VMware 2012 Annual Report Download - page 32

Table of Contents
additional rights described above may discourage transactions involving a change of control of us, including transactions in which holders of our
Class A common stock might otherwise receive a premium for their shares over the then-current market price. EMC is not prohibited from
selling a controlling interest in us to a third party and may do so without the approval of the holders of our Class A common stock and without
providing for a purchase of any shares of Class A common stock held by persons other than EMC. Accordingly, shares of Class A common
stock may be worth less than they would be if EMC did not maintain voting control over us nor have the additional rights described above.
In the event EMC is acquired or otherwise undergoes a change of control, any acquirer or successor will be entitled to exercise the voting
control and contractual rights of EMC, and may do so in a manner that could vary significantly from EMC’s historic practice.
By becoming a stockholder in our company, holders of our Class A common stock are deemed to have notice of and have consented to the
provisions of our certificate of incorporation and the master transaction agreement with respect to the limitations that are described above.
Our business and that of EMC overlap, and EMC may compete with us, which could reduce our market share.
EMC and we are both IT infrastructure companies providing products related to storage management, back-up, disaster recovery, security,
system management and automation, provisioning and resource management. There can be no assurance that EMC will not engage in increased
competition with us in the future. In addition, the intellectual property agreement that we have entered into with EMC provides EMC the ability
to use our source code and intellectual property, which, subject to limitations, it may use to produce certain products that compete with ours.
EMC’s rights in this regard extend to its majority-owned subsidiaries, which could include joint ventures where EMC holds a majority position
and one or more of our competitors hold minority positions.
EMC could assert control over us in a manner which could impede our growth or our ability to enter new markets or otherwise adversely
affect our business. Further, EMC could utilize its control over us to cause us to take or refrain from taking certain actions, including entering
into relationships with channel, technology and other marketing partners, enforcing our intellectual property rights or pursuing business
combinations, other corporate opportunities or product development initiatives that could adversely affect our competitive position, including
our competitive position relative to that of EMC in markets where we compete with them. In addition, EMC maintains significant partnerships
with certain of our competitors, including Microsoft.
EMC
’s competition in certain markets may affect our ability to build and maintain partnerships.
Our existing and potential partner relationships may be affected by our relationship with EMC. We partner with a number of companies that
compete with EMC in certain markets in which EMC participates. EMC’
s majority ownership in us might affect our ability to effectively partner
with these companies. These companies may favor our competitors because of our relationship with EMC.
EMC competes with certain of our significant channel, technology and other marketing partners, including IBM and Hewlett-Packard.
Pursuant to our certificate of incorporation and other agreements that we have with EMC, EMC may have the ability to impact our relationship
with those of our partners that compete with EMC, which could have a material adverse effect on our results of operations or our ability to
pursue opportunities which may otherwise be available to us.
Our proposed commitment to launch the Pivotal Initiative with EMC may not prove successful.
In December 2012, we launched the Pivotal Initiative with EMC, pursuant to which both companies plan to commit technology, people and
programs to focus on Big Data and Cloud Application Platforms. The Pivotal Initiative is led by Paul Maritz, Chief Strategy Officer of EMC and
VMware's former Chief Executive Officer, and is expected to include most employees and resources working within EMC's Greenplum and
Pivotal Labs organizations, and our vFabric (including Spring and Gemfire), Cloud Foundry and Cetas organizations, as well as related efforts.
While we and EMC have announced our intention to commit to this initiative, there is no assurance that we will be able to agree upon our
commitment on reasonable terms with EMC. If we are unable to reach agreement, then we might not be able to realize the potential value we
believe is possible through uniting these assets. Accordingly, it is possible that the Pivotal Initiative may not be implemented as planned, or that
timing could be delayed. Should the initiative be launched, its ability to operate successfully will require, among other factors:
30
•
the ability to successfully integrate technology from both us and EMC;
•
the ability to create offerings for which there is suitable demand in the marketplace;
• the ability to have an effective go-to-
market practice;
•
the ability to differentiate offerings developed by the initiative from competitors;