VMware Resetting Post-IPO Employee Stock Options (VMW, EMC)

All U.S.-based non-executive employees of VMware holding stock options
granted after the IPO will be able to exchange their out of the money
stock options for an equal number of new options.  non-US employees
will be granted a to-be-determined proportionate number of restricted
stock units after the exchange offer for U.S. employees is completed.

Participation is voluntary and the exercise price of the new options
will be the stock price at the close of trading on the day immediately
following the date that the exchange is completed. The exchange will
restart options’ vesting schedule, which means some employees who were
biding time to the vesting date might not participate depending upon
their goals. Executive officers of VMware will not be eligible to
participate.

As long as EMC Corp. (NYSE: EMC) is on board with this initiative, you
can consider this a done deal as it is majority owned by EMC.  This
will likely result in additional charges on a GAAP basis under new
rules, but we won't try to calculate that ahead of time without knowing
the specifics.

With shares at $39.00 and down from well over $100.00 after its IPO,
you can bet that many of the stock options issued over the last year
are under water.  Its post-IPO (nearly 52-weeks) trading range is
$36.51 to $125.25.

Jon C. Ogg

July 17, 2008