VMware 2010 Annual Report Download - page 22

Table of Contents
pursue employment opportunities with any of our competitors. Changes to management and key employees can also lead to additional unplanned
losses of key employees. The loss of key employees could seriously harm our ability to release new products on a timely basis and could
significantly help our competitors.
Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to
support our planned growth, and our compensation expenses may increase.
To execute on our strategy, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for
senior sales executives and engineers with high levels of experience in designing and developing software. We may not be successful in
attracting and retaining qualified personnel. We have from time to time in the past experienced, and we expect to continue to experience in the
future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies with which we
compete for experienced personnel have greater resources than we have. In addition, in making employment decisions, particularly in the high-
technology industry, job candidates often consider the value of the stock options, restricted stock grants or other stock-based compensation they
are to receive in connection with their employment. Declines in the value of our stock could adversely affect our ability to attract or retain key
employees and result in increased employee compensation expenses. If we fail to attract new personnel or fail to retain and motivate our current
personnel, our business and future growth prospects could be severely harmed.
If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur
significant expenses to enforce our rights.
We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws and
confidentiality agreements with employees and third parties, all of which offer only limited protection. As such, despite our efforts, the steps we
have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of
our intellectual property rights, and our ability to police such misappropriation or infringement is uncertain, particularly in countries outside of
the United States. Further, with respect to patent rights, we do not know whether any of our pending patent applications will result in the
issuance of patents or whether the examination process will require us to narrow our claims. To the extent that additional patents are issued from
our patent applications, which are not certain, they may be contested, circumvented or invalidated in the future. Moreover, the rights granted
under any issued patents may not provide us with proprietary protection or competitive advantages, and, as with any technology, competitors
may be able to develop similar or superior technologies to our own now or in the future. In addition, we rely on confidentiality or license
agreements with third parties in connection with their use of our products and technology. There is no guarantee that such parties will abide by
the terms of such agreements or that we will be able to adequately enforce our rights, in part because we rely on “click-wrap” and “shrink-wrap”
licenses in some instances.
Detecting and protecting against the unauthorized use of our products, technology and proprietary rights is expensive, difficult and, in
some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of
management resources, either of which could harm our business, financial condition and results of operations, and there is no guarantee that we
would be successful. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to
protecting their technology or intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third
parties from infringing upon or misappropriating our intellectual property, which could result in a substantial loss of our market share.
We provide access to our hypervisor and other selected source code to partners, which creates additional risk that our competitors could
develop products that are similar or better than ours.
Our success and ability to compete depend substantially upon our internally developed technology, which is incorporated in the source
code for our products. We seek to protect the source code, design code, documentation
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