VMware 2009 Annual Report Download - page 52

Table of Contents
and products that enable the aggregation of multiple servers, storage infrastructure, and networks into shared pools of resources that can be
delivered dynamically, securely, and reliably to applications as needed. Desktop virtualization products decouple the entire desktop environment
from its underlying device, enabling customers to create user-centric instead of device-
centric desktop environments. The other product category
includes solutions, such as tc Server and Hyperic HQ, that help organizations build, run, and manage enterprise applications, particularly those
written in the Java programming language. Revenues from virtualization platforms were $1,028.3, $1,178.1, and $905.4, in 2009, 2008, and
2007, respectively. As a percentage of license revenues, revenues from virtualization platforms were 99.9%, 100.0%, and 100.0% in 2009, 2008,
and 2007, respectively. Revenues from other products were insignificant in 2009. There were no revenues from other products in 2008, and
2007, respectively.
While we have recently seen continued incremental improvement in the general economic environment, we believe that our customers may
continue to exercise caution with regard to IT spending during 2010. As a result, we continue to plan conservatively for 2010.
Services Revenues
Services revenues were $994.5 in 2009, $702.9 in 2008, and $420.4 in 2007, representing year-over-year increases of $291.6 or 41% in
2009 and $282.4 or 67% in 2008. The increases in services revenues during 2009 and 2008 were primarily attributable to growth in our software
maintenance revenues. We expect that services revenues will continue to compose an incrementally larger proportion of our revenue mix for the
foreseeable future.
Software maintenance revenues were $823.8 in 2009, $555.9 in 2008, and $330.0 in 2007, representing year-over-year increases of $267.9
or 48% in 2009 and $225.9 or 69% in 2008. In 2009, services revenues benefited from strong renewals, multi-year software maintenance
contracts sold in previous periods, and additional maintenance contracts sold in conjunction with software licenses. In addition, the growth in
services revenues year-over-year increased as a result of customers becoming current on their maintenance agreements in order to receive
vSphere as part of those arrangements. In 2008, the growth reflected the increase in our license revenues, as software maintenance services are
generally purchased with licenses, the benefit from multi-year software maintenance contracts sold in previous periods, and renewals of existing
customer software maintenance contracts.
Professional services revenues were $170.7 in 2009, $147.0 in 2008, and $90.4 in 2007, representing year-over-year increases of $23.7 or
16% in 2009 and $56.5 or 63% in 2008. In 2009, revenues increased due to growing demand for design and implementation services, as well as
redemption of consulting and training credits purchased by customers in connection with ELAs and as part of vSphere license and consulting
bundles for new users of our products. In 2008, revenues increased due to growing demand for design and implementation services and training
programs, as end user organizations deployed virtualization across their organizations. Although we continue to serve our customers directly,
since the end of 2008 our strategy has been to encourage our partners to build their professional services businesses around us, which we believe
will leverage our license sales through this channel. As a result of this strategy, our professional services revenue can vary based on the delivery
channels used in any given period as well as the timing of engagements.
49