The decoupling of a users physical machine from the desktop and software

Desktop Virtualization Journal

Subscribe to Desktop Virtualization Journal: eMailAlertsEmail Alerts newslettersWeekly Newsletters
Get Desktop Virtualization Journal: homepageHomepage mobileMobile rssRSS facebookFacebook twitterTwitter linkedinLinkedIn


Desktop Virtualization Authors: Jason Bloomberg, Bruce Popky, Vinod Mohan, Peter Silva, Jayaram Krishnaswamy

Related Topics: EMC Journal, HP Virtualization Journal, Desktop Virtualization Journal, Distributed Desktop Virtualization, Zimbra on Ulitzer, Virtual Instruments Journal, mobilityajaybudhraja

News Feed Item

VMware Reports Fourth Quarter and Full Year 2014 Results

Annual Revenue Growth of 16% to a Record $6.04 Billion; Fourth Quarter Year-Over-Year Revenue Growth of 15% to a Record $1.70 Billion; Up 16% on a Constant Currency Basis; New Products and Services Including AirWatch, Cloud Management, NSX, Hybrid Cloud a

PALO ALTO, CA--(Marketwired - January 27, 2015) - VMware, Inc. (NYSE: VMW), the global leader in virtualization and cloud infrastructure, today announced financial results for the fourth quarter and full year of 2014:

Quarterly Review

  • Total revenues for the fourth quarter were $1.70 billion, an increase of 15% from the fourth quarter of 2013, or up 16% year over year in constant currency.
  • License revenues for the fourth quarter were $777 million, an increase of 13% from the fourth quarter of 2013, or up 16% year over year in constant currency.
  • Operating income for the fourth quarter was $344 million, a decrease of 8% from the fourth quarter of 2013. Non-GAAP operating income for the fourth quarter was $567 million, an increase of 7% from the fourth quarter of 2013.
  • Net income for the fourth quarter was $326 million, or $0.75 per diluted share, a decrease of 2% per diluted share compared to $335 million, or $0.77 per diluted share, for the fourth quarter of 2013. Non-GAAP net income for the quarter was $467 million, or $1.08 per diluted share, an increase of 7% per diluted share compared to $436 million, or $1.01 per diluted share, for the fourth quarter of 2013. Both GAAP and Non-GAAP results on a year-over-year basis include the impact of the acquisition of AirWatch, completed in the first quarter of 2014.

Annual Review

  • Revenues for 2014 were $6.04 billion, an increase of 16% from 2013.
  • Operating income for 2014 was $1.03 billion, a decrease of 6% from 2013. Non-GAAP operating income for 2014 was $1.88 billion, an increase of 6% from 2013.
  • Net income for 2014 was $886 million, or $2.04 per diluted share, a decrease of 13% compared to $1.01 billion, or $2.34 per diluted share, for 2013. Non-GAAP net income for 2014 was $1.54 billion, or $3.56 per diluted share, an increase of 5% per diluted share compared to $1.46 billion, or $3.37 per diluted share, for 2013. Both GAAP and Non-GAAP results on a year-over-year basis include the impact of the acquisition of AirWatch, completed in the first quarter of 2014.
  • Operating cash flows for 2014 were $2.18 billion, a decrease of 14% from 2013, and free cash flows for the year were $1.83 billion, a decrease of 17% from 2013.
  • Cash, cash equivalents and short-term investments were $7.08 billion and unearned revenues were $4.83 billion as of December 31, 2014.

VMware also announced that its Board of Directors has authorized the purchase of up to $1 billion of its Class A common stock through the end of 2017. Stock will be purchased from time to time, in the open market or through private transactions, subject to market conditions. VMware now expects the stock repurchase program to more than offset dilution from its equity compensation programs in 2015. The new stock repurchase authorization is in addition to VMware's ongoing $1 billion stock repurchase program, originally announced August 6, 2014.

"Customers continue to partner with VMware because we offer a new model for IT designed to rapidly and automatically deliver any app, anywhere, without sacrificing the need for security, availability and compliance," said Pat Gelsinger, chief executive officer, VMware. "In 2014, we surpassed the 6 billion dollar revenue mark for the first time, and in 2015 we're looking forward to providing our customers with extraordinary value through the strongest portfolio of products, services and solutions in our history."

"We are very pleased with our Q4 revenue growth of 16% on a constant currency basis and with our 2014 results, which met or exceeded our revenue and operating margin guidance for the quarter and the year," said Jonathan Chadwick, chief finance officer and chief operating officer, VMware. "Our portfolio of new disruptive products and services is experiencing significant customer momentum and driving strong growth into 2015. We are pleased to announce an additional $1 billion stock buyback, which reflects the opportunity we see ahead for VMware."

Recent Highlights & Strategic Announcements

  • AirWatch by VMware recently hit a landmark 15,000 customers globally, nearly double its closest competitor, and AirWatch Enterprise Mobility Management was named a "Leader" or equivalent in key industry analyst reports this year.
  • Continuing its strong momentum, VMware now has more than 400 customers for VMware NSX, the network virtualization and security platform for the software-defined data center.
  • With VMware-operated data centers across parts of North America, Europe and Asia, VMware announced further global expansion in Australia. In addition, on January 20, VMware announced new additions to VMware vCloud Air, including new disaster recovery capabilities, new advanced networking capabilities, and General Availability of vCloud Air Virtual Private Cloud OnDemand.
  • In the past quarter, VMware announced three additional qualified EVO:RAIL partners, NetApp, HP and Hitachi Data Systems, bringing the total EVO:RAIL partners to nine.
  • VMware announced general availability of new vRealize Cloud Management solutions, including a significant update to VMware vRealize™ Suite 6, a cloud management platform built for the hybrid cloud. These solutions simplify and automate how IT is managed, helping customers on their journey to deliver IT as a Service.
  • Following VMworld 2014 and VMworld 2014 Europe, where VMware hosted a combined total of over 32,000 registered attendees, VMware hosted VMware vForum customer and partner conferences in six countries across the Asia-Pacific Region hosting 31,500 attendees.

The company will host a conference call today at 2:00 p.m. PT/ 5:00 p.m. ET to review financial results and business outlook. A live web broadcast of the event will be available on the VMware investor relations website at http://ir.vmware.com. Slides will accompany the web broadcast. The replay of the webcast and slides will be available on the website for two months. In addition, eight quarters of historical data for revenues and unearned revenues, excluding revenues generated each period by the products and services contributed to Pivotal Software, Inc. on April 1, 2013 and the products and services associated with the divestitures that occurred in 2013 will also be made available at http://ir.vmware.com in conjunction with the conference call. 

About VMware

VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. Customers rely on VMware to help them transform the way they build, deliver and consume Information Technology resources in a manner that is evolutionary and based on their specific needs. With 2014 revenues of $6.0 billion, VMware has more than 500,000 customers. The company is headquartered in Silicon Valley with offices throughout the world and can be found online at www.vmware.com.

Additional Information

VMware's website is located at www.vmware.com, and its investor relations website is located at http://ir.vmware.com. VMware's goal is to maintain the investor relations website as a portal through which investors can easily find or navigate to pertinent information about VMware, all of which is made available free of charge. The additional information includes materials that VMware files with the SEC; announcements of investor conferences and events at which its executives talk about its products, services and competitive strategies; webcasts of its quarterly earnings calls, investor conferences and events (archives of which are also available for a limited time); additional information on its financial metrics, including reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures; press releases on quarterly earnings, product and service announcements, legal developments and international news; corporate governance information; and other news, blogs and announcements that VMware may post from time to time that investors may find useful or interesting.

VMware, VMworld, AirWatch, AirWatch by VMware, Virtual Private Cloud OnDemand, EVO: RAIL, vCloud Air, vRealize and NSX are registered trademarks or trademarks of VMware or its subsidiaries in the United States and other jurisdictions. All other marks and names mentioned herein may be trademarks of their respective organizations.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to VMware's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled "About Non-GAAP Financial Measures."

