VMware 2012 Annual Report Download - page 21

Table of Contents
stock could adversely affect our ability to attract or retain key employees and result in increased employee compensation expenses. Additionally,
the plan to streamline our operations that we announced in January 2013 could have a negative impact on employee morale and make it more
difficult for us to retain and attract personnel. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business
and future growth prospects could be severely harmed.
Our success depends upon our ability to develop new products and services, integrate acquired products and services and enhance our
existing products and services and develop appropriate business and pricing models.
If we are unable to develop new products and services, integrate acquired products and services, enhance and improve our products and
support services in a timely manner, or position or price our products and services to meet market demand, customers may not buy new software
licenses from us, update to new versions of our software or renew product support. In addition, information technology standards from both
consortia and formal standards-setting forums as well as de facto marketplace standards are rapidly evolving. We cannot provide any assurance
that the standards on which we choose to develop new products will allow us to compete effectively for business opportunities in emerging areas
such as cloud computing.
New product development and introduction involves a significant commitment of time and resources and is subject to a number of risks and
challenges including:
In addition, if we cannot adapt our business models to keep pace with industry trends, our revenues could be negatively impacted. For
example, if we increase our adoption of subscription-based pricing models for our products, we may fail to set pricing at levels appropriate to
maintain our revenue streams or our customers may choose to deploy products from our competitors that they believe are priced more favorably.
Additionally, we may fail to accurately predict subscription renewal rates or their impact on results, and because revenue from subscriptions is
recognized for our services over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our results. As
we offer more products that depend on converting users of free services to users of premium services and as such services grow in size, our
ability to maintain or improve and to predict conversion rates will become more important.
Breaches of our cybersecurity systems could degrade our ability to conduct our business operations and deliver products and services to our
customers, delay our ability to recognize revenue, compromise the integrity of our software products, result in significant data losses and the
theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional
costs to maintain the security of our networks and data.
We increasingly depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and
product development activities to our marketing and sales efforts and communications with our customers and business partners. Computer
programmers have attempted to penetrate our network security and our website. Such cyberattacks threaten to misappropriate our proprietary
information and cause interruptions of our IT services. Because the techniques used by such computer programmers to access or sabotage
networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. In
addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain
defects in design or manufacture, including “bugs” and other problems, that could unexpectedly interfere with the operation of the system. We
have also outsourced a number of our business functions to third party contractors, and our business operations also depend, in part, on the
success of our contractors’ own cybersecurity measures. Similarly, we rely upon distributors, resellers, system vendors and systems integrators
to sell our products and our sales operations depend, in part, on the reliability of their cybersecurity measures. Additionally, we depend upon our
employees to appropriately handle confidential data and deploy our IT resources in safe and secure fashion that does not expose our network
systems to security breaches and the loss of data. Accordingly, if our cybersecurity systems and those of our contractors fail to protect against
unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our
business effectively could be damaged in a number of ways, including:
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• managing the length of the development cycle for new products and product enhancements, which has frequently been longer than we
originally expected;
• managing customers’
transitions to new products, which can result in delays in their purchasing decisions;
•
adapting to emerging and evolving industry standards and to technological developments by our competitors and customers;
•
entering into new or unproven markets with which we have limited experience;
• tailoring our business and pricing models appropriately as we enter new markets and respond to competitive pressures and
technological changes;
•
incorporating and integrating acquired products and technologies; and
•
developing or expanding efficient sales channels.