VMware 2015 Annual Report Download - page 22

TableofContents
• reducingcashavailableforoperations,stockrepurchaseprogramsandotherusesandresultinginpotentiallydilutiveissuancesofequitysecuritiesorthe
incurrenceofdebt;
•incurringamortizationexpenserelatedtoidentifiableintangibleassetsacquiredthatcouldimpactouroperatingresults;
• difficultyintegratingtheoperations,systems,technologies,productsandpersonneloftheacquiredbusinesseseffectively;
• difficultyachievingexpectedbusinessresultsduetoalackofexperienceinnewmarkets,productsortechnologiesortheinitialdependenceonunfamiliar
distributionpartnersorvendors;
• retainingandmotivatingkeypersonnelfromacquiredcompanies;
•assumingtheliabilitiesoftheacquiredbusiness,includingacquiredlitigation-relatedliabilitiesandregulatorycomplianceissues,andpotentiallitigation
orregulatoryactionarisingfromaproposedorcompletedacquisition;
• maintaininggoodrelationshipswithcustomersorbusinesspartnersoftheacquiredbusinessorourowncustomersasaresultofanyintegrationof
operations;
• unidentifiedissuesnotdiscoveredduringthediligenceprocess,includingissueswiththeacquiredbusiness’sintellectualproperty,productquality,
security,privacypractices,accountingpractices,regulatorycomplianceorlegalcontingencies;
• maintainingorestablishingacceptablestandards,controls,proceduresorpolicieswithrespecttotheacquiredbusiness;
• risksrelatingtothechallengesandcostsofclosingatransaction;and
• theneedtolaterdivestacquiredassetsatalossiftheacquisitiondoesnotmeetourexpectations.
If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.
Wemaynotrealizealltheeconomicbenefitfromouracquisitionsofothercompanies,whichcouldresultinanimpairmentofgoodwillorintangibles.Asof
December31,2015,goodwillandamortizableintangibleassetswere$3,993millionand$616million,respectively.Wereviewourgoodwillandamortizable
intangibleassetsforimpairmentwheneventsorchangesincircumstancesindicatethecarryingvaluemaynotberecoverable.Wetestgoodwillforimpairmentat
leastannually.Factorsthatmayleadtoimpairmentincludeasubstantialdeclineinstockpriceandmarketcapitalizationorcashflows,reducedfuturecashflow
estimatesrelatedtotheassetsandslowergrowthratesinourindustry.Wemayberequiredtorecordasignificantchargeinourfinancialstatementsduringthe
periodinwhichanyimpairmentofourgoodwilloramortizableintangibleassetsisdetermined,whichwouldnegativelyimpactouroperatingresults.
Problems with our information systems could interfere with our business and could adversely impact our operations.
Werelyonourinformationsystemsandthoseofthirdpartiesforprocessingcustomerorders,deliveringproducts,providingservicesandsupporttoour
customers,billingandtrackingourcustomers,fulfillingcontractualobligationsandotherwiserunningourbusiness.Ifoursystemsfail,ourdisasteranddata
recoveryplanningandcapacitymayproveinsufficienttoenabletimelyrecoveryofimportantfunctionsandbusinessrecords.Anydisruptioninourinformation
systemsandthoseofthethirdpartiesuponwhomwerelycouldhaveasignificantimpactonourbusiness.Inaddition,wecontinuouslyworktoenhanceour
informationsystems.Forexample,weareinthemidstofamulti-yearprojecttoreplaceourenterpriseresourceplanningsoftware.Theimplementationofthese
typesofenhancementsisfrequentlydisruptivetotheunderlyingbusinessofanenterprise,whichmayespeciallybethecaseforusduetothesizeandcomplexity
ofourbusiness.Implementationmaydisruptinternalcontrolsandbusinessprocessesandcouldintroduceunintendedvulnerabilitytoerror.Additionally,our
informationsystemsmaynotsupportnewbusinessmodelsandinitiativesandsignificantinvestmentscouldberequiredinordertoupgradethem.Anydisruptions
relatingtooursystemsenhancements,particularlyanydisruptionsimpactingouroperationsduringtheimplementationperiod,couldadverselyaffectourbusiness
inanumberofrespects.Additionally,delaysinadaptingourinformationsystemstoaddressnewbusinessmodelscouldlimitthesuccessorresultinthefailureof
suchinitiativesandimpairtheeffectivenessofourinternalcontrols.Evenifwedonotencountertheseadverseeffects,theimplementationoftheseenhancements
maybemuchmorecostlythanweanticipated.Ifweareunabletosuccessfullyimplementtheinformationsystemsenhancementsasplanned,ouroperatingresults
couldbenegativelyimpacted.
We may have exposure to additional tax liabilities, and our operating results may be adversely impacted by higher than expected tax rates.
Asamultinationalcorporation,wearesubjecttoincometaxesaswellasnon-incomebasedtaxes,suchaspayroll,sales,use,value-added,networth,property
andgoodsandservicestaxes,inboththeUnitedStatesandvariousforeignjurisdictions.
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