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Table of Contents
Sales and Marketing Expenses
Our sales and marketing expenses include personnel costs, sales commissions and related overhead associated with the sale and marketing of our license
and services offerings, as well as the cost of product launches. Sales commissions are generally earned and expensed when a firm order is received from the
customer and may be expensed in a period other than the period in which the related revenue is recognized. Sales and marketing expenses also include the net
impact from the expenses incurred and fees generated by certain marketing initiatives, including our annual VMworld and VMworld Europe conferences.
Sales and marketing expenses increased in 2013 compared to 2012 primarily due to growth in employee-
related expenses of $174, including, incremental
growth in headcount and by higher commission expense due to increased sales volumes. To a lesser extent, costs incurred for marketing programs also
contributed to the increase of expense in 2013, compared to prior year. The increases in expenses in 2013 were partially offset by a decrease of $44 of sales
and marketing expenses related to Pivotal.
Sales and marketing expenses increased in 2012 compared to 2011 primarily due to growth in employee-
related expenses of $214, including. incremental
growth in headcount and by higher commission expense due to increased sales volumes, as well as an increase of $104 in stock-based compensation expense
and costs of marketing programs. The increases in 2012 were partially offset by the positive impact of $29 from fluctuations in foreign exchange rates.
General and Administrative Expenses
Our general and administrative expenses include personnel and related overhead costs to support the overall business. These expenses include the costs
associated with our finance, human resources, IT infrastructure and legal, as well as expenses related to corporate costs and initiatives and facilities costs.
General and administrative expenses increased in 2013 compared to 2012 due to incremental growth in headcount resulting in an increase of $19. The
increase in 2013 compared to the prior year was also due to an increase in charitable donations, stock-based compensation expense and contractor expenses.
General and administrative expenses increased in 2012 compared to 2011 due to incremental growth in headcount resulting in an increase of $24. The
increase in 2012 compared to the prior year was also due to an increase in charitable donations, equipment and depreciation expenses and contractor
expenses.
Realignment Charges
During January 2013, we approved and initiated a business realignment plan to streamline our operations resulting in realignment charges incurred in
2013. As of the second quarter of 2013, the plan was substantially complete.
The plan included the elimination of approximately 710 positions and personnel across all major functional groups and geographies. The total cash and
non-cash charges for workforce reductions of $54 and costs primarily associated with asset impairments of $14 were recorded on the consolidated statements
of income in 2013.
Although we expect that streamlining our operations will have a favorable impact on our business, our operating expenses are expected to continue to
increase as a result of the investments we are making to support our key strategic initiatives. These investments include our continued effort to add resources.
Total headcount had a net increase of approximately 500 during 2013, which is net of the reduction of employees that have or will transfer to Pivotal, as well
as the impact of our realignment activities.
46
For the Year Ended December 31,
2013 vs. 2012
2012 vs. 2011
2013
2012
2011
$ Change
% Change
$ Change
% Change
Sales and marketing
$
1,671
$
1,495
$
1,238
$
177
12
%
$
256
21
%
Stock-based compensation
144
150
96
(7
)
(5
)
54
57
Total expenses
$
1,815
$
1,645
$
1,334
$
170
10
$
311
23
% of Total revenues
35
%
36
%
35
%
For the Year Ended December 31,
2013 vs. 2012
2012 vs. 2011
2013
2012
2011
$ Change
% Change
$ Change
% Change
General and administrative
$
363
$
320
$
261
$
43
14
%
$
59
23
%
Stock-based compensation
56
48
40
9
18
8
20
Total expenses
$
419
$
368
$
301
$
52
14
$
67
22
% of Total revenues
8
%
8
%
8
%