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, statements regarding new products and services experiencing strong customer momentum; the value of shares repurchased under VMware's stock repurchase program, the duration of such program and the expectation that the program will more than offset dilution from its equity compensation programs in 2015; momentum of disruptive products and services driving strong growth; the expansion of vCloud Air in Australia; and newly announced VMware products and services, such as new additions to vCloud Air, vCloud Air Virtual Private Cloud OnDemand, vRealize Cloud Management and updates to vRealize Suite 6. These forward-looking statements are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (i) adverse changes in general economic or market conditions; (ii) delays or reductions in consumer, government and information technology spending; (iii) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, end user and mobile computing industries, and new product and marketing initiatives by VMware's competitors; (iv) VMware's customers' ability to transition to new products and computing strategies such as cloud computing, desktop virtualization and the software defined data center; (v) factors that affect timing of license revenue recognition such as product announcements and promotions and beta programs; (vi) the uncertainty of customer acceptance of emerging technology; (vii) changes in the willingness of customers to enter into longer term licensing and support arrangements; (viii) rapid technological changes in the virtualization software and cloud, end user and mobile computing industries; (ix) changes to product and service development timelines; (x) VMware's relationship with EMC Corporation and EMC's ability to control matters requiring stockholder approval, including the election of VMware's board members; (xi) VMware's ability to protect its proprietary technology; (xii) VMware's ability to attract and retain highly qualified employees; (xiii) the successful integration of acquired companies and assets into VMware; (xiv) fluctuating currency exchange rates; (xv) fluctuations and volatility in VMware's stock price; (xvi) changes in VMware's financial condition; (xvii) changes in business opportunities and priorities that could cause VMware to consider alternative uses of cash; (xviii) fluctuations in the level of cash held in the United States that is available for stock repurchases; and (xix) changes in the dilutive impact in 2015 of shares issuable through VMware's equity compensation programs. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware's most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that VMware may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

                                                                            
                                VMware, Inc.                                
                                                                            
                     CONSOLIDATED STATEMENTS OF INCOME                      
  (amounts in millions, except per share amounts, and shares in thousands)  
                                (unaudited)                                 
                                                                            
                                                                            
                           For the Three Months      For the Twelve Months  
                                   Ended                     Ended          
                               December 31,              December 31,       
                         ------------------------  ------------------------ 
                             2014         2013         2014         2013    
                         -----------  -----------  -----------  ----------- 
                                                                            
Revenues:                                                                   
  License                $       777  $       687  $     2,591  $     2,270 
  Services                       926          796        3,444        2,937 
                         -----------  -----------  -----------  ----------- 
Total revenues                 1,703        1,483        6,035        5,207 
Operating expenses (1):                                                     
  Cost of license                                                           
   revenues                       50           47          192          210 
  Cost of services                                                          
   revenues                      204          145          725          520 
  Research and                                                              
   development                   302          284        1,239        1,082 
  Sales and marketing            595          507        2,141        1,815 
  General and                                                               
   administrative                197          122          695          419 
  Realignment charges             11            4           16           68 
                         -----------  -----------  -----------  ----------- 
Operating income                 344          374        1,027        1,093 
Investment income                 10            8           38           30 
Interest expense with                                                       
 EMC                              (7)          (1)         (24)          (4)
Other income                      11            -            7           28 
                         -----------  -----------  -----------  ----------- 
Income before income                                                        
 taxes                           358          381        1,048        1,147 
Income tax provision              32           46          162          133 
                         -----------  -----------  -----------  ----------- 
Net income               $       326  $       335  $       886  $     1,014 
                         ===========  ===========  ===========  =========== 
                                                                            
Net income per weighted-                                                    
 average share, basic                                                       
 for Class A and Class B $      0.76  $      0.78  $      2.06  $      2.36 
                                                                            
Net income per weighted-                                                    
 average share, diluted                                                     
 for Class A and Class B $      0.75  $      0.77  $      2.04  $      2.34 
                                                                            
Weighted-average shares,                                                    
 basic for Class A and                                                      
 Class B                     430,198      430,174      430,355      429,093 
Weighted-average shares,                                                    
 diluted for Class A and                                                    
 Class B                     433,205      433,621      434,513      433,415 
______                                                                      
(1) Includes stock-based                                                    
 compensation as                                                            
 follows:                                                                   
  Cost of license                                                           
   revenues              $         1  $         -  $         2  $         2 
  Cost of services                                                          
   revenues                       11            8           42           29 
  Research and                                                              
   development                    57           62          244          227 
  Sales and marketing             43           38          172          144 
  General and                                                               
   administrative                 19           14           69           56 
  Realignment charges              -            -            -            6 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                         CONSOLIDATED BALANCE SHEETS                        
  (amounts in millions, except per share amounts, and shares in thousands)  
                                 (unaudited)                                
                                                                            
                                                 December 31,   December 31,
                                                     2014           2013    
                                                -------------  -------------
                                                                            
                     ASSETS                                                 
Current assets:                                                             
  Cash and cash equivalents                     $       2,071  $       2,305
  Short-term investments                                5,004          3,870
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $2 and $2                       1,520          1,220
  Due from related parties, net                            49              -
  Deferred tax asset                                      248            190
  Other current assets                                    238             96
                                                -------------  -------------
  Total current assets                                  9,130          7,681
  Property and equipment, net                           1,035            845
  Other assets, net                                       174            107
Deferred tax asset                                        165             60
Intangible assets, net                                    748            607
Goodwill                                                3,964          3,027
                                                -------------  -------------
    Total assets                                $      15,216  $      12,327
                                                =============  =============
                                                                            
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
Current liabilities:                                                        
  Accounts payable                              $         203  $         109
  Accrued expenses and other                              811            608
  Due to related parties, net                               -             18
  Unearned revenues                                     2,982          2,558
                                                -------------  -------------
Total current liabilities                               3,996          3,293
Note payable to EMC                                     1,500            450
Unearned revenues                                       1,851          1,534
Other liabilities                                         283            234
                                                -------------  -------------
    Total liabilities                                   7,630          5,511
Commitments and contingencies                                               
Stockholders' equity:                                                       
  Class A common stock, par value $.01;                                     
   authorized 2,500,000 shares; issued and                                  
   outstanding 129,359 and 130,349 shares                   1              1
  Class B convertible common stock, par value                               
   $.01; authorized 1,000,000 shares; issued                                
   and outstanding 300,000 shares                           3              3
  Additional paid-in capital                            3,380          3,496
  Accumulated other comprehensive income (loss)            (1)             4
  Retained earnings                                     4,198          3,312
                                                -------------  -------------
    Total VMware, Inc.'s stockholders' equity           7,581          6,816
Non-controlling interests                                   5              -
                                                -------------  -------------
  Total stockholders' equity                            7,586          6,816
                                                -------------  -------------
    Total liabilities and stockholders' equity  $      15,216  $      12,327
                                                =============  =============
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                    For the Three Months Ended  For the Twelve Months Ended 
                           December 31,                 December 31,        
                    --------------------------  --------------------------- 
                        2014          2013          2014           2013     
                    ------------  ------------  ------------  ------------- 
                                                                            
