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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Vmware Inc | NYSE:VMW | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 142.48 | 0 | 01:00:00 |
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
94-3292913
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
|
|
3401 Hillview Avenue
|
|
|
Palo Alto,
|
CA
|
94304
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Class A common stock
|
|
VMW
|
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
Emerging growth company
|
☐
|
|
|
Page
|
PART I – FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II – OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019(1)
|
||||
Net income
|
$
|
386
|
|
|
$
|
365
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Changes in market value of effective foreign currency forward contracts:
|
|
|
|
||||
Unrealized gains (losses), net of tax provision (benefit) of ($2) and $—
|
(13
|
)
|
|
4
|
|
||
Foreign currency translation adjustments
|
(1
|
)
|
|
—
|
|
||
Total other comprehensive income (loss)
|
(14
|
)
|
|
4
|
|
||
Comprehensive income, net of taxes
|
372
|
|
|
369
|
|
||
Less: Net loss attributable to the non-controlling interests
|
—
|
|
|
(15
|
)
|
||
Comprehensive income attributable to VMware, Inc.
|
$
|
372
|
|
|
$
|
384
|
|
__________
|
|
|
|
||||
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition in fiscal 2020, which was accounted for as a transaction between entities under common control (refer to Note A).
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,946
|
|
|
$
|
2,915
|
|
Accounts receivable, net of allowance for doubtful accounts of $6 and $7
|
1,535
|
|
|
1,883
|
|
||
Due from related parties, net
|
767
|
|
|
1,457
|
|
||
Other current assets
|
457
|
|
|
436
|
|
||
Total current assets
|
8,705
|
|
|
6,691
|
|
||
Property and equipment, net
|
1,292
|
|
|
1,280
|
|
||
Other assets
|
2,328
|
|
|
2,266
|
|
||
Deferred tax assets
|
5,658
|
|
|
5,556
|
|
||
Intangible assets, net
|
1,106
|
|
|
1,172
|
|
||
Goodwill
|
9,353
|
|
|
9,329
|
|
||
Total assets
|
$
|
28,442
|
|
|
$
|
26,294
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
195
|
|
|
$
|
208
|
|
Accrued expenses and other
|
1,922
|
|
|
2,151
|
|
||
Current portion of long-term debt and other borrowings
|
2,748
|
|
|
2,747
|
|
||
Unearned revenue
|
5,182
|
|
|
5,218
|
|
||
Total current liabilities
|
10,047
|
|
|
10,324
|
|
||
Note payable to Dell
|
270
|
|
|
270
|
|
||
Long-term debt
|
4,712
|
|
|
2,731
|
|
||
Unearned revenue
|
4,036
|
|
|
4,050
|
|
||
Income tax payable
|
816
|
|
|
817
|
|
||
Operating lease liabilities
|
787
|
|
|
746
|
|
||
Other liabilities
|
346
|
|
|
347
|
|
||
Total liabilities
|
21,014
|
|
|
19,285
|
|
||
Contingencies (refer to Note D)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Class A common stock, par value $0.01; authorized 2,500,000 shares; issued and outstanding 112,068 and 110,484 shares
|
1
|
|
|
1
|
|
||
Class B convertible common stock, par value $0.01; authorized 1,000,000 shares; issued and outstanding 307,222 shares
|
3
|
|
|
3
|
|
||
Additional paid-in capital
|
2,047
|
|
|
2,000
|
|
||
Accumulated other comprehensive loss
|
(18
|
)
|
|
(4
|
)
|
||
Retained earnings
|
5,395
|
|
|
5,009
|
|
||
Total stockholders’ equity
|
7,428
|
|
|
7,009
|
|
||
Total liabilities and stockholders’ equity
|
$
|
28,442
|
|
|
$
|
26,294
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019(1)
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
386
|
|
|
$
|
365
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
244
|
|
|
201
|
|
||
Stock-based compensation
|
272
|
|
|
216
|
|
||
Deferred income taxes, net
|
(98
|
)
|
|
(18
|
)
|
||
Unrealized (gain) loss on equity securities, net
|
(6
|
)
|
|
3
|
|
||
(Gain) loss on disposition of assets, revaluation and impairment, net
|
6
|
|
|
(5
|
)
|
||
Other
|
(4
|
)
|
|
1
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Accounts receivable
|
352
|
|
|
438
|
|
||
Other current assets and other assets
|
(171
|
)
|
|
(125
|
)
|
||
Due to/from related parties, net
|
690
|
|
|
614
|
|
||
Accounts payable
|
(10
|
)
|
|
16
|
|
||
Accrued expenses and other liabilities
|
(249
|
)
|
|
(356
|
)
|
||
Income taxes payable
|
15
|
|
|
(45
|
)
|
||
Unearned revenue
|
(53
|
)
|
|
90
|
|
||
Net cash provided by operating activities
|
1,374
|
|
|
1,395
|
|
||
Investing activities:
|
|
|
|
||||
Additions to property and equipment
|
(87
|
)
|
|
(73
|
)
|
||
Purchases of strategic investments
|
(5
|
)
|
|
—
|
|
||
Proceeds from disposition of assets
|
4
|
|
|
22
|
|
||
Business combinations, net of cash acquired, and purchases of intangible assets
|
(38
|
)
|
|
(45
|
)
|
||
Net cash paid on disposition of a business
|
—
|
|
|
(4
|
)
|
||
Net cash used in investing activities
|
(126
|
)
|
|
(100
|
)
|
||
Financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
106
|
|
|
134
|
|
||
Net proceeds from issuance of long-term debt
|
1,984
|
|
|
—
|
|
||
Repurchase of common stock
|
(181
|
)
|
|
(591
|
)
|
||
Shares repurchased for tax withholdings on vesting of restricted stock
|
(115
|
)
|
|
(204
|
)
|
||
Principal payments on finance lease obligations
|
(1
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
1,793
|
|
|
(661
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(1
|
)
|
|
—
|
|
||
Net increase in cash, cash equivalents and restricted cash
|
3,040
|
|
|
634
|
|
||
Cash, cash equivalents and restricted cash at beginning of the period
|
3,031
|
|
|
3,596
|
|
||
Cash, cash equivalents and restricted cash at end of the period
|
$
|
6,071
|
|
|
$
|
4,230
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
74
|
|
|
$
|
62
|
|
Cash paid for taxes, net
|
76
|
|
|
88
|
|
||
Non-cash items:
|
|
|
|
||||
Changes in capital additions, accrued but not paid
|
$
|
(7
|
)
|
|
$
|
3
|
|
__________
|
|
|
|
||||
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition in fiscal 2020, which was accounted for as a transaction between entities under common control (refer to Note A).
