VMware 2015 Annual Report Download - page 9

TableofContents
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.
Enduserscanobtainlicensestoourproductsthroughindividualdiscretepurchasestomeettheirimmediateneedsorthroughtheadoptionofenterprise
agreements(“EAs”).EAsarecomprehensivevolumelicenseofferingsthatprovideformulti-yearmaintenanceandsupportatdiscountedprices.EAsenableusto
buildlong-termrelationshipswithourcustomersastheycommittoourvirtualinfrastructuresolutionsintheirdatacenters.Oursalescyclecanvarygreatly
dependingonnumerousfactors,includingthesizeandcomplexityoftheproposedofferingandcustomer’sinfrastructure.
Inestablishinglistpricesforourproducts,wetakeintoaccount,amongothernumerousfactors,thevalueourproductsandsolutionsdeliverandthecostof
bothalternativevirtualizationandhardwaresolutions.
Ourmarketingeffortsfocusoncommunicatingthebenefitsofoursolutionsandeducatingourcustomers,distributors,resellers,systemvendors,systems
integrators,themediaandanalystsabouttheadvantagesofourinnovativevirtualizationtechnology.Weraiseawarenessofourcompanyandbrands,marketour
productsandgeneratesalesleadsthroughVMwareandindustryevents,publicrelationsefforts,marketingmaterials,advertising,directmarketing,socialmedia
initiatives,freedownloadsandourwebsite.Wehaveinvestedinmultipleonlinecommunitiesthatenablecustomersandpartnerstoshareanddiscusssalesand
developmentresources,bestpracticesimplementation,andindustrytrendsamongothertopics.Ourannualuserconference,VMworld,isheldinboththeU.S.and
Europe.Wealsooffermanagementpresentations,seminars,andwebinarsonourproductsofvirtualizationandcloudcomputing.Webelievethecombinationof
theseactivitiesstrengthensourbrandandenhancesourleadingmarketpositioninourindustry.
During2015,wealsoincreasedjointmarketing,sales,brandingandproductdevelopmenteffortswithEMCandotherEMCcompaniessuchasPivotal,VCE
andVirtustream,undertheEMCFederationbrand.
Ourbusinessissubjecttoseasonalityinthesaleofourproductsandservices.Forexample,ourfourthquarterrevenuesareaffectedbyanumberofseasonal
factors,includingfiscalyear-endspendingtrends.Suchfactorshistoricallyhavecontributedtostrongerfourthquarterrevenuesinanygivenyear.Webelievethat
seasonalfactorsarecommonwithinourindustry.
Customers
Ourcustomerdeploymentsrangeinsizefromasinglevirtualizedserverforsmallbusinessestothousandsofvirtualmachinesforourlargestenterprise
customers.
During2015,threedistributors,whopurchasedsoftwarelicensesandsoftwaresupportfromusforresaletoend-usercustomersdirectlyorviaresellers,each
accountedforover10%ofourconsolidatedrevenues.ArrowElectronics,Inc.,TechDataCorporationandIngramMicro,Inc.accountedfor15%,12%and11%,
respectively,ofourconsolidatedrevenuesin2015.Ourdistributionagreementsaretypicallyterminableatwill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undertheagreement.
Competition
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.Webelievethatthekeyfactorsinourabilitytosuccessfullycompeteincludethelevelof
reliability,interoperabilityandnewfunctionalityofourproductandserviceofferings;theabilityofourproductofferingstosupportmultiplehardwareplatforms,
operatingsystems,applicationsframeworksandpubliccloudplatforms;ourabilitytoanticipatecustomerneedsinrapidlyevolvingmarketsforITresources;the
pricingofourproductandserviceofferings;theabilitytointegrateopensourcetechnologiesthatarecriticalinprivateandpubliccloudcomputingarchitectures;
theabilitytoattractandretainkeyemployees;andtheabilitytomaintainandexpandourecosystemoftechnologypartners,serviceprovidersandsaleschannel
partners.Whilewebelievethatweareatechnologyleaderinvirtualizationandcloudinfrastructuresolutionsandhaveastrong,favorableimagewithour
customers,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.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offeringsfromvariouspubliccloudproviderssuchasAmazonand
Microsoft.
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