VMware 2014 Annual Report Download - page 26

Table of Contents
customer dissatisfaction, and contractual liabilities, which could materially adversely affect our business, financial condition, operating results
and cash flow.
If operating system and hardware vendors do not cooperate with us or we are unable to obtain early access to their new products, or access to
certain information about their new products to ensure that our solutions interoperate with those products, our product development efforts
may be delayed or foreclosed.
Our products interoperate with Windows, Linux and other operating systems and the hardware devices of numerous manufacturers.
Developing products that interoperate properly requires substantial partnering, capital investment and employee resources, as well as the
cooperation of the vendors and developers of the operating systems and hardware. Operating system and hardware vendors may not provide us
with early access to their technology and products, assist us in these development efforts or share with or sell to us any application programming
interfaces, or APIs, formats or protocols we may need. If they do not provide us with the necessary early access, assistance or proprietary
technology on a timely basis, we may experience product development delays or be unable to expand our products into other areas. To the extent
that software or hardware vendors develop products that compete with ours or those of our controlling stockholder, EMC Corporation (“EMC”),
they may have an incentive to withhold their cooperation, decline to share access or sell to us their proprietary APIs, protocols or formats, or
engage in practices to actively limit the functionality, compatibility and certification of our products. To the extent that we enter into
collaborations or joint development and marketing arrangements with certain hardware and software vendors, vendors who compete with our
collaborative partners may similarly choose to limit their cooperation with us. In addition, hardware or operating system vendors may fail to
certify or support or continue to certify or support our products for their systems. If any of the foregoing occurs, our product development efforts
may be delayed or foreclosed and our business and results of operations may be adversely affected.
We rely on distributors, resellers, system vendors and systems integrators to sell our products and services, and our failure to effectively
develop, manage or prevent disruptions to our distribution channels and the processes and procedures that support them could cause a
reduction in the number of end users of our products and services.
Our future success is highly dependent upon maintaining and increasing the number of our relationships with distributors, resellers, system
vendors and systems integrators. Because we rely on distributors, resellers, system vendors and systems integrators, we may have little or no
contact with the ultimate users of our products and services, thereby making it more difficult for us to establish brand awareness, ensure proper
delivery and installation of our products and services, service ongoing customer requirements, estimate end-user demand and respond to
evolving customer needs.
Recruiting and retaining qualified channel partners and training them in the use of our technology and product offerings requires significant
time and resources. In order to develop and expand our distribution channel, we must continue to expand and improve our processes and
procedures that support our channel, including our investment in systems and training, and those processes and procedures may become
increasingly complex and difficult to manage. The time and expense required for sales and marketing organizations of our channel partners to
become familiar with our product and service offerings, including our new product and service developments, may make it more difficult to
introduce those products and services to end users and delay end-user adoption of our product and service offerings.
We generally do not have long-term contracts or minimum purchase commitments with our distributors, resellers, system vendors and
systems integrators, and our contracts with these channel partners do not prohibit them from offering products or services that compete with
ours. Our competitors may be effective in providing incentives to existing and potential channel partners to favor products and services of our
competitors or to prevent or reduce sales of our products and services. Certain system vendors now offer competing virtualization products pre-
installed on their server products and services. Additionally, our competitors could attempt to require key distributors to enter into exclusivity
arrangements with them or otherwise apply their pricing or marketing leverage to discourage distributors from offering our products and
services. Accordingly, our channel partners may choose not to offer our products and services exclusively or at all. Our failure to maintain and
increase the number of relationships with channel partners would likely lead to a loss of end users of our products and services, which would
result in us receiving lower revenues from our channel partners.
Three of our distributors each accounted for 10% or more of our consolidated revenues during the year ended of 2014
. Our agreements with
distributors are typically terminable by either party upon 30 to 90 days’ prior written notice to the other party, and neither party has any
obligation to purchase or sell any products or services under the agreements. While we believe that we have in place, or would have in place by
the date of any such termination, agreements with replacement distributors sufficient to maintain our revenues from distribution, if we were to
lose the distribution services of a significant distributor, such loss could have a negative impact on our results of operations until such time as we
arrange to replace these distribution services with the services of existing or new distributors.
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