|
Three Months Ended May 1, 2020
|
Class A
Common Stock
|
|
Class B
Convertible
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Non-controlling Interests
|
|
Stockholders’
Equity
|
||||||||||||||||||||
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
||||||||||||||||||||||||||
Balance, January 31, 2020
|
110
|
|
|
$
|
1
|
|
|
307
|
|
|
$
|
3
|
|
|
$
|
2,000
|
|
|
$
|
5,009
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
7,009
|
|
Proceeds from issuance of common stock
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|||||||
Repurchase and retirement of common stock
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(181
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(181
|
)
|
|||||||
Issuance of restricted stock
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for tax withholdings on vesting of restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(154
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(154
|
)
|
|||||||
Stock-based compensation
|
|
|
|
|
|
|
|
|
272
|
|
|
|
|
|
|
|
|
272
|
|
||||||||||||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
(14
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
386
|
|
|
—
|
|
|
—
|
|
|
386
|
|
|||||||
Balance, May 1, 2020
|
112
|
|
|
$
|
1
|
|
|
307
|
|
|
$
|
3
|
|
|
$
|
2,047
|
|
|
$
|
5,395
|
|
|
$
|
(18
|
)
|
|
$
|
—
|
|
|
$
|
7,428
|
|
Three Months Ended May 3, 2019(1)
|
Class A
Common Stock
|
|
Class B
Convertible
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Non-controlling Interests
|
|
Stockholders’
Equity
|
||||||||||||||||||||
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
||||||||||||||||||||||||||
Balance, February 1, 2019
|
111
|
|
|
$
|
1
|
|
|
300
|
|
|
$
|
3
|
|
|
$
|
2,959
|
|
|
$
|
(1,096
|
)
|
|
$
|
(2
|
)
|
|
$
|
1,026
|
|
|
$
|
2,891
|
|
Cumulative effect of adoption of new accounting pronouncements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||||
Proceeds from issuance of common stock
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|||||||
Repurchase and retirement of common stock
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(591
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(591
|
)
|
|||||||
Issuance of restricted stock
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for tax withholdings on vesting of restricted stock
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(207
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(207
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
216
|
|
|||||||
Investment from Dell, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
25
|
|
|||||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||||
Transactions with Pivotal’s non-controlling stockholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
40
|
|
|
26
|
|
|||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
380
|
|
|
—
|
|
|
(15
|
)
|
|
365
|
|
|||||||
Balance, May 3, 2019
|
110
|
|
|
$
|
1
|
|
|
300
|
|
|
$
|
3
|
|
|
$
|
2,460
|
|
|
$
|
(714
|
)
|
|
$
|
2
|
|
|
$
|
1,082
|
|
|
$
|
2,834
|
|
__________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
(1) Adjusted to reflect the recast of prior period information due to the Pivotal acquisition in fiscal 2020, which was accounted for as a transaction between entities under common control (refer to Note A).
|
|
Three Months Ended
|
||||||||||||||
|
May 3, 2019
|
||||||||||||||
|
As Previously Reported
|
|
Reclassification For New Revenue Line
|
|
Pivotal Adjustments(1)
|
|
As Adjusted
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
License
|
$
|
869
|
|
|
$
|
(223
|
)
|
|
$
|
—
|
|
|
$
|
646
|
|
Subscription and SaaS
|
—
|
|
|
285
|
|
|
126
|
|
|
411
|
|
||||
Services
|
1,397
|
|
|
(62
|
)
|
|
58
|
|
|
1,393
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of license revenue
|
50
|
|
|
(14
|
)
|
|
—
|
|
|
36
|
|
||||
Cost of subscription and SaaS revenue
|
—
|
|
|
69
|
|
|
25
|
|
|
94
|
|
||||
Cost of services revenue
|
302
|
|
|
(55
|
)
|
|
52
|
|
|
299
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Unearned license revenue
|
$
|
15
|
|
|
$
|
19
|
|
Unearned subscription and SaaS revenue
|
1,579
|
|
|
1,534
|
|
||
Unearned software maintenance revenue
|
6,611
|
|
|
6,700
|
|
||
Unearned professional services revenue
|
1,013
|
|
|
1,015
|
|
||
Total unearned revenue
|
$
|
9,218
|
|
|
$
|
9,268
|
|
•
|
Pursuant to original equipment manufacturer and reseller arrangements, Dell integrates or bundles VMware’s products and services with Dell’s products and sells them to end users. Dell also acts as a distributor, purchasing VMware’s standalone products and services for resale to end-user customers through VMware-authorized resellers. Revenue under these arrangements is presented net of related marketing development funds and rebates paid to Dell. In addition, VMware provides professional services to end users based upon contractual agreements with Dell.
|
•
|
Dell purchases products and services from VMware for its internal use.
|
•
|
From time to time, VMware and Dell enter into agreements to collaborate on technology projects, and Dell pays VMware for services or reimburses VMware for costs incurred by VMware, in connection with such projects.