Operating                                                                   
 activities:                                                                
Net income          $        326  $        335  $        886  $       1,014 
Adjustments to                                                              
 reconcile net                                                              
 income to net cash                                                         
 provided by                                                                
 operating                                                                  
 activities:                                                                
  Depreciation and                                                          
   amortization               90            76           345            337 
  Stock-based                                                               
   compensation              131           122           529            454 
  Excess tax                                                                
   benefits from                                                            
   stock-based                                                              
   compensation               (2)          (10)          (36)           (70)
  Deferred income                                                           
   taxes, net                (13)           15          (128)            56 
  Non-cash                                                                  
   realignment                                                              
   charges                     -             -             -             15 
  Gain on                                                                   
   disposition of                                                           
   certain lines of                                                         
   business and                                                             
   other, net                  -             -             -            (31)
  Gain on sale of                                                           
   strategic                                                                
   investments                (7)            -            (6)             - 
  Other                        -             4            (1)             7 
  Changes in assets                                                         
   and liabilities,                                                         
   net of                                                                   
   acquisitions:                                                            
    Accounts                                                                
     receivable             (560)         (431)         (267)           (71)
    Other assets              (1)           13           (70)           (59)
    Due to/from                                                             
     related                                                                
     parties, net            (71)          (23)          (46)            60 
    Accounts                                                                
     payable                  27            14            69             30 
    Accrued                                                                 
     expenses                139            93           135              1 
    Income taxes                                                            
     receivable                                                             
     from EMC                  -             1             -             17 
    Income taxes                                                            
     payable                (101)           23            77             19 
    Unearned                                                                
     revenues                456           456           693            756 
                    ------------  ------------  ------------  ------------- 
Net cash provided                                                           
 by operating                                                               
 activities                  414           688         2,180          2,535 
                    ------------  ------------  ------------  ------------- 
                                                                            
Investing                                                                   
 activities:                                                                
Additions to                                                                
 property and                                                               
 equipment                   (98)          (98)         (352)          (345)
Purchases of                                                                
 available-for-sale                                                         
 securities                 (963)         (953)       (3,937)        (3,181)
Sales of available-                                                         
 for-sale                                                                   
 securities                  525           527         2,076          1,599 
Maturities of                                                               
 available-for-sale                                                         
 securities                  233           120           717            717 
Proceeds from                                                               
 disposition of                                                             
 certain lines of                                                           
 business                      -             -             -             37 
Purchases of                                                                
 strategic                                                                  
 investments                 (11)            -           (52)            (8)
Sales of strategic                                                          
 investments                  10             -            11              - 
Business                                                                    
 acquisitions, net                                                          
 of cash acquired            (47)         (105)       (1,159)          (289)
Increase in                                                                 
 restricted cash              (2)            -           (78)            (3)
Other investing                -             1           (11)             1 
                    ------------  ------------  ------------  ------------- 
Net cash used in                                                            
 investing                                                                  
 activities                 (353)         (508)       (2,785)        (1,472)
                    ------------  ------------  ------------  ------------- 
                                                                            
Financing                                                                   
 activities:                                                                
Proceeds from                                                               
 issuance of common                                                         
 stock                         7            12           164            197 
Proceeds from                                                               
 issuance of notes                                                          
 payable to EMC                -             -         1,050              - 
Reduction in                                                                
 capital from EMC              -             -           (24)             - 
Proceeds from non-                                                          
 controlling                                                                
 interests                     -             -             7              - 
Repurchase of                                                               
 common stock               (250)         (116)         (700)          (508)
Excess tax benefits                                                         
 from stock-based                                                           
 compensation                  2            10            36             70 
Shares repurchased                                                          
 for tax                                                                    
 withholdings on                                                            
 vesting of                                                                 
 restricted stock            (42)          (44)         (162)          (126)
                    ------------  ------------  ------------  ------------- 
Net cash provided                                                           
 by (used in)                                                               
 financing                                                                  
 activities                 (283)         (138)          371           (367)
                    ------------  ------------  ------------  ------------- 
Net increase                                                                
 (decrease) in cash                                                         
 and cash                                                                   
 equivalents                (222)           42          (234)           696 
Cash and cash                                                               
 equivalents at                                                             
 beginning of the                                                           
 period                    2,293         2,263         2,305          1,609 
                    ------------  ------------  ------------  ------------- 
Cash and cash                                                               
 equivalents at end                                                         
 of the period      $      2,071  $      2,305  $      2,071  $       2,305 
                    ============  ============  ============  ============= 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                       SUPPLEMENTAL REVENUES SCHEDULE                       
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)             
                                (in millions)                               
                                 (unaudited)                                
                                                                            
                                         For the Three Months Ended         
                                ------------------------------------------- 
                                 December   September  June 30,   March 31, 
                                 31, 2014   30, 2014     2014       2014    
                                ---------- ---------- ---------- ---------- 
Revenues as reported (1):                                                   
  License                       $      777 $      639 $      614 $      561 
  Software maintenance                 803        779        737        701 
  Professional services                123         97        106         98 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,703 $    1,515 $    1,457 $    1,360 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             13.0%      13.4%      15.8%      14.8%
  Software maintenance                14.9%      21.0%      20.0%      15.8%
  Professional services               26.9%      18.6%       7.5%       0.4%
                                ---------- ---------- ---------- ---------- 
Total revenues                        14.8%      17.5%      17.2%      14.2%
                                ========== ========== ========== ========== 
                                                                            
Revenues as reported, excluding                                             
 Pivotal (2)                                                                
  License                       $      777 $      639 $      614 $      561 
  Software maintenance                 803        779        737        701 
  Professional services                123         97        106         98 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,703 $    1,515 $    1,457 $    1,360 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             13.0%      13.4%      15.8%      15.7%
  Software maintenance                14.9%      21.0%      20.0%      16.6%
  Professional services               26.9%      18.6%       7.5%      17.4%
                                ---------- ---------- ---------- ---------- 
Total revenues                        14.8%      17.5%      17.2%      16.3%
                                ========== ========== ========== ========== 
                                                                            
Revenues as reported, excluding                                             
 Pivotal and all dispositions                                               
 (3)                                                                        
  License                       $      777 $      639 $      614 $      561 
  Software maintenance                 803        779        737        701 
  Professional services                123         97        106         98 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,703 $    1,515 $    1,457 $    1,360 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             13.0%      13.7%      16.7%      17.8%
  Software maintenance                14.9%      21.5%      20.7%      18.9%
  Professional services               26.9%      18.9%       8.0%      18.2%
                                ---------- ---------- ---------- ---------- 
Total revenues                        14.8%      17.9%      18.0%      18.4%
                                ========== ========== ========== ========== 
                                                                            
Reconciliation of "revenues as                                              
 reported" to "revenues as                                                  
 reported, excluding Pivotal and                                            
 all dispositions":                                                         
                                                                            
Revenues as reported, excluding                                             
 Pivotal and all dispositions                                               
 (3)                            $    1,703 $    1,515 $    1,457 $    1,360 
  Pivotal                                —          —          —          — 
  All dispositions                       —          —          —          — 
                                ---------- ---------- ---------- ---------- 
Revenues as reported (1)        $    1,703 $    1,515 $    1,457 $    1,360 
                                ========== ========== ========== ========== 
                                                                            
table continued below
                                                                            
                                         For the Three Months Ended         
                                ------------------------------------------- 
                                 December   September  June 30,   March 31, 
                                 31, 2013   30, 2013     2013       2013    
                                ---------- ---------- ---------- ---------- 
Revenues as reported (1):                                                   
  License                       $      687 $      564 $      531 $      488 
  Software maintenance                 699        644        614        605 
  Professional services                 97         81         98         98 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,483 $    1,289 $    1,243 $    1,191 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             15.1%      14.8%       2.6%       1.3%
  Software maintenance                18.3%      16.9%      18.3%      23.0%
  Professional services               -8.4%     -11.4%      13.4%      20.8%
                                ---------- ---------- ---------- ---------- 
Total revenues                        14.7%      13.7%      10.7%      12.9%
                                ========== ========== ========== ========== 
                                                                            
Revenues as reported, excluding                                             
 Pivotal (2)                                                                
  License                       $      687 $      564 $      531 $      485 
  Software maintenance                 699        644        614        601 
  Professional services                 97         81         98         84 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,483 $    1,289 $    1,243 $    1,170 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             16.6%      16.0%       4.4%       1.5%
  Software maintenance                19.2%      17.8%      19.3%      23.0%
  Professional services               24.5%      14.0%      45.1%      19.8%
                                ---------- ---------- ---------- ---------- 
Total revenues                        18.3%      16.8%      14.0%      12.8%
                                ========== ========== ========== ========== 
                                                                            
