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TableofContents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
InformationaboutVMware’scostsfromsucharrangementswithEMCfortheyearsendedDecember31,2015,2014and2013consistedofthefollowing
(tableinmillions):
For the Year Ended December 31,
2015
2014
2013
Purchasesandleasesofproductsandpurchasesofservices $ 63
$ 71
$ 63
Collaborativetechnologyprojectcosts 5
12
13
EMCsubsidiarysupportandadministrativecosts 100
137
128
VMwarealsopurchasesEMCproductsthroughEMC'schannelpartners.PurchasesofEMCproductsthroughEMC'schannelpartnerswere$36million,$25
millionand$6millionduringtheyearsendedDecember31,2015,2014and2013,respectively.
Inthefourthquarterof2013,VMwareandEMCmodifiedanexistingtechnologylicensingarrangement.Pursuanttothemodifiedarrangement,VMware
receivedcertainrightstodevelopedtechnologyforalump-sumpaymentof$26million,whichwasincludedinamountsduetorelatedparties,netonthe
consolidatedbalancesheetsasofDecember31,2013.Thelicenseoftechnologywasaccountedforasatransactionbyentitiesundercommoncontrol.
Accordingly,anintangibleassetof$2millionwasrecognizedandwasderivedbyallocatingthevalueascribedtothelicensedtechnologybasedupontherelative
fairmarketvaluesofthetechnologytoeachparty.Thedifferencebetweentheassetrecordedandtheconsiderationduewasprimarilyrecognizedasareductionin
capitalfromEMConthestatementsofstockholders’equity.Inadditiontothelicenseofthetechnology,VMwarewillpayEMCforsupportandfordevelopment
collaboration.Theseamountsareincludedincollaborativetechnologyprojectcostsinthetableabove.
Certain Stock-Based Compensation
EffectiveSeptember1,2012,PatGelsingerwasappointedChiefExecutiveOfficerofVMware.PriortojoiningVMware,Mr.GelsingerwasthePresidentand
ChiefOperatingOfficerofEMCInformationInfrastructureProducts.Mr.GelsingerretainscertainofhisEMCequityawardsthatwereheldasofSeptember1,
2012andhecontinuestovestinsuchawards.Stock-basedcompensationrelatedtoMr.Gelsinger’sEMCawardsarebeingrecognizedonVMware’sconsolidated
statementsofincomeovertheawards’remainingrequisiteserviceperiods.
Due To/From Related Parties, Net
AsaresultoftherelatedpartytransactionswithEMCdescribedabove,amountsduetoandfromrelatedparties,netasofDecember31,2015and2014
consistedofthefollowing(tableinmillions):
As of December 31,
2015
2014
Duetorelatedparties $ (68)
$ (76)
Duefromrelatedparties 142
125
Due(to)fromrelatedparties,net $ 74
$ 49
Incometaxdue(to)fromrelatedparties $ (18)
$ (40)
Balancesduetoorfromrelatedparties,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relatedpartiesisgovernedbythetaxsharingagreementwithEMC.
Notes Payable to EMC
VMwareandEMCenteredintoanoteexchangeagreementonJanuary21,2014providingfortheissuanceofthreepromissorynotesintheaggregateprincipal
amountof$1,500million.Thetotaldebtof$1,500millionincludes$450millionthatwasexchangedforthe$450millionpromissorynoteissuedtoEMCinApril
2007,asamendedandrestatedinJune2011.
Thethreenotesissuedmaybeprepaidwithoutpenaltyorpremium,andoutstandingprincipalisdueonthefollowingdates:$680milliondueMay1,2018,
$550milliondueMay1,2020and$270milliondueDecember1,2022.Thenotesbearinterest,payablequarterlyinarrears,attheannualrateof1.75%.During
theyearsendedDecember31,2015,2014and2013,$26million,$24millionand$4million,respectively,ofinterestexpensewasrecognized.
88