|
|
Revenue and Receipts
|
|
Unearned Revenue
|
||||||||||||
|
Three Months Ended
|
|
As of
|
||||||||||||
|
May 1,
|
|
May 3,
|
|
May 1,
|
|
January 31,
|
||||||||
|
2020
|
|
2019
|
|
2020
|
|
2020
|
||||||||
Reseller revenue
|
$
|
864
|
|
|
$
|
665
|
|
|
$
|
3,975
|
|
|
$
|
3,787
|
|
Internal-use revenue
|
18
|
|
|
12
|
|
|
46
|
|
|
57
|
|
||||
Collaborative technology project receipts
|
3
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
•
|
VMware purchases and leases products and purchases services from Dell.
|
•
|
From time to time, VMware and Dell enter into agreements to collaborate on technology projects, and VMware pays Dell for services provided to VMware by Dell related to such projects.
|
•
|
In certain geographic regions where VMware does not have an established legal entity, VMware contracts with Dell subsidiaries for support services and support from Dell personnel who are managed by VMware. The costs incurred by Dell on VMware’s behalf related to these employees are charged to VMware with a mark-up intended to approximate costs that would have been incurred had VMware contracted for such services with an unrelated third party. These costs are included as expenses on VMware’s condensed consolidated statements of income and primarily include salaries, benefits, travel and occupancy expenses. Dell also incurs certain administrative costs on VMware’s behalf in the United States (“U.S.”) that are recorded as expenses on VMware’s condensed consolidated statements of income.
|
•
|
In certain geographic regions, Dell files a consolidated indirect tax return, which includes value added taxes and other indirect taxes collected by VMware from its customers. VMware remits the indirect taxes to Dell, and Dell remits the tax payment to the foreign governments on VMware’s behalf.
|
•
|
From time to time, VMware invoices end users on behalf of Dell for certain services rendered by Dell. Cash related to these services is collected from the end user by VMware and remitted to Dell.
|
•
|
From time to time, VMware enters into agency arrangements with Dell that enable VMware to sell its subscriptions and services, leveraging the Dell enterprise relationships and end customer contracts.
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Purchases and leases of products and purchases of services(1)
|
$
|
44
|
|
|
$
|
80
|
|
Dell subsidiary support and administrative costs
|
27
|
|
|
37
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Due from related parties, current
|
$
|
899
|
|
|
$
|
1,618
|
|
Due to related parties, current(1)
|
132
|
|
|
161
|
|
||
Due from related parties, net, current
|
$
|
767
|
|
|
$
|
1,457
|
|
|
May 1, 2020
|
||||||||||||
|
Weighted-Average Useful Lives
(in years) |
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
Purchased technology
|
5.7
|
|
$
|
921
|
|
|
$
|
(412
|
)
|
|
$
|
509
|
|
Customer relationships and customer lists
|
11.4
|
|
741
|
|
|
(227
|
)
|
|
514
|
|
|||
Trademarks and tradenames
|
7.6
|
|
132
|
|
|
(64
|
)
|
|
68
|
|
|||
Other
|
2.0
|
|
21
|
|
|
(6
|
)
|
|
15
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
1,815
|
|
|
$
|
(709
|
)
|
|
$
|
1,106
|
|
|
January 31, 2020
|
||||||||||||
|
Weighted-Average Useful Lives
(in years) |
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
Purchased technology
|
5.7
|
|
$
|
1,030
|
|
|
$
|
(488
|
)
|
|
$
|
542
|
|
Customer relationships and customer lists
|
11.4
|
|
739
|
|
|
(200
|
)
|
|
539
|
|
|||
Trademarks and tradenames
|
7.6
|
|
131
|
|
|
(58
|
)
|
|
73
|
|
|||
Other
|
2.0
|
|
22
|
|
|
(4
|
)
|
|
18
|
|
|||
Total definite-lived intangible assets
|
|
|
$
|
1,922
|
|
|
$
|
(750
|
)
|
|
$
|
1,172
|
|
Balance, January 31, 2020
|
$
|
9,329
|
|
Increase in goodwill related to business combination
|
24
|
|
|
Balance, May 1, 2020
|
$
|
9,353
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Net income attributable to VMware, Inc.
|
$
|
386
|
|
|
$
|
380
|
|
|
|
|
|
||||
Weighted-average shares, basic for Classes A and B
|
418,383
|
|
|
417,636
|
|
||
Effect of other dilutive securities
|
3,130
|
|
|
9,061
|
|
||
Weighted-average shares, diluted for Classes A and B
|
421,513
|
|
|
426,697
|
|
||
Net income per weighted-average share attributable to VMware, Inc. common stockholders, basic for Classes A and B
|
$
|
0.92
|
|
|
$
|
0.91
|
|
Net income per weighted-average share attributable to VMware, Inc. common stockholders, diluted for Classes A and B
|
$
|
0.92
|
|
|
$
|
0.89
|
|
|
Three Months Ended
|
||||
|
May 1,
|
|
May 3,
|
||
|
2020
|
|
2019
|
||
Anti-dilutive securities:
|
|
|
|
||
Employee stock options
|
550
|
|
|
—
|
|
Restricted stock units
|
6,167
|
|
|
81
|
|
Total
|
6,717
|
|
|
81
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Cash and cash equivalents
|
$
|
5,946
|
|
|
$
|
2,915
|
|
Restricted cash within other current assets
|
94
|
|
|
83
|
|
||
Restricted cash within other assets
|
31
|
|
|
33
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
6,071
|
|
|
$
|
3,031
|
|
|
May 1,
|
|
January 31,
|
|
Effective Interest Rate
|
||||
|
2020
|
|