Revenues as reported, excluding                                             
 Pivotal and all dispositions                                               
 (3)                                                                        
  License                       $      687 $      562 $      526 $      476 
  Software maintenance                 699        642        611        590 
  Professional services                 97         81         98         83 
                                ---------- ---------- ---------- ---------- 
Total revenues                  $    1,483 $    1,285 $    1,235 $    1,149 
                                ========== ========== ========== ========== 
                                                                            
Change (%) over prior year                                                  
  License                             18.2%      17.3%       5.3%       1.1%
  Software maintenance                21.8%      20.0%      21.3%      23.4%
  Professional services               24.8%      15.4%      45.6%      19.9%
                                ---------- ---------- ---------- ---------- 
Total revenues                        20.3%      18.5%      15.4%      12.9%
                                ========== ========== ========== ========== 
                                                                            
Reconciliation of "revenues as                                              
 reported" to "revenues as                                                  
 reported, excluding Pivotal and                                            
 all dispositions":                                                         
                                                                            
Revenues as reported, excluding                                             
 Pivotal and all dispositions                                               
 (3)                            $    1,483 $    1,285 $    1,235 $    1,149 
  Pivotal                                —          —          —         22 
  All dispositions                       —          4          8         20 
                                ---------- ---------- ---------- ---------- 
Revenues as reported (1)        $    1,483 $    1,289 $    1,243 $    1,191 
                                ========== ========== ========== ========== 
                                                                            
table continued below
                                                      
                                  For the Year Ended  
                                --------------------- 
                                 December   December  
                                 31, 2014   31, 2013  
                                ---------- ---------- 
Revenues as reported (1):                             
  License                       $    2,591 $    2,270 
  Software maintenance               3,022      2,563 
  Professional services                422        374 
                                ---------- ---------- 
Total revenues                  $    6,035 $    5,207 
                                ========== ========== 
                                                      
Change (%) over prior year                            
  License                             14.2%       8.7%
  Software maintenance                17.9%      19.0%
  Professional services               13.1%       2.5%
                                ---------- ---------- 
Total revenues                        15.9%      13.1%
                                ========== ========== 
                                                      
Revenues as reported, excluding                       
 Pivotal (2)                                          
  License                       $    2,591 $    2,266 
  Software maintenance               3,022      2,559 
  Professional services                422        360 
                                ---------- ---------- 
Total revenues                  $    6,035 $    5,185 
                                ========== ========== 
                                                      
Change (%) over prior year                            
  License                             14.3%      10.0%
  Software maintenance                18.1%      19.7%
  Professional services               17.5%      25.6%
                                ---------- ---------- 
Total revenues                        16.4%      15.6%
                                ========== ========== 
                                                      
Revenues as reported, excluding                       
 Pivotal and all dispositions                         
 (3)                                                  
  License                       $    2,591 $    2,251 
  Software maintenance               3,022      2,542 
  Professional services                422        359 
                                ---------- ---------- 
Total revenues                  $    6,035 $    5,152 
                                ========== ========== 
                                                      
Change (%) over prior year                            
  License                             15.1%      10.9%
  Software maintenance                18.9%      21.6%
  Professional services               17.9%      26.2%
                                ---------- ---------- 
Total revenues                        17.1%      16.9%
                                ========== ========== 
                                                      
Reconciliation of "revenues as                        
 reported" to "revenues as                            
 reported, excluding Pivotal and                      
 all dispositions":                                   
                                                      
Revenues as reported, excluding                       
 Pivotal and all dispositions                         
 (3)                            $    6,035 $    5,152 
  Pivotal                                —         22 
  All dispositions                       —         33 
                                ---------- ---------- 
Revenues as reported (1)        $    6,035 $    5,207 
                                ========== ========== 
                                                      
(1) Represents revenues reported each quarter.                              
                                                                            
(2) Represents revenues reported each quarter less the revenues attributable
to products and services contributed by VMware to Pivotal Software, Inc.    
("Pivotal") on April 1, 2013. All quarters have been adjusted to exclude the
related revenues.                                                           
                                                                            
(3) Represents revenues reported each quarter less a) the revenues          
attributable to products and services contributed by VMware to Pivotal on   
April 1, 2013 and b) the revenues attributable to all lines of businesses   
which were disposed of in 2013, including Zimbra which was disposed of in   
July 2013. All quarters have been adjusted to exclude the related revenues. 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   SUPPLEMENTAL UNEARNED REVENUES SCHEDULE                  
             (INCLUDES RECONCILIATION OF GAAP TO NON-GAAP DATA)             
                                (in millions)                               
                                 (unaudited)                                
                                                                            
                              December    September   June 30,    March 31, 
                              31, 2014    30, 2014      2014        2014    
                             ----------  ----------  ----------  ---------- 
Unearned revenues as                                                        
 reported (1)                                                               
  License                    $      488  $      428  $      476  $      459 
  Software maintenance            3,905       3,558       3,541       3,378 
  Professional services             440         389         372         335 
                             ----------  ----------  ----------  ---------- 
Total unearned revenues      $    4,833  $    4,375  $    4,389  $    4,172 
                             ==========  ==========  ==========  ========== 
                                                                            
Change (%) over prior year                                                  
  License                           4.9%        3.3%       11.5%        2.8%
  Software maintenance             18.2%       21.2%       22.0%       20.8%
  Professional services            36.0%       36.6%       39.7%       35.6%
                             ----------  ----------  ----------  ---------- 
Total unearned revenues            18.1%       20.3%       22.0%       19.6%
                             ==========  ==========  ==========  ========== 
                                                                            
Unearned revenues as                                                        
 reported, excluding Pivotal                                                
 and all dispositions (2)                                                   
  License                    $      488  $      428  $      476  $      459 
  Software maintenance            3,905       3,558       3,541       3,378 
  Professional services             440         389         372         335 
                             ----------  ----------  ----------  ---------- 
Total unearned revenues      $    4,833  $    4,375  $    4,389  $    4,172 
                             ==========  ==========  ==========  ========== 
                                                                            
Change (%) over prior year                                                  
  License                           4.9%        3.5%       11.5%       12.8%
  Software maintenance             18.2%       21.3%       22.0%       23.5%
  Professional services            36.0%       36.6%       39.7%       36.5%
                             ----------  ----------  ----------  ---------- 
Total unearned revenues            18.1%       20.5%       22.0%       23.1%
                             ==========  ==========  ==========  ========== 
                                                                            
Reconciliation of "unearned                                                 
 revenues as reported" to                                                   
 "unearned revenues as                                                      
 reported, excluding Pivotal                                                
 and all dispositions":                                                     
                                                                            
Unearned revenues as                                                        
 reported, excluding Pivotal                                                
 and all dispositions (2)    $    4,833  $    4,375  $    4,389  $    4,172 
  Pivotal and all                                                           
   dispositions                       —           —           —           — 
                             ----------  ----------  ----------  ---------- 
Unearned revenues as                                                        
 reported (1)                $    4,833  $    4,375  $    4,389  $    4,172 
                             ==========  ==========  ==========  ========== 
                                                                            
table continued below
                                                                            
                              December    September   June 30,    March 31, 
                              31, 2013    30, 2013      2013        2013    
                             ----------  ----------  ----------  ---------- 
Unearned revenues as                                                        
 reported (1)                                                               
  License                    $      465  $      415  $      427  $      446 
  Software maintenance            3,304       2,937       2,903       2,797 
  Professional services             323         284         266         247 
                             ----------  ----------  ----------  ---------- 
Total unearned revenues      $    4,092  $    3,636  $    3,596  $    3,490 
                             ==========  ==========  ==========  ========== 
                                                                            
Change (%) over prior year                                                  
  License                           0.5%       13.3%       13.7%       19.6%
  Software maintenance             19.9%       21.6%       23.2%       24.5%
  Professional services            33.1%       34.3%       26.8%       30.6%
                             ----------  ----------  ----------  ---------- 
Total unearned revenues            18.3%       21.5%       22.2%       24.3%
                             ==========  ==========  ==========  ========== 
                                                                            
