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Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Based on intangible assets recorded as of December 31, 2012 and assuming no subsequent additions or impairment of underlying assets, the
remaining estimated annual amortization expense is expected to be as follows (table in thousands):
Goodwill
The excess of the consideration for acquisitions over the fair values assigned to the assets acquired and liabilities assumed, which represents
the goodwill resulting from acquisitions, was allocated to VMware’s one operating segment. Management believes that the goodwill mainly
represents the synergies expected from combining the technologies of VMware with those of the acquired businesses, including complementary
products that will enhance the Company’s overall product portfolio.
The following table summarizes the changes in the carrying amount of goodwill for the years ended 2012 and 2011 (table in thousands):
C. Earnings per Share
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the
period. Diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding and
potentially dilutive securities outstanding during the period, as calculated using the treasury stock method. Potentially dilutive securities
primarily include stock options, unvested restricted stock units, and purchase options under VMware’s employee stock purchase plan. Securities
are excluded from the computations of diluted net income per share if their effect would be anti-dilutive. VMware uses the two-class method to
calculate earnings per share as both classes share the same rights in dividends, therefore basic and diluted earnings per share are the same for
both classes.
The following table sets forth the computations of basic and diluted net income per share for the years ended December 31, 2012 , 2011 and
2010 (table in thousands, except per share data):
For the years ended December 31, 2012 , 2011 and 2010 , stock options to purchase 0.4 million , 0.8 million and 2.9 million shares,
respectively, of VMware Class A common stock were excluded from the diluted earnings per share calculations because
80
2013
$
117,719
2014
110,215
2015
100,046
2016
84,725
2017
76,541
Thereafter
242,606
Total
$
731,852
December 31,
2012
2011
Balance, beginning of the year
$
1,759,080
$
1,568,600
Increase in goodwill related to business combinations
1,091,673
188,395
Deferred tax adjustments to purchase price allocations on prior year acquisitions
(3,550
)
945
Other adjustments to purchase price allocations on prior year acquisitions
927
1,140
Balance, end of the year
$
2,848,130
$
1,759,080
For the Year Ended December 31,
2012
2011
2010
Net income
$
745,702
$
723,936
$
357,439
Weighted-average shares, basic for Class A and Class B
426,658
421,188
409,805
Effect of dilutive securities
7,316
10,562
13,641
Weighted-average shares, diluted for Class A and Class B
433,974
431,750
423,446
Net income per weighted-average share, basic for Class A and Class B
$
1.75
$
1.72
$
0.87
Net income per weighted-average share, diluted for Class A and Class B
$
1.72
$
1.68
$
0.84