EMC 2007 Annual Report Download - page 28

license revenue growth compared to our systems growth is attributable to customers migrating to higher end systems but continuing to utilize their existing
software licenses and increased lower end systems sales which utilize less software. Services revenues were $2,797.5, $2,468.5 and $2,299.4 in 2007, 2006
and 2005, respectively, representing increases of 13.3% in 2007 and 7.4% in 2006. Services revenues consist of software and hardware maintenance and
professional services revenues. Services revenues increased in both 2007 and 2006 due to greater demand for our professional services as well as software and
systems maintenance. Professional services accounted for 64.5% and 37.9% of the increase in services revenue for 2007 and 2006, respectively. Software and
systems maintenance accounted for 35.5% and 62.1% of the increases in services revenues for 2007 and 2006, respectively. While professional services
accounted for a larger proportion of the services revenue increase in 2007, a portion of this increase was attributable to acquisitions consummated in 2007 and
2006. Excluding the impact of 2007 and 2006 acquisitions, professional services accounted for 48.6% of the increase.
The Content Management and Archiving segment revenues primarily include software license and services revenues. Software license revenues were
$332.1, $323.6 and $228.7 in 2007, 2006 and 2005, respectively, representing increases of 2.6% in 2007 and 41.5% in 2006. The increase in software license
revenues in 2007 and 2006 was attributable to greater demand for our content management offerings. The growth rate in 2007 was lower than 2006 primarily
due to a consolidation of IT vendors who provide enterprise content management solutions. We believe this consolidation resulted in a short-term pause in
customer purchases. Additionally, we realigned our go-to-market model in the second quarter of 2007 which we also believe unfavorably impacted our
revenues for the year. Software license revenues for 2006 were favorably impacted by $63.7 from the Captiva acquisition which was completed in December
2005. Revenue from new and enhanced product offerings introduced in the respective fiscal year, including all product revenues from companies acquired
during that year, contributed $137.9 and $129.6 of revenue to 2007 and 2006, respectively. Services revenues were $435.8, $353.6 and $255.5 in 2007, 2006
and 2005, respectively, representing increases of 23.2% in 2007 and 38.4% in 2006. The increases in services revenues were attributable to greater demand
for our professional services and higher software maintenance revenues. Professional services accounted for 58.4% and 37.8% of the increase in services
revenues for 2007 and 2006, respectively. Software maintenance accounted for 41.6% and 62.2% of the increase in services revenues for 2007 and 2006,
respectively.
The RSA Information Security segment was created during the third quarter of 2006 as a result of our acquisitions of RSA and Network Intelligence
Corporation in September 2006. Total revenues for 2007 and 2006 were $525.3 and $151.7, respectively, representing an increase of 246.3% for 2007.
Revenue from new and enhanced product offerings introduced in the respective fiscal year, including all product revenues from companies acquired during
that year, contributed $358.3 and $151.7 of revenue to 2007 and 2006, respectively. Because this segment was formed during the third quarter of 2006, the
growth rate is not representative of future growth rates.
The VMware Virtual Infrastructure segment includes software license and services revenues. Total revenues were $1,320.8, $709.0 and $387.5 in 2007,
2006 and 2005, respectively, representing an increase of 86.3% in 2007 and 83.0% in 2006. VMware sells its products through a network of direct channel
partners, which includes distributors, resellers, x86 system vendors and systems integrators. More than 70% of the orders for each of the three years presented
were generated through the 15 largest direct channel partners, including one distributor which represented 23%, 29% and 30% of revenue in 2007, 2006 and
2005, respectively. Additionally, another distributor and a channel partner accounted for 12% and 11% of revenues in 2007, respectively. As VMware
expands geographically, they may add additional direct channel partners; however, approximately 90% of the increases in orders in 2007 and 2006 resulted
from increased sales volumes through existing direct channel partners.
VMware software license revenues were $903.2, $494.6 and $287.5 in 2007, 2006 and 2005, respectively, representing an increase of 82.6% in 2007 and
72.0% in 2006. The increases in software license revenues were the result of increased sales volume, driven largely by greater demand for virtualization
product offerings attributable to wider market acceptance of virtualization as part of organizations' IT infrastructure, a broadened product portfolio and
expansion of VMware's network of indirect channel partners. Although VMware expects license revenue to continue to grow throughout 2008, VMware
expects the rate of growth to decelerate due primarily to the size and scale of the business.
VMware had nearly 10,000 indirect channel partners as of December 31, 2007, an increase of nearly 6,000 from December 31, 2006. Over 1,500 and
1,000 new indirect channel partners were added during 2006 and 2005, respectively. These indirect channel partners obtain software licenses and services
from distributors and x86 system vendors and market and sell them to end-user customers. In addition, VMware has a direct sales force that complements
these efforts. The VMware sales force works with channel partners to introduce them to customers and new sales opportunities. These channel partners also
introduce VMware sales force to their customers.
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