Unearned revenues as                                                        
 reported, excluding Pivotal                                                
 and all dispositions (2)                                                   
  License                    $      465  $      414  $      427  $      407 
  Software maintenance            3,304       2,933       2,903       2,736 
  Professional services             323         285         266         246 
                             ----------  ----------  ----------  ---------- 
Total unearned revenues      $    4,092  $    3,632  $    3,596  $    3,389 
                             ==========  ==========  ==========  ========== 
                                                                            
Change (%) over prior year                                                  
  License                          12.3%       26.4%       27.1%       15.7%
  Software maintenance             23.7%       25.0%       26.8%       25.0%
  Professional services            34.4%       35.7%       28.7%       31.7%
                             ----------  ----------  ----------  ---------- 
Total unearned revenues            23.0%       26.0%       27.0%       24.3%
                             ==========  ==========  ==========  ========== 
                                                                            
Reconciliation of "unearned                                                 
 revenues as reported" to                                                   
 "unearned revenues as                                                      
 reported, excluding Pivotal                                                
 and all dispositions":                                                     
                                                                            
Unearned revenues as                                                        
 reported, excluding Pivotal                                                
 and all dispositions (2)    $    4,092  $    3,632  $    3,596  $    3,389 
  Pivotal and all                                                           
   dispositions                       —           4           —         101 
                             ----------  ----------  ----------  ---------- 
Unearned revenues as                                                        
 reported (1)                $    4,092  $    3,636  $    3,596  $    3,490 
                             ==========  ==========  ==========  ========== 
                                                                            
(1) Represents unearned revenues reported each quarter.                     
                                                                            
(2) Represents unearned revenues reported each quarter less a) the unearned 
revenues attributable to products and services contributed by VMware to     
Pivotal on April 1, 2013 and b) the unearned revenues attributable to all   
lines of businesses which were disposed of in 2013, including Zimbra which  
was disposed of in July 2013. All quarters have been adjusted to exclude the
related unearned revenues.                                                  
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                For the Three Months Ended December 31, 2014                
  (amounts in millions, except per share amounts, and shares in thousands)  
                                 (unaudited)                                
                                                                            
                                                 Employer                   
                                              Payroll Taxes                 
                                               on Employee                  
                                Stock-Based       Stock        Intangible   
                        GAAP    Compensation   Transactions   Amortization  
                       ------  -------------  -------------  -------------  
                                                                            
Operating expenses:                                                         
  Cost of license                                                           
   revenues            $   50             (1)             -            (28) 
  Cost of services                                                          
   revenues            $  204            (11)             -             (2) 
  Research and                                                              
   development         $  302            (57)            (1)             5  
  Sales and marketing  $  595            (43)            (2)           (10) 
  General and                                                               
   administrative      $  197            (19)             -             (1) 
  Realignment charges  $   11              -              -              -  
                                                                            
Operating income       $  344            131              3             36  
Operating margin (2)     20.2%           7.7%           0.2%           2.1% 
                                                                            
Other income           $   11              -              -              -  
                                                                            
Income before income                                                        
 taxes                 $  358            131              3             36  
                                                                            
Income tax provision   $   32                                               
Tax rate (2)              8.9%                                              
                                                                            
Net Income             $  326            131              3             36  
                                                                            
Net income per                                                              
 weighted-average                                                           
 share,basic for Class                                                      
 A and Class B (2) (3) $ 0.76  $        0.30  $        0.01  $        0.08  
                                                                            
Net income per                                                              
 weighted-average                                                           
 share,diluted for                                                          
 Class A and Class B                                                        
 (2) (4)               $ 0.75  $        0.30  $        0.01  $        0.08  
                                                                            
table continued below
                                                                         
                                     Acquisition               Non-GAAP, 
                                      and Other       Tax          as    
                       Realignment     Related     Adjustment   adjusted 
                         Charges        Items         (1)         (2)    
                      ------------  ------------  -----------  --------- 
                                                                         
Operating expenses:                                                      
  Cost of license                                                        
   revenues                      -             -            -  $      22 
  Cost of services                                                       
   revenues                      -             -            -  $     191 
  Research and                                                           
   development                   -             -            -  $     249 
  Sales and marketing            -             -            -  $     539 
  General and                                                            
   administrative                -           (43)           -  $     135 
  Realignment charges          (11)            -            -  $       - 
                                                                         
Operating income                11            43            -  $     567 
Operating margin (2)           0.7%          2.5%         0.0%      33.3%
                                                                         
Other income                     -            (8)           -  $       3 
                                                                         
Income before income                                                     
 taxes                          11            35            -  $     573 
                                                                         
Income tax provision                                       74  $     106 
Tax rate (2)                                                        18.5%
                                                                         
Net Income                      11            35          (74) $     467 
                                                                         
Net income per                                                           
 weighted-average                                                        
 share,basic for Class                                                   
 A and Class B (2) (3)$       0.03  $       0.08  $     (0.17) $    1.09 
                                                                         
Net income per                                                           
 weighted-average                                                        
 share,diluted for                                                       
 Class A and Class B                                                     
 (2) (4)              $       0.03  $       0.08  $     (0.17) $    1.08 
                                                                         
(1) Non-GAAP financial information for the quarter is adjusted for a tax    
rate equal to our annual estimated tax rate on non-GAAP income. This rate is
based on our estimated annual GAAP income tax rate forecast, adjusted to    
account for items excluded from GAAP income in calculating the non-GAAP     
financial measures presented above. Our estimated tax rate on non-GAAP      
income is determined annually and may be adjusted during the year to take   
into account events or trends that we believe materially impact the         
estimated annual rate including, but not limited to, significant changes    
resulting from tax legislation, material changes in the geographic mix of   
revenues and expenses and other significant events. Due to the differences  
in the tax treatment of items excluded from non-GAAP earnings, as well as   
the methodology applied to our estimated annual tax rates as described      
above, our estimated tax rate on non-GAAP income may differ from our GAAP   
tax rate and from our actual tax liabilities.                               
                                                                            
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net 
income per weighted average share information are calculated based upon the 
respective underlying, non-rounded data.                                    
                                                                            
(3) Calculated based upon 430,198 basic weighted-average shares for Class A 
and Class B.                                                                
                                                                            
(4) Calculated based upon 433,205 diluted weighted-average shares for Class 
A and Class B.                                                              
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                For the Three Months Ended December 31, 2013                
  (amounts in millions, except per share amounts, and shares in thousands)  
                                 (unaudited)                                
                                                                            
                                                  Employer                  
                                               Payroll Taxes                
                                                on Employee                 
                                 Stock-Based       Stock        Intangible  
                         GAAP    Compensation   Transactions   Amortization 
                        ------  -------------  -------------  ------------- 
                                                                            
Operating expenses:                                                         
  Cost of license                                                           
   revenues             $   47              —              —            (23)
  Cost of services                                                          
   revenues             $  145             (8)             —              — 
  Research and                                                              
   development          $  284            (62)            (1)            (1)
  Sales and marketing   $  507            (38)             —             (1)
  General and                                                               
   administrative       $  122            (14)             —              — 
  Realignment charges   $    4              —              —              — 
                                                                            
Operating income        $  374            122              1             25 
Operating margin (2)      25.2%           8.2%           0.1%           1.7%
                                                                            
Income before income                                                        
 taxes                  $  381            122              1             25 
                                                                            
Income tax provision    $   46                                              
Tax rate (2)              12.1%                                             
                                                                            
Net income              $  335            122              1             25 
                                                                            
Net income per                                                              
 weighted-average                                                           
 share, basic for Class                                                     
 A and Class B (2) (3)  $ 0.78  $        0.28  $           —  $        0.06 
                                                                            
