VMware 2014 Annual Report Download - page 23

Table of Contents
greater resources than we have. Research and development personnel are also aggressively recruited by startup and emerging growth companies,
which are especially active in many of the technical areas and geographic regions in which we conduct product and service development. In
addition, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the stock-
based compensation they are to receive in connection with their employment. Declines in the value of our stock could adversely affect our ability
to attract or retain key employees and result in increased employee compensation expenses. 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, 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 and services will allow us to compete effectively for business opportunities in
emerging areas such as cloud computing.
New product and service development and introduction involve 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 of operations, and because revenues 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. Unauthorized
parties have attempted to penetrate our network security and our website. Such cyberattacks
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• managing the length of the development cycle for new products and services and product and service enhancements, which has
frequently been longer than we originally expected;
• increasing complexity of our product offerings as we introduce product suites such as our vCloud Suite, which can significantly
increase the development time and effort necessary to achieve the interoperability of product suite components while maintaining
product quality;
• growth rates of our emerging products and services may be negatively impacted despite their technical merit by the need to package
such products and services in more complex product suite offerings that require more time for customer evaluation and purchase
decisions;
• managing customers’
transitions to new products and services, 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;
•
reacting to trends and predicting which technologies will be successful and develop into industry standards;
• 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.