VMware 2010 Annual Report Download - page 17

Table of Contents
Industry alliances or consolidation may result in increased competition.
Some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer more comprehensive
virtualization and cloud computing solutions than they individually had offered. For example, in 2010, Red Hat acquired Makara, a developer of
PaaS solutions, and Citrix acquired VMLogix, a developer of lab management solutions that can be applied to cloud computing. Citrix Systems
continues to work in close collaboration with Microsoft in the desktop virtualization market. Moreover, information technology companies are
increasingly seeking to deliver top-to-bottom IT solutions to end-users that combine enterprise-level hardware and software solutions to provide
an alternative to our virtualization platform. For example, in early 2010, Oracle completed its acquisition of Sun Microsystems, which was both
a hardware vendor and a provider of virtualization technology, and Microsoft and Hewlett-Packard announced a collaboration based on
Microsoft’s cloud computing and virtualization platforms. We expect these trends to continue as companies attempt to strengthen or maintain
their market positions in the evolving virtualization infrastructure and enterprise IT solutions industry. Many of the companies driving this trend
have significantly greater financial, technical and other resources than we do and may be better positioned to acquire and offer complementary
products and technologies. The companies and alliances resulting from these possible combinations may create more compelling product
offerings and be able to offer greater pricing flexibility than we can or may engage in business practices that make it more difficult for us to
compete effectively, including on the basis of price, sales and marketing programs (such as providing greater incentives to our channel partners
to sell a competitor’s product), technology or product functionality. This competition could result in a substantial loss of customers or a
reduction in our revenues.
Our operating results may fluctuate significantly, which makes our future results difficult to predict and may result in our operating results
falling below expectations or our guidance, which could cause the price of our Class A common stock to decline.
Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our
operating results on a period-to-period basis may not be meaningful. Our past results should not be relied upon as an indication of our future
performance. In addition, a significant portion of our quarterly sales typically occurs during the last month of the quarter, which we believe
generally reflects customer buying patterns for enterprise technology. As a result, our quarterly operating results are difficult to predict even in
the near term. If our revenues or operating results fall below the expectations of investors or securities analysts or below any guidance we may
provide to the market, the price of our Class A common stock would likely decline substantially.
In addition, factors that may affect our operating results include, among others:
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general economic conditions in our domestic and international markets and the effect that these conditions have on our customers
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capital budgets and the availability of funding for software purchases;
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fluctuations in demand, adoption rates, sales cycles and pricing levels for our products and services;
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fluctuations in foreign currency exchange rates;
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changes in customers
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budgets for information technology purchases and in the timing of their purchasing decisions;
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the timing of recognizing revenues in any given quarter, which, as a result of software revenue recognition policies, can be affected
by a number of factors, including product announcements, beta programs and product promotions that can cause revenue recognition
of certain orders to be deferred until future products to which customers are entitled become available;
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the sale of our products in the time frames we anticipate, including the number and size of orders in each quarter;