Net income per                                                              
 weighted-average                                                           
 share, diluted for                                                         
 Class A and Class B                                                        
 (2) (4)                $ 0.77  $        0.28  $           —  $        0.06 
                                                                            
table continued below                                                                           
                                       Acquisition                         
                                        and Other       Tax      Non-GAAP, 
                         Realignment     Related     Adjustment      as    
                           Charges        Items         (1)       adjusted 
                        ------------  ------------  -----------  --------- 
                                                                           
Operating expenses:                                                        
  Cost of license                                                          
   revenues                        —             —            —  $      24 
  Cost of services                                                         
   revenues                        —             —            —  $     137 
  Research and                                                             
   development                     —             —            —  $     220 
  Sales and marketing              —             —            —  $     468 
  General and                                                              
   administrative                  —            (2)           —  $     106 
  Realignment charges             (4)            —            —  $       — 
                                                                           
Operating income                   4             2            —  $     528 
Operating margin (2)             0.3%          0.1%           —       35.6%
                                                                           
Income before income                                                       
 taxes                             4             2            —  $     535 
                                                                           
Income tax provision                                         53  $      99 
Tax rate (2)                                                          18.5%
                                                                           
Net income                         4             2          (53) $     436 
                                                                           
Net income per                                                             
 weighted-average                                                          
 share, basic for Class                                                    
 A and Class B (2) (3)  $       0.01  $          —  $     (0.12) $    1.01 
                                                                           
Net income per                                                             
 weighted-average                                                          
 share, diluted for                                                        
 Class A and Class B                                                       
 (2) (4)                $       0.01  $          —  $     (0.11) $    1.01 
                                                                           
(1) Non-GAAP financial information for the quarter is adjusted for a tax    
rate equal to our annual estimated tax rate on non-GAAP income. This rate is
based on our estimated annual GAAP income tax rate forecast, adjusted to    
account for items excluded from GAAP income in calculating the non-GAAP     
financial measures presented above. Our estimated tax rate on non-GAAP      
income is determined annually and may be adjusted during the year to take   
into account events or trends that we believe materially impact the         
estimated annual rate including, but not limited to, significant changes    
resulting from tax legislation, material changes in the geographic mix of   
revenues and expenses and other significant events. Due to the differences  
in the tax treatment of items excluded from non-GAAP earnings, as well as   
the methodology applied to our estimated annual tax rates as described      
above, our estimated tax rate on non-GAAP income may differ from our GAAP   
tax rate and from our actual tax liabilities.                               
                                                                            
(2) Operating margin, tax rate and net income per weighted-average share    
information are calculated based upon the respective underlying, non-rounded
data.                                                                       
                                                                            
(3) Calculated based upon 430,174 basic weighted-average shares for Class A 
and Class B.                                                                
                                                                            
(4) Calculated based upon 433,621 diluted weighted-average shares for Class 
A and Class B.                                                              
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                For the Twelve Months Ended December 31, 2014               
  (amounts in millions, except per share amounts, and shares in thousands)  
                                 (unaudited)                                
                                                                       
                                                            Employer   
                                                         Payroll Taxes 
                                                          on Employee  
                                           Stock-Based       Stock     
                                   GAAP    Compensation   Transactions 
                                  ------  -------------  ------------- 
                                                                       
Operating expenses:                                                    
  Cost of license revenues        $  192             (2)             — 
  Cost of services revenues       $  725            (42)            (1)
  Research and development        $1,239           (244)            (4)
  Sales and marketing             $2,141           (172)            (5)
  General and administrative      $  695            (69)            (1)
  Realignment charges             $   16              —              — 
                                                                       
Operating income                  $1,027            529             11 
Operating margin (2)                17.0%           8.8%           0.2%
                                                                       
Other income                      $    7              —              — 
                                                                       
Income before income taxes        $1,048            529             11 
                                                                       
Income tax provision              $  162                               
Tax rate (2)                        15.5%                              
                                                                       
Net Income                        $  886            529             11 
                                                                       
                                                                       
Net income per weighted-average                                        
 share, basic for Class A and                                          
 Class B (2) (3)                  $ 2.06  $        1.23  $        0.03 
                                                                       
Net income per weighted-average                                        
 share, diluted for Class A and                                        
 Class B (2) (4)                  $ 2.04  $        1.22  $        0.03 
                                                                       
table continued below
                                                                            
                                                                Acquisition 
                                                                 and Other  
                                    Intangible    Realignment     Related   
                                   Amortization     Charges        Items    
                                  -------------  ------------  ------------ 
                                                                            
Operating expenses:                                                         
  Cost of license revenues                 (107)            —             — 
  Cost of services revenues                  (3)            —             — 
  Research and development                    —             —             — 
  Sales and marketing                       (24)            —             — 
  General and administrative                 (2)            —          (149)
  Realignment charges                         —           (16)            — 
                                                                            
Operating income                            136            16           149 
Operating margin (2)                        2.3%          0.3%          2.5%
                                                                            
Other income                                  —             —            (6)
                                                                            
Income before income taxes                  136            16           143 
                                                                            
Income tax provision                                                        
Tax rate (2)                                                                
                                                                            
Net Income                                  136            16           143 
                                                                            
                                                                            
Net income per weighted-average                                             
 share, basic for Class A and                                               
 Class B (2) (3)                  $        0.32  $       0.04  $       0.33 
                                                                            
Net income per weighted-average                                             
 share, diluted for Class A and                                             
 Class B (2) (4)                  $        0.31  $       0.04  $       0.33 
                                                                            
table continued below
                                                                        
                                      Certain                 Non-GAAP, 
                                  Litigation and     Tax          as    
                                       Other      Adjustment   adjusted 
                                  Contingencies      (1)         (2)    
                                  -------------- -----------  --------- 
                                                                        
Operating expenses:                                                     
  Cost of license revenues                    —            —  $      83 
  Cost of services revenues                   —            —  $     679 
  Research and development                    —            —  $     991 
  Sales and marketing                         —            —  $   1,940 
  General and administrative                (11)           —  $     463 
  Realignment charges                         —            —  $       - 
                                                                        
Operating income                             11            —  $   1,879 
Operating margin (2)                        0.2%         0.0%      31.1%
                                                                        
Other income                                  —            —  $       2 
                                                                        
Income before income taxes                   11            —  $   1,895 
                                                                        
Income tax provision                                     188  $     351 
Tax rate (2)                                                       18.5%
                                                                        
Net Income                                   11         (188) $   1,544 
                                                                        
                                                                        
Net income per weighted-average                                         
 share, basic for Class A and                                           
 Class B (2) (3)                  $        0.02  $     (0.44) $    3.59 
                                                                        
Net income per weighted-average                                         
 share, diluted for Class A and                                         
 Class B (2) (4)                  $        0.02  $     (0.43) $    3.56 
                                                                        
(1) Non-GAAP financial information for the quarter is adjusted for a tax    
rate equal to our annual estimated tax rate on non-GAAP income. This rate is
based on our estimated annual GAAP income tax rate forecast, adjusted to    
account for items excluded from GAAP income in calculating the non-GAAP     
financial measures presented above. Our estimated tax rate on non-GAAP      
income is determined annually and may be adjusted during the year to take   
into account events or trends that we believe materially impact the         
estimated annual rate including, but not limited to, significant changes    
resulting from tax legislation, material changes in the geographic mix of   
revenues and expenses and other significant events. Due to the differences  
in the tax treatment of items excluded from non-GAAP earnings, as well as   
the methodology applied to our estimated annual tax rates as described      
above, our estimated tax rate on non-GAAP income may differ from our GAAP   
tax rate and from our actual tax liabilities.                               
                                                                            
(2) Totals may not sum, due to rounding. Operating margin, tax rate and net 
income per weighted average share information are calculated based upon the 
respective underlying, non-rounded data.                                    
                                                                            
(3) Calculated based upon 430,355 basic weighted-average shares for Class A 
and Class B.                                                                
                                                                            
