VMware 2014 Annual Report Download - page 11

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Table of Contents
In establishing list prices for our products, we take into account, among other numerous factors, the value our products and solutions deliver
and the cost of both alternative virtualization and hardware solutions.
Our marketing efforts focus on communicating the benefits of our solutions and educating our customers, distributors, resellers, system
vendors, systems integrators, the media and analysts about the advantages of our innovative virtualization technology.
We raise awareness of our company and brands, market our products and generate sales leads through VMware and industry events, public
relations efforts, marketing materials, advertising, direct marketing, social media initiatives, free downloads and our website. We have invested
in multiple online communities that enable customers and partners to share and discuss sales and development resources, best practices
implementation, and industry trends among other topics. Our annual user conference, VMworld, is held in both the U.S. and Europe. We also
offer management presentations, seminars, and webinars on our products of virtualization and cloud computing. We believe the combination of
these activities strengthens our brand and enhances our leading market position in our industry.
Our business is subject to seasonality in the sale of our products and services. For example, our fourth quarter revenues are affected by a
number of seasonal factors, including fiscal year-end spending trends. Such factors historically have contributed to stronger fourth quarter
revenues in any given year. We believe that seasonal factors are common within our industry.
Customers
Our customer deployments range in size from a single virtualized server for small businesses to thousands of virtual machines for our largest
enterprise customers.
During 2014, three distributors, who purchased software licenses and software support from us for resale to end-user customers directly or
via resellers, each accounted for over 10% of our consolidated revenues. Arrow Electronics, Inc., Tech Data Corporation and Ingram Micro, Inc.
accounted for 15% , 13% and 11% , respectively, of our consolidated revenues in 2014. Our distribution agreements are typically terminable at
will by either party upon 30 to 90 days’ prior written notice to the other party, and neither party has any obligation to purchase or sell any
products under the agreement.
Competition
The cloud computing, end-user computing and virtualization spaces are inter-related and rapidly evolving. We experienced increased
competition during 2014 and expect it to significantly intensify in the future. We compete with large and small vendors in different segments of
the cloud computing, end-user computing and virtualization spaces, and expect that new entrants will continue to enter these industries and
develop technologies that, if commercialized, may compete with our products and services.
We believe the key competitive factors in the cloud computing, end-user computing and virtualization spaces include:
9
•
the level of reliability, interoperability and new functionality of product and service offerings;
•
the ability to provide comprehensive solutions, including management capabilities;
• the ability to offer products and software-as-a-service 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;
• delivery of next-generation end-
user computing capabilities that integrate with and work alongside existing, legacy capabilities;
•
the ability to drive down the marginal cost of operations and management for both new and existing assets;
• a proven track record of formulating and delivering a roadmap of compelling software and service capabilities that align with industry
trends;
•
pricing of products, individually and in bundles;
•
the ability to attract and preserve a large installed base of customers;
•
the ability to attract and maintain a large number of application developers for a given cloud ecosystem;
•
our market leadership in enterprise data center virtualization and presence in most enterprise IT environments;
• the ability to embrace and integrate many open source technologies that are critical in private and public cloud computing architectures,
including OpenStack and Docker;