VMware 2012 Annual Report Download - page 18

Table of Contents
announced its acquisition of Cloud.com, which offers an IaaS cloud services solution, and Red Hat continued to invest in the Open Virtualization
Alliance (“OVA”) to bolster KVM as a direct competitor to VMware vSphere. In 2012, Dell acquired Wyse Technologies to bolster its ability to
serve the “cloud client” market and Quest to enhance its management and automation solutions. Software-defined networking is a new frontier,
and many companies are active in this space. For example, in 2012, Cisco acquired Cariden and Meraki, and Juniper acquired Contrail Systems.
In February 2013, Microsoft committed to participate in the proposed leveraged buyout of Dell. We expect these trends to continue as companies
attempt to strengthen or maintain their market positions in the evolving virtualization infrastructure and enterprise IT solutions industry. Many of
the companies driving this trend have significantly greater financial, technical and other resources than we do and may be better positioned to
acquire and offer complementary products and technologies. The companies and alliances resulting from these possible combinations may create
more compelling product offerings and be able to offer greater pricing flexibility than we can or may engage in business practices that make it
more difficult for us to compete effectively, including on the basis of price, sales and marketing programs (such as providing greater incentives
to our channel partners to sell a competitor’s product), technology or product functionality. This competition could result in a substantial loss of
customers or a reduction in our revenues.
We may not be able to respond to rapid technological changes with new solutions and services offerings, which could have a material
adverse effect on our sales and profitability.
The markets for our software solutions are characterized by rapid technological changes, changing customer needs, frequent new software
product introductions and evolving industry standards. The introduction of third-
party solutions embodying new technologies and the emergence
of new industry standards could make our existing and future software solutions obsolete and unmarketable. Cloud computing is proving to be a
disruptive technology that will alter the way that businesses consume, manage and provide physical IT resources, applications, data and IT
services. We may not be able to develop updated products that keep pace with technological developments and emerging industry standards and
that address the increasingly sophisticated needs of our customers or that interoperate with new or updated operating systems and hardware
devices or certify our products to work with these systems and devices. As a result, we may not be able to accurately predict the lifecycle of our
software solutions, and they may become obsolete before we receive the amount of revenues that we anticipate from them. There is no assurance
that any of our new offerings would be accepted in the marketplace. Significant reductions in server-related costs or the rise of more efficient
infrastructure management software could also affect demand for our software solutions. As hardware and processors become more powerful,
we will have to adapt our product and service offerings to take advantage of the increased capabilities. For example, while the introduction of
more powerful servers presents an opportunity for us to provide better products for our customers, the migration of servers to microprocessors
with an increasing number of multiple cores also allows an end user with a given number of licensed copies of our software to multiply the
number of virtualization machines run per server socket without having to purchase additional licenses from us. If we are unable to revise our
solutions and offerings in response to new technological developments, our ability to retain or increase market share and revenues in the
virtualization software market could be materially adversely affected.
Our operating results may fluctuate significantly, which makes our future results difficult to predict and may result in our operating results
falling below expectations or our guidance, which could cause the price of our Class A common stock to decline.
Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our
operating results on a period-to-period basis may not be meaningful. Our past results should not be relied upon as an indication of our future
performance. In addition, a significant portion of our quarterly sales typically occurs during the last month of the quarter, which we believe
generally reflects customer buying patterns for enterprise technology. As a result, our quarterly operating results are difficult to predict even in
the near term. If our revenues or operating results fall below the expectations of investors or securities analysts or below any guidance we may
provide to the market, the price of our Class A common stock would likely decline substantially.
In addition, factors that may affect our operating results include, among others:
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• general economic conditions in our domestic and international markets and the effect that these conditions have on our customers’
capital budgets and the availability of funding for software purchases;
•
fluctuations in demand, adoption rates, sales cycles and pricing levels for our products and services;
•
fluctuations in foreign currency exchange rates;
• changes in customers’
budgets for information technology purchases and in the timing of their purchasing decisions;
•
the timing of recognizing revenues in any given quarter, which, as a result of software revenue recognition policies, can be affected by a
number of factors, including product announcements, beta programs and product promotions that