(4) Calculated based upon 434,513 diluted weighted-average shares for Class 
A and Class B.                                                              
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                   RECONCILIATION OF GAAP TO NON-GAAP DATA                  
                For the Twelve Months Ended December 31, 2013               
  (amounts in millions, except per share amounts, and shares in thousands)  
                                 (unaudited)                                
                                                                            
                                                  Employer                  
                                               Payroll Taxes                
                                                on Employee                 
                                 Stock-Based       Stock        Intangible  
                         GAAP    Compensation   Transactions   Amortization 
                        ------  -------------  -------------  ------------- 
                                                                            
Operating expenses:                                                         
  Cost of license                                                           
   revenues             $  210             (2)             —            (90)
  Cost of services                                                          
   revenues             $  520            (29)            (1)            (2)
  Research and                                                              
   development          $1,082           (227)            (4)            (4)
  Sales and marketing   $1,815           (144)            (3)            (7)
  General and                                                               
   administrative       $  419            (56)            (2)             — 
  Realignment charges   $   68              —              —              — 
                                                                            
Operating income        $1,093            458             10            103 
Operating margin (3)      21.0%           8.8%           0.2%           2.0%
                                                                            
Other income (expense),                                                     
 net                    $   28              —              —              — 
                                                                            
Income before income                                                        
 taxes                  $1,147            458             10            103 
                                                                            
Income tax provision    $  133                                              
Tax rate (3)              11.6%                                             
                                                                            
Net income              $1,014            458             10            103 
                                                                            
                                                                            
Net income per                                                              
 weighted-average                                                           
 share, basic for Class                                                     
 A and Class B (3) (4)  $ 2.36  $        1.07  $        0.02  $        0.24 
                                                                            
                                                                            
Net income per                                                              
 weighted-average                                                           
 share, diluted for                                                         
 Class A and Class B                                                        
 (3) (5)                $ 2.34  $        1.06  $        0.02  $        0.24 
                                                                            
table continued below
                                                                 
                                       Acquisition   Capitalized 
                                        and Other     Software   
                         Realignment     Related     Development 
                           Charges        Items       Costs (1)  
                        ------------  ------------  ------------ 
                                                                 
Operating expenses:                                              
  Cost of license                                                
   revenues                        —             —           (34)
  Cost of services                                               
   revenues                        —             —             — 
  Research and                                                   
   development                     —             —             — 
  Sales and marketing              —             —             — 
  General and                                                    
   administrative                  —            (5)            — 
  Realignment charges            (68)            —             — 
                                                                 
Operating income                  68             5            34 
Operating margin (3)             1.3%            —           0.7%
                                                                 
Other income (expense),                                          
 net                               —             —             — 
                                                                 
Income before income                                             
 taxes                            68             5            34 
                                                                 
Income tax provision                                             
Tax rate (3)                                                     
                                                                 
Net income                        68             5            34 
                                                                 
                                                                 
Net income per                                                   
 weighted-average                                                
 share, basic for Class                                          
 A and Class B (3) (4)  $       0.16  $       0.01  $       0.08 
                                                                 
                                                                 
Net income per                                                   
 weighted-average                                                
 share, diluted for                                              
 Class A and Class B                                             
 (3) (5)                $       0.16  $          —  $       0.08 
                                                                 
table continued below
                                                             
                          Gain on                            
                         Disposition                         
                             of                              
                           Certain                           
                          Lines of        Tax      Non-GAAP, 
                         Business &    Adjustment      as    
                         Other, Net       (2)       adjusted 
                        ------------  -----------  --------- 
                                                             
Operating expenses:                                          
  Cost of license                                            
   revenues                        —            —  $      84 
  Cost of services                                           
   revenues                        —            —  $     488 
  Research and                                               
   development                     —            —  $     847 
  Sales and marketing              —            —  $   1,661 
  General and                                                
   administrative                  —            —  $     356 
  Realignment charges              —            —  $       — 
                                                             
Operating income                   —            —  $   1,771 
Operating margin (3)               —            —       34.0%
                                                             
Other income (expense),                                      
 net                             (31)           —  $      (3)
                                                             
Income before income                                         
 taxes                           (31)           —  $   1,794 
                                                             
Income tax provision                          199  $     332 
Tax rate (3)                                            18.5%
                                                             
Net income                       (31)        (199) $   1,462 
                                                             
                                                             
Net income per                                               
 weighted-average                                            
 share, basic for Class                                      
 A and Class B (3) (4)  $      (0.07) $     (0.46) $    3.41 
                                                             
                                                             
Net income per                                               
 weighted-average                                            
 share, diluted for                                          
 Class A and Class B                                         
 (3) (5)                $      (0.07) $     (0.46) $    3.37 
                                                             
(1) For the year ended December 31, 2013, no costs were capitalized for the 
development of software products. Amortization expense from previously      
capitalized amounts was $34.                                                
                                                                            
(2) Non-GAAP financial information for the quarter is adjusted for a tax    
rate equal to our annual estimated tax rate on non-GAAP income. This rate is
based on our estimated annual GAAP income tax rate forecast, adjusted to    
account for items excluded from GAAP income in calculating the non-GAAP     
financial measures presented above. Our estimated tax rate on non-GAAP      
income is determined annually and may be adjusted during the year to take   
into account events or trends that we believe materially impact the         
estimated annual rate including, but not limited to, significant changes    
resulting from tax legislation, material changes in the geographic mix of   
revenues and expenses and other significant events. Due to the differences  
in the tax treatment of items excluded from non-GAAP earnings, as well as   
the methodology applied to our estimated annual tax rates as described      
above, our estimated tax rate on non-GAAP income may differ from our GAAP   
tax rate and from our actual tax liabilities.                               
                                                                            
(3) Operating margin, tax rate and net income per weighted-average share    
information are calculated based upon the respective underlying, non-rounded
data.                                                                       
                                                                            
(4) Calculated based upon 429,093 basic weighted-average shares for Class A 
and Class B.                                                                
                                                                            
(5) Calculated based upon 433,415 diluted weighted-average shares for Class 
A and Class B.                                                              
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                              REVENUES BY TYPE                              
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                                                                            
                    For the Three Months Ended  For the Twelve Months Ended 
                           December 31,                 December 31,        
                    --------------------------  --------------------------- 
                        2014          2013          2014           2013     
                    ------------  ------------  ------------  ------------- 
                                                                            
Revenues:                                                                   
  License           $        777  $        687  $      2,591  $       2,270 
  Services:                                                                 
    Software                                                                
     maintenance             803           699         3,022          2,563 
    Professional                                                            
     services                123            97           422            374 
                    ------------  ------------  ------------  ------------- 
  Total services             926           796         3,444          2,937 
                    ------------  ------------  ------------  ------------- 
Total revenues      $      1,703  $      1,483  $      6,035  $       5,207 
                    ============  ============  ============  ============= 
                                                                            
                                                                            
Percentage of                                                               
 revenues:                                                                  
  License                   45.6%         46.3%         42.9%          43.6%
  Services:                                                                 
    Software                                                                
     maintenance            47.2%         47.2%         50.1%          49.2%
    Professional                                                            
     services                7.2%          6.5%          7.0%           7.2%
                    ------------  ------------  ------------  ------------- 
  Total services            54.4%         53.7%         57.1%          56.4%
                    ------------  ------------  ------------  ------------- 
Total revenues             100.0%        100.0%        100.0%         100.0%
                    ============  ============  ============  ============= 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
                           REVENUES BY GEOGRAPHY                            
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                    For the Three Months Ended  For the Twelve Months Ended 
                           December 31,                 December 31,        
                    --------------------------  --------------------------- 
                        2014          2013          2014           2013     
                    ------------  ------------  ------------  ------------- 
                                                                            
Revenues:                                                                   
  United States     $        800  $        712  $      2,912  $       2,485 
  International              903           771         3,123          2,722 
                    ------------  ------------  ------------  ------------- 
Total revenues      $      1,703  $      1,483  $      6,035  $       5,207 
                    ============  ============  ============  ============= 
                                                                            
