VMware 2015 Annual Report Download - page 5

TableofContents
PART I
ITEM 1. BUSINESS
Overview
VMware,Inc.(“VMware”)pioneeredthedevelopmentandapplicationofvirtualizationtechnologieswithx86server-basedcomputing,separatingapplication
softwarefromtheunderlyinghardware.Wearealeaderinvirtualizationandcloudinfrastructuresolutionsthatenablebusinessestotransformthewaytheybuild,
deliverandconsumeInformationTechnology(“IT”)resourcesinamannerthatisevolutionaryandbasedontheirspecificneeds.Thebenefitstoourcustomers
includelowerITcostsandamoreautomatedandresilientsystemsinfrastructurecapableofrespondingdynamicallytovariablebusinessdemands.
Overtheyears,wehaveincreasedourproductofferingsbeyondcomputevirtualizationtoincludeofferingsthatalloworganizationstomanageITresources
acrossprivatecloudsandcomplexmulti-cloud,multi-deviceenvironmentsbyleveragingsynergiesacrossthesethreeproductgroups:
• SDDCorSoftware-DefinedDataCenter
• HybridCloudComputing
• End-UserComputing
WewerethefirstcompanytoarticulateavisionfortheSDDC,whereincreasinglyinfrastructureisvirtualizedanddeliveredasaservice,enablingcontrolof
thedatacentertobeentirelyautomatedbysoftware.
WeincorporatedinDelawarein1998,wereacquiredbyEMCin2004andconductedourinitialpublicofferingofourClassAcommonstockinAugust2007.
EMCholdsapproximately81.3%ofouroutstandingcommonstock,including43millionsharesofourClassAcommonstockasofDecember31,2015,andallof
ourClassBcommonstock,andweareconsidereda“controlledcompany”undertherulesoftheNewYorkStockExchange.OnOctober12,2015,DellInc.
(“Dell”),DenaliHoldingInc.(“Denali”)andEMCenteredintoadefinitiveagreementunderwhichDenalihasagreedtoacquireEMC.Underthetermsofthe
agreement,wewillcontinuetooperateasapubliclytradedcompany.Uponclosingofthetransaction,aportionofthemergerconsiderationthatEMCshareholders
willreceivewillincludesharesofClassVcommonstockthatwillberegisteredwiththeSecuritiesandExchangeCommissionandissuedbyDenali.Pursuantto
thetermsoftheagreement,itisexpectedthatapproximately0.111sharesofClassVcommonstockwillbeissuedbyDenaliforeachEMCshare.Denalihas
disclosedthattheClassVcommonstockwillbeapubliclytradedtrackingstockthat,uponissuance,isintendedtotracktheperformanceofanapproximately53%
economicinterestinourbusiness.TheclosingofthetransactionscontemplatedbythemergeragreementissubjecttoapprovaloftheEMCshareholdersaswellas
variousregulatoryapprovals.
Totalrevenuesin2015increased9%to$6,571million.Thisisprimarilycomprisedoflicenserevenuesof$2,720millionandservicesrevenuesof$3,927
million.Ofourtotalservicesrevenuesin2015,87%comprisedsoftwaremaintenancerevenuesandtheremaining13%wascomprisedofprofessionalservices
revenues,includingtraining.Historically,themajorityofourlicensesaleshavebeenfromVMwarevSphere,whichisincludedinourcomputeproductcategory
withinourSDDCproductgroup.However,overthelasttwoyears,VMwarevSpherelicensesaleshavedeclined.AsthetransformationoftheITindustry
continues,weexpectthatourgrowthwillbeincreasinglyderivedfromsalesofournewerproducts,suitesandservicessolutionsacrossourthreeproductgroups.
Forexample,wehaveexperiencedcontinuedgrowthinsalesvolumes,productionuseandnumberofcustomerswhohavepurchasedVMwareNSX,ournetwork
virtualizationsolution.Inaddition,ourend-usercomputingsolutionscontinuetogrowdriveninpartbyenterprisemobilemanagementofferings.Foradditional
financialinformationonourbusinessbyproductandgeographicarea,refertoNoteOtotheconsolidatedfinancialstatementsinPartII,Item8ofthisAnnual
ReportonForm10-K.Ourcorporateheadquartersarelocatedat3401HillviewAvenue,PaloAlto,California,andwehave119officesworldwide.
Products and Technology
Software-Defined Data Center
VMwarewasthefirstcompanytoarticulateavisionfortheSDDC,whereincreasinglyinfrastructureisvirtualized,enablingmanagementofthedatacenterto
beentirelyautomatedbysoftware,fromone,unifiedplatform.Traditionaldatacentersareloosecollectionsoftechnologysiloswhereeachapplicationtypehasits
ownverticalstackconsistingofaCPUandoperatingsystem,storagepool,networkingandsecurity,andmanagementsystems.Overtime,coststomaintainthe
datacenterinfrastructurehavebeenincreasingbecausethedatacenterenvironmenthasbecomedivergent,leadingtohighercomplexity.Theincreasedcomplexity
ofthedatacenterdemandsconstantlyincreasingresourcestomanageandmaintaintheITinfrastructure.TheSDDCisdesignedtotransformthedatacenterintoan
on-demandservicethataddressesapplicationrequirementsbyabstracting,poolingandautomatingtheservicesthatarerequiredfromtheunderlyinghardware.
SDDCpromisestodramaticallysimplifydatacenteroperationsandlowercosts.
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