2020
|
|
|||||
Senior Notes issued August 21, 2017:
|
|
|
|
|
|
||||
2.30% Senior Note Due August 21, 2020
|
$
|
1,250
|
|
|
$
|
1,250
|
|
|
2.56%
|
2.95% Senior Note Due August 21, 2022
|
1,500
|
|
|
1,500
|
|
|
3.17%
|
||
3.90% Senior Note Due August 21, 2027
|
1,250
|
|
|
1,250
|
|
|
4.05%
|
||
Senior Notes issued April 7, 2020:
|
|
|
|
|
|
||||
4.50% Senior Note Due May 15, 2025
|
750
|
|
|
—
|
|
|
4.70%
|
||
4.65% Senior Note Due May 15, 2027
|
500
|
|
|
—
|
|
|
4.80%
|
||
4.70% Senior Note Due May 15, 2030
|
750
|
|
|
—
|
|
|
4.86%
|
||
Total principal amount
|
6,000
|
|
|
4,000
|
|
|
|
||
Less: unamortized discount
|
(8
|
)
|
|
(5
|
)
|
|
|
||
Less: unamortized debt issuance costs
|
(31
|
)
|
|
(16
|
)
|
|
|
||
Net carrying amount
|
5,961
|
|
|
3,979
|
|
|
|
||
Current portion of long-term debt and other borrowings
|
1,249
|
|
|
1,248
|
|
|
|
||
Long-term debt
|
$
|
4,712
|
|
|
$
|
2,731
|
|
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2 - Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
May 1, 2020
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
|||||
Money-market funds
|
$
|
5,109
|
|
|
$
|
—
|
|
|
$
|
5,109
|
|
Demand deposits and time deposits(1)
|
—
|
|
|
28
|
|
|
28
|
|
|||
Total cash equivalents
|
$
|
5,109
|
|
|
$
|
28
|
|
|
$
|
5,137
|
|
|
January 31, 2020
|
||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money-market funds
|
$
|
2,158
|
|
|
$
|
—
|
|
|
$
|
2,158
|
|
Demand deposits and time deposits(1)
|
—
|
|
|
102
|
|
|
102
|
|
|||
Total cash equivalents
|
$
|
2,158
|
|
|
$
|
102
|
|
|
$
|
2,260
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Operating lease expense
|
$
|
46
|
|
|
$
|
40
|
|
|
|
|
|
||||
Finance lease expense:
|
|
|
|
||||
Amortization of ROU assets
|
$
|
2
|
|
|
$
|
—
|
|
Total finance lease expense
|
$
|
2
|
|
|
$
|
—
|
|
|
|
|
|
||||
Short-term lease expense
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
||||
Variable lease expense
|
$
|
8
|
|
|
$
|
7
|
|
Total lease expense
|
$
|
57
|
|
|
$
|
48
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
43
|
|
|
$
|
46
|
|
Financing cash flows from finance leases
|
1
|
|
|
—
|
|
||
ROU assets obtained in exchange for lease liabilities:
|
|
|
|
||||
Operating leases
|
$
|
74
|
|
|
$
|
15
|
|
Finance leases
|
1
|
|
|
—
|
|
|
May 1, 2020
|
||||||
|
Operating Leases
|
|
Finance Leases
|
||||
ROU assets, non-current(1)
|
$
|
920
|
|
|
$
|
57
|
|
|
|
|
|
||||
Lease liabilities, current(2)
|
$
|
101
|
|
|
$
|
4
|
|
Lease liabilities, non-current(3)
|
787
|
|
|
52
|
|
||
Total lease liabilities
|
$
|
888
|
|
|
$
|
56
|
|
|
January 31, 2020
|
||||||
|
Operating Leases
|
|
Finance Leases
|
||||
ROU assets, non-current(1)
|
$
|
886
|
|
|
$
|
58
|
|
|
|
|
|
||||
Lease liabilities, current(2)
|
$
|
109
|
|
|
$
|
4
|
|
Lease liabilities, non-current(3)
|
746
|
|
|
55
|
|
||
Total lease liabilities
|
$
|
855
|
|
|
$
|
59
|
|
|
May 1,
|
|
January 31,
|
||
|
2020
|
|
2020
|
||
Weighted-average remaining lease term (in years)
|
|
|
|
||
Operating leases
|
12.9
|
|
|
13.3
|
|
Finance leases
|
9.0
|
|
|
9.2
|
|
Weighted-average discount rate
|
|
|
|
||
Operating leases
|
3.7
|
%
|
|
3.8
|
%
|
Finance leases
|
2.9
|
%
|
|
3.1
|
%
|
|
May 1, 2020
|
||||||
|
Operating Leases
|
|
Finance Leases
|
||||
2021
|
$
|
102
|
|
|
$
|
4
|
|
2022
|
148
|
|
|
6
|
|
||
2023
|
133
|
|
|
7
|
|
||
2024
|
105
|
|
|
7
|
|
||
2025
|
79
|
|
|
6
|
|
||
Thereafter
|
597
|
|
|
34
|
|
||
Total future minimum lease payments
|
1,164
|
|
|
64
|
|
||
Less: Imputed interest
|
(276
|
)
|
|
(8
|
)
|
||
Total lease liabilities(1)
|
$
|
888
|
|
|
$
|
56
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Aggregate purchase price(1)
|
$
|
181
|
|
|
$
|
591
|
|
Class A common stock repurchased
|
1,540
|
|
|
3,264
|
|
||
Weighted-average price per share
|
$
|
117.52
|
|
|
$
|
180.96
|
|
|
Number of Units
|
|
Weighted-Average Grant Date Fair Value
(per unit)
|
|||
Outstanding, January 31, 2020
|
17,474
|
|
|
$
|
128.38
|
|
Granted
|
743
|
|
|
108.24
|
|
|
Vested
|
(3,153
|
)
|
|
101.52
|
|
|
Forfeited
|
(761
|
)
|
|
125.02
|
|
|
Outstanding, May 1, 2020
|
14,303
|
|
|
133.35
|
|
|
Unrealized Gain (Loss) on
Forward Contracts |
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||
Balance, January 31, 2020
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
(4
|
)
|
Unrealized gains (losses), net of tax provision (benefit) of ($2), $—, and ($2)
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|||
Foreign currency translation adjustments
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Other comprehensive income (loss), net
|
(13
|
)
|
|
(1
|
)
|
|
(14
|
)
|
|||
Balance, May 1, 2020
|
$
|
(13
|
)
|
|
$
|
(5
|
)
|
|
$
|
(18
|
)
|
|
|
|
|
|
|
||||||
|
Unrealized Gain (Loss) on
Forward Contracts |
|
Foreign Currency Translation Adjustment
|
|
Total
|
||||||
Balance, February 1, 2019
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
(2
|
)
|
Unrealized gains (losses), net of tax provision (benefit) of $—
|
4
|
|
|
—
|
|
|
4
|
|
|||
Other comprehensive income (loss), net
|
4
|
|
|
—
|
|
|
4
|
|