                                                                            
Percentage of                                                               
 revenues:                                                                  
  United States             47.0%         48.0%         48.3%          47.7%
  International             53.0%         52.0%         51.7%          52.3%
                    ------------  ------------  ------------  ------------- 
Total revenues             100.0%        100.0%        100.0%         100.0%
                    ============  ============  ============  ============= 
                                                                            
                                                                            
                                                                            
                                VMware, Inc.                                
                                                                            
        RECONCILIATION OF GAAP CASH FLOWS FROM OPERATING ACTIVITIES         
                             TO FREE CASH FLOWS                             
                       (A NON-GAAP FINANCIAL MEASURE)                       
                               (in millions)                                
                                (unaudited)                                 
                                                                            
                  For the Three Months Ended    For the Twelve Months Ended 
                         December 31,                  December 31,         
                 ----------------------------  ---------------------------- 
                      2014           2013           2014           2013     
                 -------------  -------------  -------------  ------------- 
                                                                            
GAAP cash flows                                                             
 from operating                                                             
 activities      $         414  $         688  $       2,180  $       2,535 
Capital                                                                     
 expenditures              (98)           (98)          (352)          (345)
                 -------------  -------------  -------------  ------------- 
Free cash flows  $         316  $         590  $       1,828  $       2,190 
                 =============  =============  =============  ============= 
                                                                            

About Non-GAAP Financial Measures
To provide investors and others with additional information regarding VMware's results, VMware has disclosed in this earnings release the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP other income (expense), net, non-GAAP net income, non-GAAP income per diluted share, and free cash flows. VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, other than free cash flows, differ from GAAP in that they exclude stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquired intangible assets, realignment charges, acquisition and other-related items, certain litigation and other contingencies, the net effect of the amortization and capitalization of software development costs and gain on disposition of certain lines of business and other net, each as discussed below. Free cash flows differ from GAAP cash flows from operating activities in its treatment of capital expenditures.

VMware has also presented in this earnings release quarterly and annual historical data for revenue and unearned revenue, excluding revenue generated each period by the products and services contributed to Pivotal Software, Inc. on April 1, 2013 and the products and services associated with the divestures consummated by VMware in 2013. VMware's management believes that these measures are useful to investors because they allow investors to make meaningful comparisons of VMware revenues and unearned revenues across periods.

VMware's management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, to calculate bonus payments and to evaluate VMware's financial performance, the performance of its individual functional groups and the ability of operations to generate cash. Management believes these non-GAAP financial measures reflect VMware's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in VMware's business, as they exclude expenses and gains that are not reflective of ongoing operating results. Management also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating VMware's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. Additionally, management believes information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to repurchase shares, to fund ongoing operations and to fund other capital expenditures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing VMware's operating performance due to the following factors:

  • Stock-based compensation. Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. Although stock-based compensation is an important aspect of the compensation of our employees and executives, the expense for the fair value of the stock-based instruments VMware utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options is determined using a complex formula that incorporates factors, such as market volatility, that are beyond VMware's control. Additionally, in order to establish the amount of expense to recognize for performance-based stock awards, which are also an element of ongoing stock-based compensation, VMware is required to apply judgment to estimate the probability of the extent to which performance objectives will be achieved. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of VMware's core business and to facilitate comparison of its results to those of peer companies.  
  • Employer payroll tax on employee stock transactions. The amount of employer payroll taxes on stock-based compensation is dependent on VMware's stock price and other factors that are beyond our control and do not correlate to the operation of the business.  
  • Amortization of acquired intangible assets. A portion of the purchase price of VMware's acquisitions is generally allocated to intangible assets, such as intellectual property, and is subject to amortization. However, VMware does not acquire businesses on a predictable cycle. Additionally, the amount of an acquisition's purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition. Therefore, VMware believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods.  
  • Realignment charges. Realignment charges include workforce reductions, asset impairments and losses on asset disposals, and costs to exit facilities. VMware's management believes it is useful to exclude these items, when significant, as they are not reflective of VMware's ongoing business and operating results.  
  • Acquisition and other-related items. Acquisition and other-related items include direct costs of acquisitions and dispositions, such as transaction and advisory fees. Also included are accruals for the portion of merger consideration payable in installments that may be paid in cash or VMware stock, at the option of VMware. These accruals are primarily composed of amounts VMware has committed to make to designated founders and key executives of AirWatch, subject to employment conditions and indemnification claims, if any. Additionally, charges recognized for non-recoverable strategic investments or gains recognized on the disposition of strategic investments during 2014 are included as other-related items. As VMware does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, VMware believes it is useful to exclude these items when looking for a consistent basis for comparison across accounting periods.  
  • Certain litigation and other contingencies. VMware, from time to time may incur charges or benefits that are outside of the ordinary course of our business related to litigation and other contingencies. VMware believes it is useful to exclude such charges or benefits because we do not consider such amounts to be part of the ongoing operation of our business and because of the singular nature of the claims underlying the matter. 
  • Capitalized software development costs. Capitalized software development costs encompass capitalization of development costs and the subsequent amortization of the capitalized costs over the useful life of the product. Amortization and capitalization of software development costs can vary significantly depending upon the timing of products reaching technological feasibility and being made generally available. VMware did not capitalize software development costs related to product offerings in either fiscal year 2014 or fiscal year 2013 given its current go-to-market strategy. In future periods, VMware does not expect amortization expense as previously capitalized software development costs have become fully amortized.  
  • Gain on disposition of certain lines of business and other, net. In 2013, VMware recognized a gain as a result of exiting certain lines of business under its business realignment plan, which was partially offset by a charge recognized for a non-recoverable strategic investment. These transactions resulted in a net gain of $31 million. To the extent that significant gains or losses are realized on such dispositions and strategic investments, they do not occur on a predictable cycle, and such gains and losses are not reflective of VMware's ongoing business and operating results.  
  • Tax adjustment. Non-GAAP financial information for the quarter is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. This rate is based on VMware's estimated annual GAAP income tax rate forecast, adjusted to account for items excluded from GAAP income in calculating VMware's non-GAAP income. VMware's estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that VMware management believes materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to VMware's estimated annual tax rates as described above, the estimated tax rate on non-GAAP income may differ from the GAAP tax rate and from VMware's actual tax liabilities.  

Additionally, VMware's management believes that the non-GAAP financial measure free cash flows is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect VMware's operations. Specifically, in the case of stock-based compensation, if VMware did not pay out a portion of its compensation in the form of stock-based compensation and related employer payroll taxes, the cash salary expense included in operating expenses would be higher, which would affect VMware's cash position. VMware compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP and should not be considered measures of VMware's liquidity. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Management encourages investors and others to review VMware's financial information in its entirety and not rely on a single financial measure.

Revenue Growth in Constant Currency
We invoice and collect in the Euro, the British Pound, the Japanese Yen, the Australian Dollar and the Chinese Renminbi in their respective regions. As a result, our total revenues are affected by changes in the U.S. Dollar against these currencies.

In order to provide a comparable framework for assessing how our business performed excluding the effect of foreign currency fluctuations, management analyzes year-over-year revenue growth on a constant currency basis. Since all of our entities operate with the U.S. Dollar as their functional currency, unearned revenues for orders booked in currencies other than U.S. Dollars are converted into U.S. Dollars at the exchange rate in effect for the month in which each order is booked.

During 2014, we calculated constant currency on license revenues recognized during the current period that were originally booked in currencies other than U.S. Dollars by comparing the exchange rates used to recognize revenue in the current period against the exchange rates used to recognize revenue in the comparable period. We did not calculate constant currency on services revenues, which include software maintenance revenues and professional services revenues.

Contacts:

Paul Ziots
VMware Investor Relations
[email protected]
650-427-3267

Joan Stone
VMware Global Communications
[email protected]

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.