VMware 2009 Annual Report Download - page 29

Table of Contents
If we fail to manage future growth effectively, we may not be able to meet our customers
’ needs or be able to meet our future reporting
obligations.
We have rapidly expanded our operations since inception and anticipate further expansion in the future. This future growth, if it occurs,
will place significant demands on our management, infrastructure and other resources. Additionally, further international growth may occur in
regions where we presently have little or no infrastructure. To manage any future growth, we will need to hire, integrate and retain highly skilled
and motivated employees. We will also need to continue to improve our financial and management controls, reporting and operational systems
and procedures. If we do not effectively manage our growth we may not be able to meet our customers’ needs, thereby adversely affecting our
sales, or be able to meet our future reporting obligations.
Our financial results may be adversely impacted by higher than expected tax rates and we may have exposure to additional tax liabilities.
As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the United States and various
foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions
and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable
tax laws in the jurisdictions in which we file and changes to tax laws. Significant judgment is required in determining our worldwide provision
for income taxes and other tax liabilities. From time to time, we are subject to income tax audits. While we believe we have complied with all
applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess
us with additional taxes. Should we be assessed with additional taxes, there could be a material adverse effect on our financial condition or
results of operations.
Our future effective tax rate may be affected by such factors as changes in tax laws, regulations or rates, changing interpretation of existing
laws or regulations, the impact of accounting for stock-based compensation, the impact of accounting for business combinations under the new
generally accepted accounting principles, changes in our international organization, and changes in overall levels of income before tax. In
addition, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax
determination is uncertain. Although we believe that our tax estimates are reasonable, we cannot assure you that the final determination of tax
audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.
We are also subject to non-income 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. We are under audit from time to time by tax authorities with respect to these non-income
taxes and may have exposure to additional non-income tax liabilities.
Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events such as pandemics, and to interruption
by man-
made problems, such as computer viruses, unanticipated disruptions in local infrastructure or terrorism, which could result in delays
or cancellations of customer orders or the deployment of our products.
Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity. A significant natural disaster,
such as an earthquake, fire or a flood, could have a material adverse impact on our business, financial condition and results of operations. As we
continue to grow internationally, increasing amounts of our business will be located in foreign countries that may be more subject to political or
social instability that could disrupt operations. In addition, our servers are vulnerable to computer viruses, break-ins and similar disruptions from
unauthorized tampering with our computer systems. Unanticipated disruptions in services provided through localized physical infrastructure,
such as utility or telecommunication outages, can curtail the functioning of local offices as well as critical components of our information
systems and adversely affect our ability to process orders, respond to customer requests and maintain local and global business continuity.
Furthermore, acts of terrorism or war could cause disruptions in our or our customers’ business or the
26