VMware 2011 Annual Report Download - page 45

Table of Contents
had an average maintenance term of three years. Renewed ELAs typically include additional products and upgrades, as well expanded use of
originally purchased products within the customer's environment, as compared with the initial ELA.
Services Revenues
Services revenues were $1,925.9 in 2011 , $1,455.9 in 2010 and $994.5 in 2009 , representing a year-over-year increase of $470.0 or 32%
in
2011 and $461.4 or 46% in 2010 . The increase in services revenues during 2011 and 2010 was primarily attributable to growth in our software
maintenance revenues.
Software maintenance revenues were $1,640.4 in 2011 , $1,217.0 in 2010 and $823.8 in 2009 , representing a year-over-year increase of
$423.3 or 35% in 2011 and $393.3 or 48% in 2010 . In 2011 and 2010, software maintenance revenues benefited from strong renewals, multi-
year software maintenance contracts sold in previous periods, and additional maintenance contracts sold in conjunction with new software
license sales. In 2011, 2010, and 2009, customers bought, on average, more than 24 months of support and maintenance with each new license
purchased, which we believe illustrates our customers’ commitment to VMware as a core element of their data center architecture and hybrid
cloud strategy.
Professional services revenues were $285.5 in 2011 , $238.9 in 2010 and $170.7 in 2009 , representing a year-over-year increase of $46.7
or
20% in 2011 and $68.2 or 40% in 2010 . In 2011 and 2010, professional services revenues increased as growth in our license sales and installed-
base led to additional demand for our professional services. As we continue to invest in our partners and expand our ecosystem of third-party
professionals with expertise in our solutions to independently provide professional services to our customers, we do not expect our professional
services revenues to constitute an increasing component of our revenue mix. As a result of this strategy, our professional services revenue can
vary based on the delivery channels used in any given period as well as the timing of engagements.
Revenue Growth in Constant Currency
We have invoiced and collected in the Euro, the British Pound, the Japanese Yen and the Australian Dollar in their respective regions since
May 2009. As a result, our total revenues are affected by changes in the value of the U.S. Dollar against these currencies. In order to provide a
comparable framework for assessing how our business performed excluding the effect of foreign currency fluctuations, management analyzes
year
-over-year revenue growth on a constant currency basis. Since we operate with the U.S. Dollar as our functional currency, unearned
revenues for orders booked in currencies other than U.S. Dollars are converted into U.S. Dollars at the exchange rate in effect for the month in
which each order is booked. We calculate constant currency on license revenues recognized during the current period that were originally
booked in currencies other than U.S. Dollars by comparing the exchange rates used to recognize revenue in the current period against the
exchange rates used to recognize revenue in the comparable period. We do not calculate constant currency on services revenues, which include
software maintenance revenues and professional services revenues.
In 2011, the year-over-year growth in license revenues measured on a constant currency basis was 30% compared with 31% as reported.
The year-over-year growth in total revenues in 2011 measured on a constant currency basis was 31% compared with 32%
as reported. Given that
we began to invoice and collect in currencies other than the U.S. Dollar during the second quarter of 2009, we are not able to calculate a full
year
-over-year impact of foreign currency fluctuations on our revenues for 2010 as compared with 2009.
Unearned Revenues
Our unearned revenues as of December 31, 2011 and 2010 were as follows:
The complexity of our unearned revenues has increased over time as a result of acquisitions, an expanded product portfolio and a broader
range of pricing and packaging alternatives. As of December 31, 2011 , total unearned revenues increased by $848.3 or 46% to $2,708.4 from
$1,860.1 at December 31, 2010 . This increase was primarily due to growth in unearned software maintenance revenues, attributable to our
growing base of maintenance contracts.
Unearned license revenues are recognized either ratably or upon the delivery of existing products, future products or services. Future
products include, in some cases, emerging products that are offered as part of product promotions where the purchaser of an existing product is
entitled to receive a promotional product at no additional charge. We regularly offer product promotions as a strategy to improve awareness of
our emerging products. To the extent promotional products have not been
40
December 31,
2011
2010
Unearned license revenues
$
389.2
$
267.1
Unearned software maintenance revenues
2,133.5
1,461.3
Unearned professional services revenues
185.7
131.7
Total unearned revenues
$
2,708.4
$
1,860.1