VMware 2009 Annual Report Download - page 30

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Table of Contents
economy as a whole and disease pandemics could temporarily sideline a substantial part of our workforce at any particular time. To the extent
that such disruptions result in delays or cancellations of customer orders, or the deployment of our products, our revenues would be adversely
affected.
Our business is subject to a variety of U.S. and international laws regarding data protection.
Our business is subject to federal, state and international laws regarding privacy and protection of user data. We post, on our website, our
privacy policies and practices concerning the use and disclosure of user data. Any failure by us to comply with our posted privacy policies or
other federal, state or international privacy-
related or data protection laws and regulations could result in proceedings against us by governmental
entities or others which could have a material adverse effect on our business, results of operations and financial condition.
It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the
possibility of fines and penalties, a governmental order requiring that we change our data practices could result, which in turn could have a
material adverse effect on our business. Compliance with these regulations may involve significant costs or require changes in business practices
that result in reduced revenue. Noncompliance could result in penalties being imposed on us or we could be ordered to cease conducting the
noncompliant activity.
If we fail to comply with our customer contracts or government contracting regulations, our business could be adversely affected.
Our contracts with our customers may include unique and specialized performance requirements. In particular, our contracts with federal,
state, and local and non-U.S. governmental customers are subject to various procurements regulations, contract provisions and other
requirements relating to their formation, administration and performance. Any failure by us to comply with the specific provisions in our
customer contracts or any violation of government contracting regulations could result in the imposition of various civil and criminal penalties,
which may include termination of contracts, forfeiture of profits, suspension of payments and, in the case of our government contracts, fines and
suspension from future government contracting. Further, any negative publicity related to our customer contracts or any proceedings surrounding
them, regardless of its accuracy, may damage our business and affect our ability to compete for new contracts. If our customer contracts are
terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, we could suffer an
adverse affect on our business, operating results or financial condition.
Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting charges or effects, including
changes to our previously-filed financial statements, which could cause our stock price to decline.
We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles. These principles are
subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change
in these principles or guidance, or in their interpretations, can have a significant effect on our reported results and may retroactively affect
previously reported results.
Risks Related to Our Relationship with EMC
As long as EMC controls us, holders of our Class A common stock will have limited ability to influence matters requiring stockholder
approval.
As of December 31, 2009, EMC owned 27,000,000 shares of our Class A common stock and all 300,000,000 shares of our Class B
common stock, representing approximately 81% of the total outstanding shares of common stock or 98% of the voting power of outstanding
common stock. The holders of our Class A common stock and our Class B common stock have identical rights, preferences and privileges
except with respect to voting and conversion rights, the election of directors, certain actions that require the consent of holders of Class B
common stock and other protective provisions as set forth in our certificate of incorporation. Holders of our Class B common stock are entitled
to 10 votes per share of Class B common stock on all matters
27