VMware 2010 Annual Report Download - page 25

Table of Contents
If we are unable to successfully address the challenges of integrating products based upon open source technology into our business, our
ability to realize revenues from such products will be negatively affected and our development costs may increase.
Our sales cycles can be long and unpredictable, our sales efforts require considerable time and expense and timing of sales is subject to
changing purchasing behaviors of our customers. As a result, our sales are difficult to predict and may vary substantially from quarter to
quarter, which may cause our operating results to fluctuate significantly.
The timing of our revenues is difficult to predict. Our sales efforts involve educating our customers about the use and benefit of our
products, including their technical capabilities, potential cost savings to an organization and advantages compared to lower-
cost products offered
by our competitors. Customers typically undertake a significant evaluation process that has in the past resulted in a lengthy sales cycle which
typically lasts several months, and may last a year or longer. We spend substantial time, effort and money on our sales efforts without any
assurance that our efforts will produce any sales. In addition, product purchases are frequently subject to budget constraints, multiple approvals,
and unplanned administrative, processing and other delays. Moreover, the greater number of competitive alternatives, as well as announcements
by our competitors that they intend to introduce competitive alternatives at some point in the future, can lengthen customer procurement cycles,
cause us to spend additional time and resources to educate end-users on the advantages of our product offerings and delay product sales. These
factors can have a particular impact on the timing and length of our ELA sales cycles.
Additionally, our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter’s total
sales occur in the last month, weeks and days of each quarter. Similarly, our yearly sales have historically reflected a disproportionate percentage
of the year’s sales in the fourth fiscal quarter. These patterns make prediction of revenues, earnings and working capital for each financial period
especially difficult and uncertain and increase the risk of unanticipated variations in financial condition and results of operations. We believe this
uneven sales pattern is a result of many factors including the following:
If sales expected from a specific customer for a particular quarter are not realized in that quarter or at all, our results could fall short of
public expectations and our business, financial condition and results of operations could be materially adversely affected.
Our current research and development efforts may not produce significant revenues for several years, if at all.
Developing our products is expensive. Our investment in research and development may not result in marketable products or may result in
products that take longer to generate revenues, or generate less revenues, than we anticipate. Our research and development expenses were over
20% of our total revenues, in each of fiscal year 2010 and 2009. Our future plans include significant investments in software research and
development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research
and development efforts to maintain our competitive position. However, we may not receive significant revenues from these investments for
several years, if at all.
We may not be able to respond to rapid technological changes with new solutions and services offerings, which could have a material
adverse effect on our sales and profitability.
The markets for our software solutions are characterized by rapid technological changes, changing customer needs, frequent new software
product introductions and evolving industry standards. The introduction of third-
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the tendency of customers to wait until late in a quarter to commit to a purchase in the hope of obtaining more favorable pricing;
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the fourth quarter influence of customers spending their remaining capital budget authorization prior to new budget constraints in the
first nine months of the following year; and
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seasonal influences.