VMware 2015 Annual Report Download - page 13

TableofContents
transactionswithEMCanditsotheraffiliatedcompanies,aresetforthbelowundertheheading“RisksRelatedtoOurRelationshipwithEMC.”
Risks Related to Our Business
Our success depends increasingly on customer acceptance of our emerging products and services.
Ourproductsandservicesareprimarilybasedonservervirtualizationandrelatedcomputetechnologiesusedforvirtualizingon-premisedatacenterservers,
whichformthefoundationforprivatecloudcomputing.Asthemarketforservervirtualizationcontinuestomature,salesofourvSpherehypervisorproducthave
beguntodecline,andweareincreasinglydirectingourproductdevelopmentandmarketingeffortstowardproductsandservicesthatenablebusinessestoutilize
virtualizationasthefoundationforprivate,publicandhybridcloud-basedcomputingandmobilecomputing,includingourvSphere-basedsoftware-defineddata
center(“SDDC”)productssuchasourmanagementandautomationandnetworkvirtualization(“NSX”)offerings,ourHorizonclientvirtualizationofferings,our
AirWatchmobiledevicemanagementofferingsandourVirtualSAN(“vSAN”)storagevirtualizationofferings.Wehavealsobeenintroducingsoftware-as-a-
service(“SaaS”)versionsofouron-premisesproducts,includingourvRealizeandHorizonSuiteandcertainAirWatchofferings,andareworkingtoextendour
SDDCandNSXofferingsintothepubliccloud.Theseinitiativespresentnewanddifficulttechnologicalandcompliancechallenges,andsignificantinvestments
willberequiredtodeveloporacquiresolutionstoaddressthosechallenges.Oursuccessdependsonourcurrentandfuturecustomersperceivingtechnologicaland
operationalbenefitsandcostsavingsassociatedwithadoptingourprivateandhybridcloudsolutionsandourclientvirtualizationandmobiledevicemanagement
solutions.Asthemarketforourservervirtualizationproductscontinuestomature,andthescaleofourbusinesshasincreased,ourrateofrevenuegrowth
increasinglydependsuponthesuccessofournewerproductandserviceofferings.Totheextentthatouremergingproductsandservicesareadoptedmoreslowly
thanrevenuegrowthinourestablishedservervirtualizationofferingsdeclines,ourrevenuegrowthratesmayslowmateriallyorourrevenuemaydecline
substantiallyandouroperatingresultscouldbemateriallyadverselyaffected.
A significant decrease in demand for our server virtualization products would adversely affect our operating results.
Thelargemajorityofourrevenuesisderived,andwillfortheforeseeablefuturecontinuetobederived,fromourservervirtualizationproducts.Asmoreand
morebusinessesachievehighlevelsofvirtualizationintheirdatacenters,themarketforourVMwarevSphereproducthasmatured.Additionally,asbusinesses
increasinglyutilizepubliccloudandSaaS-basedofferings,theyarebuildingmoreoftheirnewcomputeworkloadsoff-premisesandmayalsoshiftsomeoftheir
existingworkloadstopubliccloudproviders,therebylimitinggrowth,andpotentiallyreducing,themarketforon-premisesdeploymentsofVMwarevSphere.
AlthoughsalesofVMwarevSpherehavedeclinedasaportionofouroverallbusiness,andweexpectthistrendtocontinue,VMwarevSphereremainskeytoour
futuregrowth,asitservesasthefoundationforournewerSDDCandnetworkvirtualizationofferings.Althoughwearedevelopingproductstoextendour
vSphere-basedSDDCofferingstothepubliccloudduetoourproductconcentration,asignificantdecreaseindemandforourservervirtualizationproductswould
adverselyaffectouroperatingresults.
We face intense competition that could adversely affect our operating results.
Thevirtualization,cloudcomputing,end-usercomputingandsoftware-defineddatacenterindustriesareinter-relatedandrapidlyevolving,andweface
intensecompetitionacrossallthemarketsforourproductsandservices.Manyofourcurrentorpotentialcompetitorshavelongeroperatinghistories,greatername
recognition,largercustomerbasesandsignificantlygreaterfinancial,technical,sales,marketingandotherresourcesthanwedo.
Wefacecompetitionfrom,amongothers:
ProvidersofpubliccloudinfrastructureandSaaS-basedofferings.AsbusinessesincreasinglyutilizepubliccloudandSaaS-basedofferings,theyarebuilding
moreoftheirnewcomputeworkloadsoff-premisesandmayalsoshiftsomeoftheirexistingworkloads.Asaresult,thedemandforon-premisesITresourcesis
expectedtoslow,andourproductsandserviceswillneedtoincreasinglycompeteforcustomers'ITworkloadswithoff-premisespubliccloudandSaaS-based
offerings.Ifwefailtodevelopproductsandservicesthataddressevolvingcustomerrequirementsandthatcomplementandorcompetewithoff-premisescompute
resourcesofferedbycompetitors,thedemandforVMware’svirtualizationproductsandservicesmaydecline,andwecouldexperiencelowergrowth.
Additionally,vCloudAirNetworkofferingsfromourpartnersandcertainvCloudAirofferingsmaycompetedirectlywithinfrastructure-as-aservice(“IaaS”)
offeringsfromvariouspubliccloudproviderssuchasAmazonandMicrosoft.
Large,diversifiedenterprisesoftwareandhardwarecompanies.Thesecompetitorssupplyawidevarietyofproductsandservicesto,andhavewell-
establishedrelationshipswith,ourcurrentandprospectiveendusers.Forexample,smalltomediumsizedbusinessesandcompaniesinemergingmarketsthatare
evaluatingtheadoptionofvirtualization-basedtechnologiesandsolutionsmaybeinclinedtoconsiderMicrosoftsolutionsbecauseoftheirexistinguseof
WindowsandOfficeproducts.Someofthesecompetitorshaveinthepastandmayinthefuturetakeadvantageoftheirexistingrelationshipstoengageinbusiness
practicesthatmakeourproductsandserviceslessattractivetoourendusers.Othercompetitorshavelimitedordeniedsupport
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