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ACTG 2608: Financial Analysis Project | Fall Quarter 2021 | Extra Credit – Written Assessment Introduction The purpose of financial accounting statements is to communicate the story of the business activities for the most recent accounting period to interested, outside parties. Outside parties are typically interested in whether the business is profitable, growing, able to handle its debt, and able to weather economic storms. Investors are constantly assessing whether they believe a company’s stock price represents a buying or selling opportunity. Lenders are trying to assess whether the company is one to whom they should loan money, with confidence they will get repaid. Financial statements play a crucial role in determining the answer to these questions. Deliverable You will prepare a strategic assessment of VMware and convey areas the Company has for expansion (whether revenue, investment, or market) and areas that will challenge those opportunities. Leverage the financial statements to strengthen your argument as well as any other publicly available collateral. At a minimum, you must use, and present information based on the following documents / presentations: SEC filings [these have been loaded into Camino] · Form 10-K for fiscal year 2021 · Form 10-Q for Q2 fiscal year 2022 Earnings reports and accompanying earnings call playbacks (refer to the VMware investor relations webpage: ir.vmware.com) · Year ended January 29, 2021 · Second quarter results (quarter ended July 30, 2021) Recommended process/approach to this project (the points below are suggestions to assist in framing your research to document your analysis) Gather facts on the specific Company. Consider the following questions for your summary: a) Try to find information about the dollar size of the industry in the US and globally. b) Who are the main companies dominating the industry? Where does the Company rank? c) How fast is VMware growing compared to its competitors? Are they gaining, or losing, market share? d) Have there been any other changes at the company (changes in executive management, changes in auditors, layoffs, etc?) Determine what analyst expectations were for the Company’s financial performance a) Read at least one analyst report written in advance of the Earnings conference call. b) Use any reports you have read, or other sources of information you can find, to summarize what analyst “expectations” were for VMware. Specifically, what were analysts looking for in terms of sales and earnings? Listen a replay of the Earnings Calls and gather relevant financial information and supplemental data. a) Reviewing the conference call, what stood out to you? What was the main point you felt “management” tried to make on the call? b) What were the key questions analysts asked on the call? How did the company answer them? c) What new piece of news did you learn from the conference call? d) What did management say about future performance? Did they “guide” the listeners relative to future sales/earnings? See how Financial Analysts “reacted” to VMware’s financial performance. a) Read at least one analyst report written after the conference call. b) How did VMware perform in relative to analyst expectations? c) Did analyst expectations for VMware’s revenues/EPS for the full year of 2020 (FY ’21) go up or down after the Q4 financial earnings release/call? Why do you think this happened? How does this calibrate against the information presented at the second quarter report (Q2 FY’22)? d) What happened to the VMware stock price in the few days leading up to the earnings announcement, and the first day or two of trading after the announcement? e) Did the stock move in the direction you would have expected? Why or why not? Financial analytics (some suggestions are as follows) Liquidity/Solvency Ratios: · Current Ratio · Working Capital · Receivables Turnover (better to use Accounts Receivable Days Sales Outstanding (DSO) --Formula is Ending A/R divided by Sales, times 90 (ie, the number of days in a quarter)). · Free cash flow Profitability Ratios (use GAAP, not Non-GAAP net income, and use diluted, not basic, EPS): · Earnings per share · Net Profit Margin · Gross margin · Operating margin · Revenue growth Key operational drivers · Income statement drivers (review MD&A commentary of the most recent annual report – Form 10-K) Report requirements Your ability to convey the information outlined in Parts 1, 2, and 3 in a concise and direct manner will be evaluated. This should be prepared as if you are presenting your information to senior leaders of the organization. Your report should have the following information: · Key Highlights and Executive Overview/Summary · Overview of VMware (highlights from Parts 1 and 2) · Financial and Strategic Analysis · Based upon your review of the financial information and qualitative notes from analyst reports and the earnings transcripts of the two earnings reports and replay, where are the areas of opportunity for expansion? What are the areas of concern? · Other key findings & recommendations Note, this memo should not exceed 5 pages of written analysis – you may attach 2 pages of financial analytics as an appendix to support your narrative. Grading: Your grade will not exceed 15 points of extra credit and will be based upon the quality of your analysis as well as your ability to deliver a crisp message that would be appropriate for a senior leader to consume. Accounting 2608: Financial Analysis Project | Extra Credit – Fall 2021 0001124610-21-000015 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 29, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33622 _______________________________________________________ VMWARE, INC. (Exact name of registrant as specified in its charter) _______________________________________________________ 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) (650) 427-5000 (Registrant’s telephone number, including area code) _____________________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A common stock VMW New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ As of July 31, 2020, the aggregate market value of the registrant’s Class A common stock held by non-affiliates of the registrant (based upon the closing sale price of such shares on the New York Stock Exchange on July 31, 2020) was approximately $11.4 billion. Shares of the registrant’s Class A common stock and Class B common stock held by each executive officer and director and by each entity or person, other than investment companies, that, to the registrant’s knowledge, owned 5% or more of the registrant’s outstanding Class A common stock as of July 31, 2020 have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 16, 2021, the number of shares of common stock, par value $0.01 per share, of the registrant outstanding was 419,232,986, of which 112,011,150 shares were Class A common stock and 307,221,836 were Class B common stock. DOCUMENTS INCORPORATED BY REFERENCE Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference to portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held in 2021. The Proxy Statement will be filed by the registrant with the Securities and Exchange Commission no later than 120 days after the end of the registrant’s fiscal year ended January 29, 2021. TABLE OF CONTENTS Page PART I Item 1. Business 7 Item 1A. Risk Factors 18 Item 1B. Unresolved Staff Comments 36 Item 2. Properties 37 Item 3. Legal Proceedings 37 Item 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. Selected Financial Data 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8. Financial Statements and Supplementary Data 58 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 108 Item 9A. Controls and Procedures 108 Item 9B. Other Information 108 PART III Item 10. Directors, Executive Officers and Corporate Governance 109 Item 11. Executive Compensation 109 Item