|||
Balance, May 3, 2019
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
2
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Revenue:
|
|
|
|
||||
License
|
$
|
660
|
|
|
$
|
646
|
|
Subscription and SaaS
|
572
|
|
|
411
|
|
||
Total license and subscription and SaaS
|
1,232
|
|
|
1,057
|
|
||
Services:
|
|
|
|
||||
Software maintenance
|
1,245
|
|
|
1,148
|
|
||
Professional services
|
257
|
|
|
245
|
|
||
Total services
|
1,502
|
|
|
1,393
|
|
||
Total revenue
|
$
|
2,734
|
|
|
$
|
2,450
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
United States
|
$
|
1,363
|
|
|
$
|
1,196
|
|
International
|
1,371
|
|
|
1,254
|
|
||
Total
|
$
|
2,734
|
|
|
$
|
2,450
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
United States
|
$
|
865
|
|
|
$
|
860
|
|
International
|
213
|
|
|
209
|
|
||
Total
|
$
|
1,078
|
|
|
$
|
1,069
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended
|
|
|
|||||||||||
|
May 1,
|
|
May 3,
|
|
|
|||||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
License
|
$
|
660
|
|
|
$
|
646
|
|
|
$
|
14
|
|
|
2
|
%
|
Subscription and SaaS
|
572
|
|
|
411
|
|
|
162
|
|
|
39
|
|
|||
Total license and subscription and SaaS
|
1,232
|
|
|
1,057
|
|
|
176
|
|
|
17
|
|
|||
Services:
|
|
|
|
|
|
|
|
|||||||
Software maintenance
|
1,245
|
|
|
1,148
|
|
|
98
|
|
|
9
|
|
|||
Professional services
|
257
|
|
|
245
|
|
|
10
|
|
|
4
|
|
|||
Total services
|
1,502
|
|
|
1,393
|
|
|
108
|
|
|
8
|
|
|||
Total revenue
|
$
|
2,734
|
|
|
$
|
2,450
|
|
|
$
|
284
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
United States
|
$
|
1,363
|
|
|
$
|
1,196
|
|
|
$
|
167
|
|
|
14
|
%
|
International
|
1,371
|
|
|
1,254
|
|
|
117
|
|
|
9
|
|
|||
Total revenue
|
$
|
2,734
|
|
|
$
|
2,450
|
|
|
$
|
284
|
|
|
12
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Unearned license revenue
|
$
|
15
|
|
|
$
|
19
|
|
Unearned subscription and SaaS revenue
|
1,579
|
|
|
1,534
|
|
||
Unearned software maintenance revenue
|
6,611
|
|
|
6,700
|
|
||
Unearned professional services revenue
|
1,013
|
|
|
1,015
|
|
||
Total unearned revenue
|
$
|
9,218
|
|
|
$
|
9,268
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
May 1,
|
|
May 3,
|
|
|
|
|
|||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Cost of license revenue
|
$
|
40
|
|
|
$
|
36
|
|
|
$
|
4
|
|
|
10
|
%
|
% of License revenue
|
6
|
%
|
|
6
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
May 1,
|
|
May 3,
|
|
|
|||||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Cost of subscription and SaaS revenue
|
$
|
122
|
|
|
$
|
91
|
|
|
$
|
32
|
|
|
35
|
%
|
Stock-based compensation
|
4
|
|
|
3
|
|
|
1
|
|
|
22
|
|
|||
Total expenses
|
$
|
126
|
|
|
$
|
94
|
|
|
$
|
33
|
|
|
35
|
|
% of Subscription and SaaS revenue
|
22
|
%
|
|
23
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|||||||||||
|
May 1,
|
|
May 3,
|
|
|
|||||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Cost of services revenue
|
$
|
296
|
|
|
$
|
281
|
|
|
$
|
15
|
|
|
5
|
%
|
Stock-based compensation
|
22
|
|
|
18
|
|
|
4
|
|
|
20
|
|
|||
Total expenses
|
$
|
318
|
|
|
$
|
299
|
|
|
$
|
19
|
|
|
6
|
|
% of Services revenue
|
21
|
%
|
|
21
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
May 1,
|
|
May 3,
|
|
|
|
|
|||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Research and development
|
$
|
540
|
|
|
$
|
488
|
|
|
$
|
52
|
|
|
11
|
%
|
Stock-based compensation
|
125
|
|
|
102
|
|
|
23
|
|
|
23
|
|
|||
Total expenses
|
$
|
665
|
|
|
$
|
590
|
|
|
$
|
75
|
|
|
13
|
|
% of Total revenue
|
24
|
%
|
|
24
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
May 1,
|
|
May 3,
|
|
|
|
|
|||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Sales and marketing
|
$
|
845
|
|
|
$
|
805
|
|
|
$
|
39
|
|
|
5
|
%
|
Stock-based compensation
|
72
|
|
|
63
|
|
|
10
|
|
|
16
|
|
|||
Total expenses
|
$
|
917
|
|
|
$
|
868
|
|
|
$
|
49
|
|
|
6
|
|
% of Total revenue
|
34
|
%
|
|
35
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
May 1,
|
|
May 3,
|
|
|
|
|
|||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
General and administrative
|
$
|
197
|
|
|
$
|
179
|
|
|
$
|
18
|
|
|
10
|
%
|
Stock-based compensation
|
49
|
|
|
30
|
|
|
19
|
|
|
65
|
|
|||
Total expenses
|
$
|
246
|
|
|
$
|
209
|
|
|
$
|
37
|
|
|
18
|
|
% of Total revenue
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
May 1,
|
|
May 3,
|
|
|
|
|
|||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|||||||
Other income (expense), net
|
$
|
(6
|
)
|
|
$
|
17
|
|
|
$
|
(23
|
)
|
|
(137
|
)%
|
% of Total revenue
|
—
|
%
|
|
1
|
%
|
|
|
|
|
•
|
Pursuant to OEM and reseller arrangements, Dell integrates or bundles our products and services with Dell’s products and sells them to end users. Dell also acts as a distributor, purchasing our standalone products and services for resale to end-user customers through VMware-authorized resellers. Revenue under these arrangements is presented net of related marketing development funds and rebates paid to Dell. In addition, we provide professional services to end users based upon contractual agreements with Dell.
