VMware 2011 Annual Report Download - page 19

Table of Contents
We are dependent on our management and our key development personnel, and the loss of key personnel may prevent us from implementing
our business plan in a timely manner.
Our success depends largely upon the continued services of our existing management. We are also substantially dependent on the continued
service of our key development personnel for product innovation and timely development and delivery of upgrades and enhancements to our
existing products. The market for expert software developers upon whom we rely has become increasingly competitive. We generally do not
have employment or non-
compete agreements with our existing management or development personnel and, therefore, they could terminate their
employment with us at any time without penalty and could 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.
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 2010 and 2011, respectively. 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.
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 continue to 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.
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-
party solutions embodying new technologies and the emergence
of new industry standards could make our existing and future software solutions obsolete and unmarketable. Cloud computing promises to be a
disruptive technology that will alter the way that businesses consume, manage and provide physical IT resources, applications, data and IT
services. We may not be able to develop updated products that keep pace with technological developments and emerging industry standards and
that address the
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our ability to control costs, including our operating expenses;
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changes to our effective tax rate;
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the increasing scale of our business and its effect on our ability to maintain historical rates of growth;
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our ability to attract and retain highly skilled employees, particularly those with relevant experience in software development and sales;
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our ability to conform to emerging industry standards and to technological developments by our competitors and customers;
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renewal rates for ELAs as original ELA terms expire;
• the timing and amount of software development costs that are capitalized beginning when technological feasibility has been established
and ending when the product is available for general release;
• unplanned events that could affect market perception of the quality or cost-
effectiveness of our products and solutions; and
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the recoverability of benefits from goodwill and intangible assets and the potential impairment of these assets.