EMC 2008 Annual Report Download - page 28

Table of Contents
purchases. Software maintenance revenues increased due to continued demand for support from our installed base. The 7.8% increase in software revenues in
2007 was due to an increase in software maintenance revenue of $33.9 or 15.5% and an increase in software license revenues of $8.5 or 2.6%. Software
maintenance revenues increased due to continued demand for support from our installed base. The increase in software license revenues in 2007 was
attributable to greater demand for our content management offerings. Other services revenues increased $19.1 or 10.5% and $48.2 or 35.8% in 2008 and 2007,
respectively, as a result of increased demand for professional services to support and implement solutions for managing increasing volumes of customers'
unstructured data.
The RSA Information Security segment was created during the third quarter of 2006 as a result of our acquisitions of RSA and Network Intelligence
Corporation in September 2006. The RSA Information Security segment revenues primarily include software revenues and other services revenues. Total
software revenues were $461.6, $438.7 and $127.3 in 2008, 2007 and 2006, respectively, representing an increase of 5.2% in 2008 and 244.6% in 2007. The
5.2% increase in 2008 was primarily due to an increase in software maintenance revenues of $26.4 or 27.0%, partially offset by a decrease in software license
revenues of $3.5 or 1.0%. Software maintenance revenues increased due to continued demand for support from our installed base. The decrease in software
license revenues in 2008 was attributable to lower demand resulting from the current uncertain economic climate and resulting negative impact in our
customers' IT purchases. Other services revenues increased $32.4 or 46.7% and $52.3 or 305.1% in 2008 and 2007, respectively, as a result of increased
demand for professional services. Because this segment was formed during the third quarter of 2006, the 2007 growth rate is not representative of the actual
ongoing growth rate.
The VMware Virtual Infrastructure segment includes software license revenues and services revenues. Total revenues were $1,876.9, $1,320.8 and
$709.0 in 2008, 2007 and 2006, respectively, representing an increase of 42.1% in 2008 and 86.3% in 2007. Software license revenues were $1,175.1, $903.2
and $494.6 in 2008, 2007 and 2006, respectively, representing an increase of 30.1% in 2008 and 82.6% in 2007. A significant majority of the revenue growth
in 2008 and 2007 when compared to the prior comparable period is the result of greater demand for VMware's virtualization product offerings attributable to
wider industry acceptance of virtualization as part of organizations' IT infrastructure, a broadened product portfolio and expansion of VMware's network of
indirect channel partners. ELAs continue to be a significant component of VMware's revenue growth. Under a typical ELA, a portion of the revenue is
attributed to the license and recognized immediately, but the majority is deferred and recognized as services revenue in future periods. At the end of the fourth
quarter of 2008, VMware observed seasonal strength in ELAs from its enterprise accounts and comparative weakness in the transactional business especially
with price-sensitive customers, such as the academic market and smaller businesses. During the second half of the year, customers began purchasing VMware
solutions in smaller quantities through the channel to meet their immediate needs, forgoing larger discounts offered under ELAs. VMware expects that
customers may continue smaller purchases through the channel at least through the first quarter of 2009 and perhaps longer. VMware expects the rate of
revenue growth to continue to decelerate due primarily to the size and scale of its business and lengthened sales cycles attributable to challenges its customers
may face in the current uncertain economic environment, such as decreases in IT budgets and difficulties in obtaining financing.
VMware software maintenance and services revenues were $701.9, $417.6 and $214.4 in 2008, 2007 and 2006, respectively, representing an increase of
68.1% in 2008 and 94.8% in 2007. Software maintenance and services revenues primarily consist of software maintenance and professional services revenues.
This growth reflects the increase in VMware's license revenues, as software maintenance services are generally purchased with licenses, the benefit from
multi-year software maintenance contracts sold in previous periods and renewals of existing customer software maintenance contracts. Professional services
revenue growth reflects increased demand for design and implementation services and training programs, as end-user organizations deployed virtualization
across their organizations. Given the reasons cited previously, VMware expects that services revenue will compose a larger proportion of its revenue mix and
revenue growth in 2009.
Revenues by geography were as follows:
Percentage Change
2008 2007 2006 2008 vs 2007 2007 vs 2006
United States $7,990.8 $7,343.0 $6,319.7 8.8% 16.2%
Europe, Middle East and Africa 4,555.0 3,921.1 3,232.6 16.2 21.3
Asia Pacific 1,640.1 1,400.0 1,126.2 17.2 24.3
Latin America, Mexico and Canada 690.3 566.1 476.6 21.9 18.8
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