|
•
|
Dell purchases products and services from us for its internal use.
|
•
|
From time to time, we and Dell enter into agreements to collaborate on technology projects, and Dell pays us for services or reimburses us for costs incurred by us, in connection with such projects.
|
|
Revenue and Receipts
|
|
Unearned Revenue
|
||||||||||||
|
Three Months Ended
|
|
As of
|
||||||||||||
|
May 1,
|
|
May 3,
|
|
May 1,
|
|
January 31,
|
||||||||
|
2020
|
|
2019
|
|
2020
|
|
2020
|
||||||||
Reseller revenue
|
$
|
864
|
|
|
$
|
665
|
|
|
$
|
3,975
|
|
|
$
|
3,787
|
|
Internal-use revenue
|
18
|
|
|
12
|
|
|
46
|
|
|
57
|
|
||||
Collaborative technology project receipts
|
3
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
•
|
We purchase and lease products and purchase services from Dell.
|
•
|
From time to time, we and Dell enter into agreements to collaborate on technology projects, and we pay Dell for services provided to us by Dell related to such projects.
|
•
|
In certain geographic regions where we do not have an established legal entity, we contract with Dell subsidiaries for support services and support from Dell personnel who are managed by us. The costs incurred by Dell on our behalf related to these employees are charged to us with a mark-up intended to approximate costs that would have been incurred had we contracted for such services with an unrelated third party. These costs are included as expenses on our condensed consolidated statements of income and primarily include salaries, benefits, travel and occupancy expenses. Dell also incurs certain administrative costs on our behalf in the U.S. that are recorded as expenses on our condensed consolidated statements of income.
|
•
|
In certain geographic regions, Dell files a consolidated indirect tax return, which includes value added taxes and other indirect taxes collected by us from our customers. We remit the indirect taxes to Dell, and Dell remits the tax payment to the foreign governments on our behalf.
|
•
|
From time to time, we invoice end users on behalf of Dell for certain services rendered by Dell. Cash related to these services is collected from the end user by us and remitted to Dell.
|
•
|
From time to time, we enter into agency arrangements with Dell that enable us to sell our subscriptions and services, leveraging the Dell enterprise relationships and end customer contracts.
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Purchases and leases of products and purchases of services(1)
|
$
|
44
|
|
|
$
|
80
|
|
Dell subsidiary support and administrative costs
|
27
|
|
|
37
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Due from related parties, current
|
$
|
899
|
|
|
$
|
1,618
|
|
Due to related parties, current(1)
|
132
|
|
|
161
|
|
||
Due from related parties, net, current
|
$
|
767
|
|
|
$
|
1,457
|
|
|
May 1,
|
|
January 31,
|
||||
|
2020
|
|
2020
|
||||
Cash and cash equivalents
|
$
|
5,946
|
|
|
$
|
2,915
|
|
|
Three Months Ended
|
||||||
|
May 1,
|
|
May 3,
|
||||
|
2020
|
|
2019
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,374
|
|
|
$
|
1,395
|
|
Investing activities
|
(126
|
)
|
|
(100
|
)
|
||
Financing activities
|
1,793
|
|
|
(661
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(1
|
)
|
|
—
|
|
||
Net increase in cash, cash equivalents and restricted cash
|
$
|
3,040
|
|
|
$
|
634
|
|
Senior Notes issued August 21, 2017:
|
|
||
2.30% Senior Note Due August 21, 2020
|
$
|
1,250
|
|
2.95% Senior Note Due August 21, 2022
|
1,500
|
|
|
3.90% Senior Note Due August 21, 2027
|
1,250
|
|
|
Senior Notes issued April 7, 2020:
|
|
||
4.50% Senior Note Due May 15, 2025
|
750
|
|
|
4.65% Senior Note Due May 15, 2027
|
500
|
|
|
4.70% Senior Note Due May 15, 2030
|
750
|
|
|
Total principal amount
|
$
|
6,000
|
|
•
|
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”);
|
•
|
announcements of investor conferences, speeches and events at which our executives discuss our products, services and competitive strategies;
|
•
|
webcasts of our quarterly earnings calls and links to webcasts of investor conferences at which our executives appear (archives of these events are also available for a limited time);
|
•
|
additional information on financial metrics, including reconciliations of non-GAAP financial measures discussed in our presentations to the nearest comparable GAAP measure;
|
•
|
press releases on quarterly earnings, product and service announcements, legal developments and international news;
|
•
|
corporate governance information including our certificate of incorporation, bylaws, corporate governance guidelines, board committee charters, business conduct guidelines (which constitutes our code of business conduct and ethics) and other governance-related policies;
|
•
|
other news, blogs and announcements that we may post from time to time that investors might find useful or interesting; and
|
•
|
opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
Certain industry events that we sponsor or at which we present and certain customer events have been canceled, postponed or moved to virtual-only experiences, including our annual United States (“U.S.”) and regional VMworld trade shows, which have historically been our most significant marketing and customer outreach events where we annually make important new product announcements, and which have been changed to virtual-only events, and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future; and
|
•
|
In addition, substantially all of our employees worldwide have worked remotely for an extended period of time, and while we expect to gradually re-open facilities with appropriate social distancing and health practices when and as permitted by local governmental authorities, we are allowing most employees to work from home for the foreseeable future until they feel it is safe to return to their workplaces.
