VMware 2009 Annual Report Download - page 24

Table of Contents
If we are unable to successfully address the challenges of integrating products based upon open source technology into our business, our
ability to realize revenues from such products will be negatively affected and our development costs may increase.
Our sales cycles can be long and unpredictable, our sales efforts require considerable time and expense and timing of sales is subject to
changing purchasing behaviors of our customers. As a result, our sales are difficult to predict and may vary substantially from quarter to
quarter, which may cause our operating results to fluctuate significantly.
The timing of our revenues is difficult to predict. Our sales efforts involve educating our customers about the use and benefit of our
products, including their technical capabilities, potential cost savings to an organization and advantages compared to lower-
cost products offered
by our competitors. Customers typically undertake a significant evaluation process that has in the past resulted in a lengthy sales cycle, which
typically lasts several months, and may last a year or longer. We spend substantial time, effort and money on our sales efforts without any
assurance that our efforts will produce any sales. In addition, product purchases are frequently subject to budget constraints, multiple approvals,
and unplanned administrative, processing and other delays. Additionally, the greater number of competitive alternatives, as well as
announcements by our competitors that they intend to introduce competitive alternatives at some point in the future, can lengthen customer
procurement cycles, cause us to spend additional time and resources to educate end users on the advantages of our product offerings and delay
product sales. These factors can have a particular impact on the timing and length of our ELA sales cycles.
Additionally, our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter’s total
sales occur in the last month, weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each
financial period especially difficult and uncertain and increases the risk of unanticipated variations in financial condition and results of
operations. We believe this uneven sales pattern is a result of many factors including the following:
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develop without the degree of overhead and lead time required by traditional proprietary software companies. It is possible for new
competitors with greater resources than ours to develop their own open source solutions, potentially reducing the demand for, and
putting price pressure on, our solutions.
• It is possible that a court could hold that the Apache License and similar licenses under which our open source products are
developed and licensed are not enforceable or that someone could assert a claim for proprietary rights in a program developed and
distributed under them. Any ruling by a court that these licenses are not enforceable, or that open source components of our product
offerings may not be liberally copied, modified or distributed, may have the effect of preventing us from distributing or developing
all or a portion of our products. In addition, licensors of open source software employed in our offerings may, from time to time,
modify the terms of their license agreements in such a manner that those license terms may no longer be compatible with other open
source licenses in our offerings or our end user license agreement, and thus could, among other consequences, prevent us from
continuing to distribute the software code subject to the modified license.
•
Actions to protect and maintain ownership and control over our intellectual property could adversely affect our standing in the open
source community, which in turn could limit our ability to continue to rely on this community, upon which we are dependent, as a
resource to help develop and improve our open source products.
•
the tendency of customers to wait until late in a quarter to commit to a purchase in the hope of obtaining more favorable pricing;
•
the fourth quarter influence of customers spending their remaining capital budget authorization prior to new budget constraints in the
first nine months of the following year; and
•
seasonal influences.