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VMware Grows as Cloud Services Market Set to Mature

By Sean Michael Kerner (Send Email)
Posted January 29, 2014


VMware, more than perhaps any other vendor, has helped enterprises around the world embrace server virtualization. In 2013, VMware's efforts paid off as the company reported strong revenues as it gears up for the cloud-computing future.

VMware reported fourth quarter fiscal 2013 revenue of $1.48 billion, which is a 15 percent year-over-year gain. Cloud Computing and VMwareNet income for the quarter was reported at $335 million. For the full fiscal 2013 year, VMware revenue came in at $5.21 billion, for a 13 percent gain over 2012, with net income reported at $1.01 billion.

Looking forward, VMware provided first quarter fiscal 2014 guidance for revenue in the range of $1.33 billion and $1.37 billion, representing a gain of 12 to 15 percent year-over-year. For the the full fiscal 2014 year, VMware's guidance is for revenue in the range of $5.94 billion and $6.1 billion, for a gain of 14 to 17 percent year over year.

While the market for server virtualization is relatively mature, growth for VMware in 2014 will come from its management and automation products.

"Even with the success of our management and automation products thus far, we believe our customer base is only 10 percent penetrated, reflecting ample runway for growth," Carl Eschenbach, President and Chief Operating Officer at VMware, said during the company's earnings call. "We continue to believe that the path to the software-defined data center goes through management and automation, and this will continue to be a key driver of our growth in 2014 and beyond."

VMware is also optimistic about its NSX network virtualization platform that officially launched in August. Another area of growth is the desktop-as-a-service (DaaS) market that VMware entered in October with the acquisition of Deskone.

Last week, VMware acquired mobile device management vendor AirWatch for $1.5 billion.

"With the addition of AirWatch, we will be positioned to accelerate VMware’s long-term growth in a significant way by delivering a complete and proven enterprise-class solution for empowering the mobile workforce," VMware CEO Pat Gelsinger said during his company's earnings call.

Into the Cloud

Gelsinger noted that one of the most exciting milestones for VMware in 2013 was the launch of vCloud Hybrid Service in May.

While cloud is certainly an area of growth for VMware, Gelsinger stressed that it's still a nascent market.

"As we think about the entire cloud services space for enterprise customers, this is immature," Gelsinger said. "And with customers, there’s a lot of tire kicking, a lot of experimentation and test and dev. So overall, for anybody in the enterprise space, this is still very early days."

At the same time, Gelsinger emphasized that in his view the VMware vCloud Hybrid service is very uniquely focused for enterprise use-cases and is a seamless hybrid cloud. He noted the value proposition of a hybrid cloud for enterprises is an extension of what they're doing on premise, with the high market penetration of virtual machines that are running on the VMware software stack today.

Those existing VMware server virtualization users benefit from the common management, security and networking capabilities that Gelsinger sees as differentiating VMware's vCloud from Amazon Web Services or anybody else in the marketplace.

"So while generally we see this large pool of public cloud services, our position is quite differentiated, and that is resonating with customers," Gelsinger said. "We do expect there will be some competition with AWS over time for different workloads and customers, but today we're largely pursuing different customers with different value propositions."


Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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