|
•
|
sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen;
|
•
|
our electronic communications systems, including email and other methods, could be disrupted, and our ability to conduct our business operations could be seriously damaged until such systems can be restored and secured;
|
•
|
our ability to process customer orders and electronically deliver products and services could be degraded, and our distribution channels could be disrupted, resulting in delays in revenue recognition;
|
•
|
defects and security vulnerabilities could be exploited or introduced into our software products or our subscription and SaaS offerings and impair or disrupt their availability, thereby damaging the reputation and perceived reliability and security of our products and services and potentially making the data systems of our customers vulnerable to further data loss and cyber incidents; and
|
•
|
personally identifiable or confidential data of our customers, employees and business partners could be stolen or lost.
|
•
|
fluctuations in demand, adoption rates, sales cycles and pricing levels for our products and services;
|
•
|
variations in customer choices among our on-premises and subscription and SaaS offerings, which can impact our rates of total revenue and license revenue growth;
|
•
|
changes in customers’ budgets for information technology purchases and in the timing of their purchasing decisions;
|
•
|
the timing of announcements or releases of new or upgraded products and services by us or by our competitors;
|
•
|
the timing and size of business realignment plans and restructuring charges;
|
•
|
our ability to maintain scalable internal systems for reporting, order processing, license fulfillment, product delivery, purchasing, billing and general accounting, among other functions;
|
•
|
our ability to control costs, including our operating expenses;
|
•
|
the credit risks associated with our distributors, who account for a significant portion of our product revenue and accounts receivable, and our customers;
|
•
|
the timing of when sales orders are processed, which can cause fluctuations in our backlog and impact our bookings and timing of revenue recognition;
|
•
|
seasonal factors such as the end of fiscal period budget expenditures by our customers and the timing of holiday and vacation periods;
|
•
|
renewal rates and the amounts of the renewals for EAs as original EA terms expire;
|
•
|
the timing and amount of internally developed software development costs that may be capitalized;
|
•
|
unplanned events that could affect market perception of the quality or cost-effectiveness of our products and solutions;
|
•
|
increased volatility in the provision for income taxes in periods in which transfers of intellectual property between our legal entities occur;
|
•
|
fluctuations in the severity and duration of the COVID-19 pandemic and resulting restrictions on business activity which may vary significantly by region; and
|
•
|
our ability to accurately predict the degree to which customers will elect to purchase our subscription-based offerings in place of licenses to our on-premises offerings.
|
•
|
disrupting our ongoing operations and diverting management from day-to-day responsibilities;
|
•
|
increasing our expenses, and adversely impacting our business, financial condition and operating results, including, for example, the dilutive impact on our operating margin and earnings per share that we expect from our acquisitions of Carbon Black and Pivotal;
|
•
|
the costs of integrating business operations and on-boarding personnel, particularly for larger acquisitions such as Carbon Black and Pivotal;
|
•
|
failure of an acquired business to further our business strategy;
|
•
|
uncertainties in achieving the expected benefits of an acquisition or disposition, including enhanced revenue, technology, human resources, cost savings, operating efficiencies and other synergies;
|
•
|
reducing cash available for operations, stock repurchase programs and other uses and resulting in potentially dilutive issuances of equity securities or the incurrence of additional debt;
|
•
|
incurring amortization expense related to identifiable intangible assets acquired that could impact our operating results;
|
•
|
difficulty integrating the operations, systems, technologies, products and personnel of acquired businesses effectively;
|
•
|
the need to provide transition services in connection with a disposition that may result in the diversion of resources and focus;
|
•
|
difficulty achieving expected business results due to a lack of experience in new markets, products or technologies or the initial dependence on unfamiliar distribution partners or vendors;
|
•
|
retaining and motivating key personnel from acquired companies;
|
•
|
declining employee morale and retention issues affecting employees of businesses that we acquire or dispose of, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or the direction of the acquired or disposed business;
|
•
|
assuming the liabilities of an acquired business, including acquired litigation-related liabilities and regulatory compliance issues, and potential litigation or regulatory action arising from a proposed or completed acquisition;
|
•
|
lawsuits resulting from an acquisition or disposition;
|
•
|
maintaining good relationships with customers or business partners of an acquired business or our own customers as a result of any integration of operations or the divestiture of a business upon which our customers rely;
|
•
|
unidentified issues not discovered during the diligence process, including issues with the acquired or divested business’s intellectual property, product quality, security, privacy practices, accounting practices, regulatory compliance or legal contingencies;
|
•
|
maintaining or establishing acceptable standards, controls, procedures or policies with respect to an acquired business;
|
•
|
risks relating to the challenges and costs of closing a transaction;
|
•
|
the accounting consequences of certain acquisitions, which may vary by deal structure, including, for instance, the need to account for our acquisition of Pivotal as a transaction between entities under common control, which requires prior period financial statements of VMware to be recast as if we had owned Pivotal and operated as one consolidated entity for all periods presented; and
|
•
|
the need to later divest acquired assets at a loss if an acquisition does not meet our expectations.
|
•
|
difficulties in enforcing contracts and collecting accounts receivable and longer payment cycles, especially in emerging markets;
|
•
|
difficulties in delivering support, training and documentation in certain foreign markets;
|
•
|
tariffs and trade barriers, which could increase due to the current geopolitical climate, and other regulatory or contractual limitations on our ability to sell or develop our products and services in certain foreign markets;
|
•
|
changes and instability in government policies and international trade arrangements that could adversely affect the ability of U.S.-based companies to conduct business in non-U.S. markets;
|
•
|
economic or political instability and security concerns in countries that are important to our international sales and operations;
|
•
|
difficulties in transferring funds from certain countries;
|
•
|
increased compliance risks, particularly in emerging markets; and
|
•
|
difficulties in maintaining appropriate controls relating to revenue recognition practices.
