VMware 2010 Annual Report Download - page 31

Table of Contents
In addition, in the ordinary course of our 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 ensure 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, flood or other act of God, 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 economy as a whole and
disease pandemics could temporarily sideline a substantial part of our or our customers’ 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.
Additionally, our virtualization technology is used by cloud computing vendors, and we have expanded our involvement in the delivery
and provision of cloud computing through business alliances with various providers of cloud computing services and software and expect to
continue to do so in the future. The application of U.S. and international data privacy laws to cloud computing vendors is uncertain, and our
existing contractual provisions may prove to be inadequate to protect us from claims for data loss or regulatory noncompliance made against
cloud computing providers who we may partner with. Accordingly, the failure to comply with data protection laws and regulations by our
customers and business partners who provide cloud computing services could have a material adverse effect on our business.
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