VMware 2012 Annual Report Download - page 16

Table of Contents
Ongoing economic uncertainty has also resulted in general and ongoing tightening in the credit markets, lower levels of liquidity, increases
in the rates of default and bankruptcy and significant volatility in the credit, equity and fixed income markets. As a result, current or potential
customers may be unable to fund software purchases, which could cause them to delay, decrease or cancel purchases of our products and
services. Even if customers are willing to purchase our products and services, if they do not meet our credit requirements, we may not be able to
record accounts receivable or unearned revenue or recognize revenues from these customers until we receive payment, which could adversely
affect the amount of revenues we are able to recognize in a particular period.
In addition, although we plan to continue making strategic investments in our business, many of our competitors have significantly greater
financial, technical and other resources than we do, and if the economic recovery is anemic or not sustained, they may be better positioned to
continue investment in competitive technologies.
If we are unable to successfully implement our plan to streamline our operations, our business outlook and financial results could be
adversely affected.
In January 2013, in order to enable us to focus our business on strategic areas we have determined to be most compelling, we approved,
subject to compliance with all applicable legal obligations, a plan to streamline our operations. The plan includes the elimination of
approximately 900 positions and personnel and a planned exit of certain lines of business and consolidation of facilities. Any such proposals in
countries outside the United States are subject to a review of efficiency, resources and performance. The plan is expected to be completed by the
end of 2013. Finalization of the plan will be subject to local information and consultation processes with employee representatives if required by
law.
The changes to our business may be disruptive, and we may not be able to realize the market opportunities that we believe are available to
us in the areas of our strategic focus. Additionally, we may not be able to achieve the cost savings we project from this plan. Because the details
of our facilities consolidation and divestitures are not yet final, the total amount expected to be incurred in connection with our plan may not be
achieved and its timing may be delayed. If we are unable to achieve our plan when planned, the timing of the costs and charges associated with
the plan may be delayed or not fully achieved. Our exit from certain lines of business could have a negative impact on sales and marketing
strategies and reduce our future revenues and projections and the costs of implementing the plan may outweigh the commensurate benefits.
Accordingly, our activities to streamline our operations, including any related charges and the impact of the related headcount reductions, could
have a material adverse effect on our business, operating results, and financial condition.
We expect to face increasing competition that could result in a loss of customers, reduced revenues or decreased operating margins.
The virtualization, cloud computing, and end-user computing markets are inter-related and rapidly evolving. We experienced increased
competition during 2012 and expect it to remain intense in 2013. For example, Microsoft continues to make incremental improvements to its
virtual infrastructure and virtual management products. In September 2012, Microsoft began shipping Windows Server 2012, which includes a
more advanced version of its Hyper-V virtualization product, which continues its push into the virtualization market, and more recently,
Microsoft released System Center 2012, its bundle of management products targeted at legacy and virtual environments. Microsoft also has
cloud-based computing offerings and recently announced infrastructure as a service (“IaaS”)-like capabilities for Windows Azure. We also face
competition from other companies that have announced a number of new product initiatives, alliances and consolidation efforts. For example,
Citrix Systems continues to enhance its end-user and server virtualization offerings and now has a client hypervisor in the market. IBM, Google
and Amazon have existing cloud computing offerings and announced new cloud computing initiatives. Red Hat has released commercial
versions of Linux that have virtualization capabilities as part of the Linux kernel (“KVM”) and has also announced plans for cloud computing
products. Other companies have indicated their intention to expand offerings of virtual management and cloud computing solutions as well.
Additionally, our vision for hybrid cloud computing in which enterprises pool internal and external IT resources running on a common vSphere
infrastructure competes with low-cost public cloud infrastructure offerings such as Amazon EC2 and Google Compute Engine. Enterprises and
service providers have also shown significant interest in building their own clouds based on open source projects such as OpenStack.
We believe that the key competitive factors in the virtualization and cloud computing markets include:
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the level of reliability, security and new functionality of product offerings;
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the ability to provide comprehensive solutions, including management and security capabilities;
• the ability to offer products that support multiple hardware platforms, operating systems, applications and application development
frameworks;
• the ability to deliver an intuitive end-user experience for accessing data, applications and services from a wide variety of end-user
devices;