|
•
|
requiring the dedication of a portion of our expected cash flow from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
|
•
|
pay significant damages;
|
•
|
stop distributing our products that contain the open source software;
|
•
|
revise or modify our product code to remove alleged infringing code;
|
•
|
release the source code of our proprietary software; or
|
•
|
take other steps to avoid or remedy an alleged infringement.
|
•
|
Dell is able to control matters requiring our stockholders’ approval, including the election of a majority of our directors as described in the risk factors below.
|
•
|
Dell could implement changes to our business, including changing our commercial relationship with Dell or taking other corporate actions, such as participating in business combinations, that our other stockholders may not view as beneficial.
|
•
|
We have arrangements with a number of companies that compete with Dell, and our relationship with Dell could adversely affect our relationships with these companies or other customers, suppliers and partners.
|
•
|
Since the Dell Acquisition, the portion of our bookings that are realized through Dell sales channels has grown more rapidly than our sales through non-Dell resellers and distributors, and we expect this trend to continue. To the extent that we find ourselves relying more heavily upon Dell for our channel sales, Dell’s leverage over our sales and marketing efforts may increase and our ability to negotiate favorable go-to-market arrangements with Dell and with other channel partners may decline. During the three months ended May 1, 2020, revenue from Dell, including purchases of products and services directly from us, as well as through our channel partners, accounted for 32% of our consolidated revenue, which included revenue from Dell selling joint solutions as an OEM, acting as a distributor to other non-Dell resellers, reselling products and services as a reseller or purchasing products and services for its own internal use. On certain transactions, Dell Financial Services also provided financing to our end users at our end users’ discretion.
|
•
|
Dell has a right to approve certain matters under our certificate of incorporation, including acquisitions or investments in excess of $100 million, and Dell may choose not to consent to matters that our board of directors believes are in the best interests of VMware.
|
•
|
Synergies and benefits that we expect from our relationship with Dell may not be realized.
|
•
|
Dell is highly leveraged and commits a substantial portion of its cash flows to servicing its indebtedness. Dell’s significant debt could create the perception that Dell may exercise its control over us to limit our growth in favor of its other businesses or cause us to transfer cash to Dell. In addition, if Dell defaults, or appears in danger of defaulting, on its indebtedness, uncertainty as to the impact of such a default on VMware could disrupt our business.
|
•
|
Investor perceptions of Dell’s performance, future plans and prospects could contribute to volatility in the price of our Class A common stock.
|
•
|
Some of our products compete directly with products sold or distributed by Dell, which could result in reduced sales.
|
•
|
that a majority of our board of directors consists of independent directors;
|
•
|
that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
|
•
|
that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
•
|
for an annual performance evaluation of the nominating and governance committee and compensation committee.
|
•
|
the division of our board of directors into three classes, with each class serving for a staggered three-year term, which prevents stockholders from electing an entirely new board of directors at any annual meeting;
|
•
|
the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;
|
•
|
following a 355 Distribution of Class B common stock by Dell to its stockholders, the restriction that a beneficial owner of 10% or more of our Class B common stock may not vote in any election of directors unless such person or group also owns at least an equivalent percentage of Class A common stock or obtains approval of our board of directors prior to acquiring beneficial ownership of at least 5% of Class B common stock;
|
•
|
the prohibition of cumulative voting in the election of directors or any other matters, which would otherwise allow less than a majority of stockholders to elect director candidates;
|
•
|
the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon at a stockholders’ meeting;
|
•
|
the ability of the board of directors to issue, without stockholder approval, up to 100,000,000 shares of preferred stock with terms set by the board of directors, which rights could be senior to those of common stock; and
|
•
|
in the event that Dell or its successor-in-interest no longer owns shares of our common stock representing at least a majority of the votes entitled to be cast in the election of directors, stockholders may not act by written consent and may not call special meetings of the stockholders.
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share(1)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs(2)
|
||||||
February 1 – February 28, 2020
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,000,397,897
|
|
February 29 – March 27, 2020
|
1,390,608
|
|
|
115.76
|
|
|
1,390,608
|
|
|
839,417,826
|
|
||
March 28 – May 1, 2020
|
149,624
|
|
|
133.65
|
|
|
149,624
|
|
|
819,420,325
|
|
||
|
1,540,232
|
|
|
$
|
117.50
|
|
|
1,540,232
|
|
|
819,420,325
|
|
(1)
|
The average price paid per share excludes commissions.
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
|
|
8-K
|
|
001-33622
|
|
4.2
|
|
4/7/20
|
|
4.7
|
|
|
|
8-K
|
|
001-33622
|
|
4.3
|
|
4/7/20
|
|
4.8
|
|
|
|
8-K
|
|
001-33622
|
|
4.4
|
|
4/7/20
|
|
10.30*+
|
|
|
|
|
|
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
|
|
|
|
|
|
32.1ǂ
|
|
|
|
|
|
|
|
|
|
|
|
32.2ǂ
|
|
|
|
|
|
|
|
|
|
|
|
101.INS*
|
|
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
|
|
|
|
101.SCH*
|
|
|
Inline XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
101.CAL*
|
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
101.DEF*
|
|
|
Inline XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
101.LAB*
|
|
|
Inline XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
101.PRE*
|
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
104
|
|
|
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101)
|
|
|
|
|
|
|
|
|
|
|
VMWARE, INC.
|
|
Dated:
|
June 8, 2020
|
By:
|
/s/ J. Andrew Munk
|
|
|
|
J. Andrew Munk
Chief Accounting Officer
(Principal Accounting Officer)
|
1 Year Vmware Chart |
1 Month Vmware Chart |
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