011
and 2010 , we received $6.5 , $2.3 and $2.3 , respectively, from EMC for EMC's portion of expenses related to such projects.
Effective September 1, 2012, Pat Gelsinger succeeded Paul Maritz as Chief Executive Officer of VMware. Prior to joining us, Pat Gelsinger
was the President and Chief Operating Officer of EMC Information Infrastructure Products. Paul Maritz remains a board member of VMware
and took on the role of Chief Strategy Officer of EMC. With the exception of a long-term incentive performance award from EMC that Pat
Gelsinger agreed to cancel in consideration of a new performance stock unit award from VMware, both Paul Maritz and Pat Gelsinger retained
and continue to vest in their respective equity awards that they held as of September 1, 2012. Stock-based compensation related to Pat
Gelsinger’s EMC awards will be recognized on our consolidated statements of income over the awards’ remaining requisite service periods.
Stock-based compensation related to Paul Maritz’s VMware awards will be recognized as an expense by EMC.
As of December 31, 2012 , we had $67.9 net due from EMC, which consisted of $111.5 due from EMC, partially offset by $43.6 due to
EMC. As of December 31, 2011 , we had $73.8 net due from EMC, which consisted of $101.4 due from EMC, partially offset by $27.6 due to
EMC. These amounts resulted from the related party transactions described above. Additionally, we had a net income tax payable due to EMC of
$31.9 and $3.3 as of December 31, 2012 and 2011, which were included in accrued expenses and other on our consolidated balance sheets.
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.
In December 2012, we launched the Pivotal Initiative with EMC, pursuant to which both companies plan to commit technology, people and
programs.
By nature of EMC’s majority ownership of us, the amounts we recorded for our intercompany transactions with EMC may not be
considered arm’
s length with an unrelated third party. Therefore the financial statements included herein may not necessarily reflect our financial
condition, results of operations and cash flows had we engaged in such transactions with an unrelated third party during all periods presented.
Accordingly, our historical results should not be relied upon as an indicator of our future performance as a stand-alone company.
Liquidity and Capital Resources
At December 31, 2012 and 2011 , we held cash, cash equivalents, and short-term investments as follows:
As of December 31, 2012 , we held a diversified portfolio of money market funds and fixed income securities totaling $4,194.3 . Our fixed
income securities were denominated in U.S. Dollars and consisted of highly liquid debt instruments of the U.S. government and its agencies,
U.S. municipal obligations, and U.S. and foreign corporate debt securities. We limit the amount of our domestic and international investments
with any single issuer and any single financial institution, and also monitor the diversity of the portfolio, thereby diversifying the credit risk.
Within our portfolio, we held $40.6 of foreign government and agencies securities, $10.4 of which was deemed sovereign debt, at December 31,
2012
. These sovereign debt securities had an average credit rating of AAA and were predominantly from Canada. None of the securities deemed
sovereign debt were from Greece, Ireland, Italy, Portugal or Spain.
As of December 31, 2012 , our total cash, cash equivalents and short-term investments were $4,630.8 , of which $2,996.7 was held outside
the U.S. If these overseas funds were needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes on related
undistributed earnings to repatriate these funds. However, our intent is to indefinitely reinvest our non-U.S. earnings in our foreign operations
and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
We expect to continue to generate positive cash flows from operations in 2013 and to use cash generated by operations as our primary
source of liquidity. We believe that existing cash and cash equivalents, together with any cash generated from operations will be sufficient to
meet normal operating requirements for at least the next twelve months. While we believe our existing cash and cash equivalents and cash to be
generated by operations will be sufficient to meet our normal operating
51
December 31,
2012
2011
Cash and cash equivalents
$
1,609.3
$
1,955.8
Short-term investments
3,021.5
2,556.5
Total cash, cash equivalents and short-term investments
$
4,630.8
$
4,512.3