VMware 2010 Annual Report Download - page 28

Table of Contents
in businesses that offer complementary products, services or technologies. These investments are accompanied by risks similar to those
encountered in an acquisition of a business.
Operating in foreign countries subjects us to additional risks that may harm our ability to increase or maintain our international sales and
operations.
Revenues from customers outside the United States comprised approximately 49% of our total revenues in both fiscal year 2010 and 2009.
We have sales, administrative, research and development and technical support personnel in numerous countries worldwide. We expect to
continue to add personnel in additional countries. Our international operations subject us to a variety of risks, including:
Additionally, as we continue to expand our business globally, we will need to maintain compliance with legal and regulatory requirements
covering the foreign activities of U.S. corporations, such as export control requirements and the Foreign Corrupt Practices Act. Our success will
depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. We
expect a significant portion of our growth to occur in foreign countries, which can add to the difficulties in maintaining adequate management
and compliance systems and internal controls over financial reporting and increase challenges in managing an organization operating in various
countries.
Our failure to manage any of these risks successfully could negatively affect our reputation, harm our operations and reduce our
international sales.
Our products are highly technical and may contain errors, defects or security vulnerabilities which could cause harm to our reputation and
adversely affect our business.
Our products are highly technical and complex and, when deployed, have contained and may contain errors, defects or security
vulnerabilities. Some errors in our products may only be discovered after a product has been installed and used by customers. Any errors, defects
or security vulnerabilities discovered in our products after commercial release could result in loss of revenues or delay in revenue recognition,
loss of customers and increased service and warranty cost, any of which could adversely affect our business, financial condition and results of
operations. Undiscovered vulnerabilities in our products could expose them to hackers or other unscrupulous third parties who develop and
deploy viruses, worms, and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our
products could harm our reputation and lead some customers to return products, to reduce or delay future purchases or use competitive products.
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• the difficulty of managing and staffing international offices and the increased travel, infrastructure and legal compliance costs
associated with multiple international locations;
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increased exposure to foreign currency exchange rate risk;
•
difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;
•
difficulties in delivering support, training and documentation in certain foreign markets;
•
tariffs and trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign
markets;
•
economic or political instability and security concerns in countries that are important to our international sales and operations;
•
the overlap of different tax structures or changes in international tax laws;
•
reduced protection for intellectual property rights, including reduced protection from software piracy in some countries;
•
difficulties in transferring funds from certain countries; and
•
difficulties in maintaining appropriate controls relating to revenue recognition practices.